1. maximum wealth of a share holder
3. P( 1+I)T
4. do constant strategic planning
5. Search Project for Aspects of Close Encounters
6. market growth
11. Program Evaluation Review Technique
1. SINKING FUND PAYMENT:
Money set aside in a special ...view middle of the document...
PERT | CPM |
PERT uses event oriented network. | CPM uses activity oriented network. |
Estimate of time for activities are not so accurate and definite. | Durations of activity may be estimated with a fair degree of accuracy. |
It is used mostly in research and development projects, particularly projects of non-repetitive nature. | It is used extensively in construction projects. |
Probabilistic model concept is used. | Deterministic concept is used. |
PERT is basically a tool for planning. | CPM can control both time and cost when planning. |
In PERT, it is assumed that cost varies directly with time. Attention is therefore given to minimize the time so that minimum cost results. Thus in PERT, time is the controlling factor. | In CPM, cost optimization is given prime importance. The time for the completion of the project depends upon cost optimization. The cost is not directly proportioned to time. Thus, cost is the controlling factor. |
3. Capital Asset Pricing Model (CAPM):
A model that describes the relationship between risk and expected return and that is used in the pricing of risky securities.
The general idea behind CAPM is that investors need to be compensated in two ways: time value of money and risk
The time value of money is represented by the risk-free (rf) rate in the formula and compensates the investors for placing money in any investment over a period of time.
The other half of the formula represents risk and calculates the amount of compensation the investor needs for taking on additional risk. This is calculated by taking a risk measure (beta) that compares the returns of the asset to the market over a period of time and to the market premium (Rm - rf).
4. PBP (PAYBACK PERIOD METHOD):
Payback period is the time in which the initial cash outflow of an investment is expected to be recovered from the cash inflows generated by the investment. It is one of the simplest investment appraisal techniques.
The formula to calculate payback period of a project depends on whether the cash flow per period from the project is even or uneven. In case they are even, the formula to calculate payback period is:
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Payback period = initial investment / cash inflow per period
When cash inflows are uneven, we need to calculate the cumulative net cash flow for each period and then use the following formula for payback period.
Payback period= A +(B / C)
In the above formula,
A is the last period with a negative cumulative cash flow;
B is the absolute value of cumulative cash flow at the end of the period A;
C is the total cash flow during the period after A
5. PLANNING FOR PROCUREMENT:
Procurement planning is the process of deciding what to buy, when and from what source. During the procurement planning process the procurement method is assigned and the expectations for fulfillment of procurement requirements...