2. Calculate net present value (NPV)
Calculating the project's present value enables you to estimate the value of future project income today. It takes into account the time (and cost) it will take to finance your project, and the accumulated income. It can be used to prioritize projects (acceptance and rejection decisions) and the interest they represent for your organization. Net present value (NPV) is calculated as follows (where r is the interest rate and n is the number of project periods):
The projects chosen are always those with the highest NPV.
Example: You have a choice between two projects:...
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Calculate net present value (NPV)
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Bibliography
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Bibliography
International Project Management Association, International Competence Baseline - ICB version 3 : 1.13 - Cost and Finance and 3.10 : Finance Management
Managing Successful Projects (MSP) with PRINCE2 ® , chap. 13 "Project Management Components - The Business Case".
Project Management Institute,...
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