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Methods for Calculating a Project's Viability

How do you value the financial merits of one project over another? In theory, the investment value models that are used for valuing securities should also be used for valuing capital investments (projects). The problem is that securities are traded in markets like the New York Stock Exchange and NASDAQ. These markets are considered to be efficient for the most part. It is generally accepted that the price (cost) of a security equals its value. There is no efficient market for the buying and selling of projects.

In addition, many projects are predominantly one of a ki...

From

Cover of Project Management Accounting: Budgeting, Tracking, and Reporting Costs and Profitability, Second Edition

Note

Before initiating a new project, evaluate three key financial factors: relevant cash flows, figure of merit, and acceptance criterion.