The definitive guide to Managing the Numbers
The definitive guide to Managing the Numbers
The definitive guide to Managing the NumbersThe definitive guide to Managing the Numbers

Chapter 21– Appraising Projects

‘An expert is someone who knows some of the worst mistakes that can be made in his subject, and how to avoid them.’
Werner Heisenberg

Overview

This chapter pulls together most of the preceding chapters and explains how to use the information gained so far to appraise and select projects. It also reviews techniques for planning and managing projects. The next chapter continues the financial control theme by looking at budgetary controls, which, of course, can and should be applied to project management.

Mastering projects

After reading this chapter, you should be able to answer the following questions:

  • What are the weaknesses of using payback and return on investment to assess projects?
  • Why would you use internal rate of return (IRR) or net present value (NPV) to assess projects? Which is better? When can’t you use IRR?
  • What factors are not taken into account by metrics such as IRR and NPV?
  • What is critical path analysis? What does it tell you?
  • What is PERT? What does it tell you?
  • What is a Gantt chart? How can you create one using a spreadsheet’s floating bar chart?
  • What is Prince 2? Can you use it instead of techniques such as CPA and PERT?
  • What is the hurdle rate? How do you set it? Why is it higher than the cost of capital?
  • How do you choose between multiple projects with differing cash flows and returns?
  • Why should you go on to read the next chapter on budgets after reading this one?
The Definitive Guide to Managing the Numbers