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Finance for IT Decision Makers - A practical handbook by Michael Blackstaff

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6 HOW FINANCIAL CASES ARE EVALUATED: PART 2

OBJECTIVES

When you have studied this chapter, a continuation of the previous one, you should be able to:

  • describe the following methods of evaluating financial cases:
    • payback;
    • discounted payback;
    • return on investment (ROI);
    • shareholder value added (SVA);
  • apply all the above methods to an IT financial case, and explain the significance and limitations of the results.

In the previous chapter we explored the application of discounted cash flow methods to the evaluation of IT, and other, financial cases. At the end of this one we shall look at a method (SVA) that at its simplest can be thought of as a variation of NPV. However, before doing so we shall discuss some other widely-used methods. The ...

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