Cost-Benefit Analysis for Investment Decisions: Chapter 5 (Scale, Timing, Length and Inter-Dependencies in Project Selection)

Glenn Jenkins (), Chun-Yan Kuo and Arnold Harberger ()
Additional contact information
Chun-Yan Kuo: Queen's University, Canada

No 2011-05, Development Discussion Papers from JDI Executive Programs

Abstract: It is generally agreed that a project's net present value (NPV) is the most important criterion for the financial and the economic evaluation of a project from either the owner's or economic perspective. The NPV criterion requires that a project analyst recommend only projects with positive NPV. The next step is to endeavor to maximize the NPV. The reason for trying to maximize the NPV is to extract as much value from the project as possible. Ideally, we should strive to maximize the NPV of incremental net cash flows or net economic benefits. Of course, optimization cannot be pursued blindly; there may be repercussions for other stakeholders that need to be considered in the final decision making. There are other important considerations project analysts often encounter. These considerations include changes in project parameters like the scale of investment, the date of initiation of a project, the length of project life or interdependencies of project components. Each of them is addressed in this chapter by using the criterion of a project's net present value. This chapter explains how project analysts use the criterion of a project's net present value to make such decisions.

Keywords: Project Selecting; Economic Evaluation; Financial Evaluation (search for similar items in EconPapers)
JEL-codes: H43 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2011-08
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://cri-world.com/publications/qed_dp_198.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:qed:dpaper:198

Access Statistics for this paper

More papers in Development Discussion Papers from JDI Executive Programs Contact information at EDIRC.
Bibliographic data for series maintained by Mark Babcock ().