M B A 8450 Chapter Notes - Chapter 7: Discounted Cash Flow, Net Present Value, Innovation Management
8 Sep 2016
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Firms use a form of capital rationing in formulating their new product development plan for project selection. 1- establish budget based on past year"s sales. 2- uses a rank ordering to determine which projects will be funded, methods: quantitave a. i. Investments in new technologies play a crucial role in building and leveraging firm capabilities and creating options for the future. The two most commonly used forms of quantitative methods are: They both provide concrete financial estimates for strategic planning and trade-off decisions. They consider the timing of the investments and its cash flows. They both consider the time value of money and risk. They can make the returns of the project seem unambiguous. Numbers may be deceptive especially based on the assumptions taken. Its extremely difficult to anticipate the returns of the technology being analyzed. This methods discriminate the length and risk it comes with long projects.
