My learning this week was on project Analysis and evaluation. I learned the concepts of net present value, risk forecasting, different forms of break-even analysis, scenario analysis, and sensitivity analysis. I also gained knowledge of capital rationing, operating cash flows, sales volume, operating leverage. Project analysis is a method that helps to understand and examine all the problems and issues in the project before its start. Project analysis and evaluation help to know if the project is running as per the estimated budgets. The object is to provide complete and accurate information about the project to the decision-maker. An effective evaluation of the project helps in achieving the outcomes of the project. The Net Present Value is calculated based on the present cash inflows and outflows over a period of time by using a discounted rate. Break-even analysis helps businesses to understand at what point the business will gain profits. This technique analyzes the sales volume and profitability relation. I also realized that there are three types of break-even; cash break-even, financial break-even, accounting break-even. Sensitivity analysis is an excellent tool for management to make business and investment decisions. This tool helps to identify the key variables that have a major impact on the cost and benefits of the project. I understood the concept of scenario analysis, or the what-if analysis evaluates the different scenarios, their effect, and the impact on the project object.
To gain more knowledge, I read an article on Financial and economic assessment of investment and innovative projects on the improvement of the personnel management system (Bril, Kalinina, and Ilin, (2017). In this article, the economic feasibility of the personnel management project was carried using the IRR and NPV techniques.