Screening Matrix
Project |
Criteria |
Importance Weight |
Score |
Weighted Score |
Project Alpha |
Quality |
7 |
1 |
7 |
Cost |
3 |
7 |
21 |
|
Speed to Market |
5 |
5 |
25 |
|
Visibility |
1 |
3 |
3 |
|
Reliability |
7 |
5 |
35 |
|
Total
|
|
|
91 |
|
Project Beta |
Quality |
7 |
3 |
21 |
Cost |
3 |
7 |
21 |
|
Speed to Market |
5 |
5 |
25 |
|
Visibility |
1 |
1 |
1 |
|
Reliability |
7 |
5 |
35 |
|
Total
|
|
|
103 |
|
Project Gamma |
Quality |
7 |
3 |
21 |
Cost |
3 |
5 |
15 |
|
Speed to Market |
5 |
3 |
15 |
|
Visibility |
1 |
5 |
5 |
|
Reliability |
7 |
7 |
49 |
|
Total
|
|
|
105 |
|
Project Delta |
Quality |
7 |
5 |
35 |
Cost |
3 |
3 |
9 |
|
Speed to Market |
5 |
5 |
25 |
|
Visibility |
1 |
1 |
1 |
|
Reliability |
7 |
7 |
49 |
|
Total |
|
|
119 |
The most likely candidate is Project Delta with the highest total score 119.
Discounted Payback
Discount
factor: simply
the reciprocal of the discount rate
k – rate of return; in this case k=0.125;
t – year;
Year |
Cash Flow |
DF |
Discounted Cash Flow |
Cum. Dis. C.F. |
0 |
($50 000) |
1 |
($50 000) |
($50 000) |
1 |
$30 000 |
0.889 |
26 670 |
($23 330) |
2 |
30 000 |
0.79 |
23 700 |
370 |
3 |
40 000 |
0.702 |
28 080 |
28 450 |
4 |
25 000 |
0.624 |
15 600 |
44 050 |
5 |
15 000 |
0.554 |
8310 |
52 360 |
So payback period is equal 2-370/23700=1.98
Net Present Value
Discount
Factor = 
k – Required rate of return; in this case k=0.125;
t – Year;
p - Inflation rate during period t;
In this case, k=0.1 and p=0.03
Example,
in 3rd year DF = 
= 0.693
Project |
Year |
Inflows |
Outflows |
Net Flow |
D.F. |
NPV |
Project A |
0 |
|
$500 000 |
(500 000) |
1.000 |
(500 000) |
1 |
$150 000 |
|
150 000 |
0.885 |
132 750 |
|
2 |
150 000 |
|
150 000 |
0.783 |
117 450 |
|
3 |
150 000 |
|
150 000 |
0.693 |
103 950 |
|
4 |
150 000 |
|
150 000 |
0.613 |
91 950 |
|
5 |
150 000 |
|
150 000 |
0.543 |
81 450 |
|
Total |
|
|
|
|
27 550 |
|
Project B |
0 |
|
$400 000 |
|
1.000 |
(400 000) |
1 |
$0 |
|
0 |
0.885 |
0 |
|
2 |
50 000 |
|
50 000 |
0.783 |
39 150 |
|
3 |
200 000 |
|
200 000 |
0.693 |
138 600 |
|
4 |
300 000 |
|
300 000 |
0.613 |
183 900 |
|
5 |
200 000 |
|
200 000 |
0.543 |
108 600 |
|
Total |
|
|
|
|
70 250 |
The total in these projects positive number, indicating that the investment is worthwhile and should be pursued. But Project B is the better investment with total is greater than in Project A
Net Present Value
Year |
Inflows |
Outflows |
Net Flow |
D.F. |
NPV |
0 |
|
$110 000 |
(110 000) |
1.000 |
(110 000) |
1 |
$30 000 |
|
30 000 |
0.91 |
27 300 |
2 |
30 000 |
|
30 000 |
0.83 |
24 900 |
3 |
30 000 |
|
30 000 |
0.75 |
22 500 |
4 |
30 000 |
|
30 000 |
0.68 |
20 400 |
5 |
30 000 |
|
30 000 |
0.62 |
18 600 |
Total |
|
|
|
|
$3700 |
Based on this analysis, the NVP for the project is positive, indicating that the investment is worthwhile and should be pursued.