5 HOW FINANCIAL CASES ARE EVALUATED: PART 1
This chapter and the one that follows it both cover what is really a single topic: how IT and other investment proposals are evaluated. The reason why the topic has been spread over two chapters is to keep chapters to a reasonable length.
When you have studied this chapter you should be able to:
- describe and contrast, in a business context, the two discounted cash flow (DCF) methods of investment evaluation:
- net present value (NPV);
- internal rate of return (IRR);
- apply the above methods to an IT financial case and explain the significance and limitations of the results;
- explain how ‘profitability index’ (PI) can be used to compare the profitability of projects from their NPV results; ...