Question

Explain why discounted cash flow techniques provide better criteria for project selection then net profit or return on investment​

Answer 1

Explanation:

Discounted cash flow method- It is amethod of evaluating the project. This method estimates the futurefree cash flow and discount them by using the current discounted orannual rate. If the calculated value is higher than the initialinvestment or current cost of investment, the opportunity is goodand project should be approved.

Discounted cash flow method vs return on investment-Discounted cash flow method provides the actual cash flowsthat are discounted with the current annual rate, this method usesthe "Time value of money concept". Time value ofmoney concept helps in calculating the present worth of the futurecash flows as we know that money that is received today worth morethan the money that is received in future.

Cost Benefit Analysis in Software Development-Cost benefit analysis provides the insight about the cost incurredand benefits reaped from a project. Cost benefit analysis makes iteasier to know the profit from a project. In software development,cost benefit analysis is very important. Developing a Softwareneeds several steps and it requires higher cost too. Softwaredevelopment is a very crucial decision, sometimes it may fail andmoney gets wasted so Before developing a software, cost-benefitanalysis should be done so that it can be know whether the projectis feasible or not, whether it will be profitable or not. If theproject looks profitable then only steps should be taken to developit.

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Answer 2

Explain why discounted cash flow techniques providebetter criteria for project selection then net profit orreturn on investment.Also discuss the need of Cost BenefitAnalysis in Software Development with proper diagram andexplanation

.What is the difference between Cost benefitAnalysis and Earned Value Analysis with propereasy explanation and diagrams in Software project managementSubject.