A Little Bit of Overlap

overlap1So I don’t post much about my work as a Grad Student at the University of Kansas in their MBA program. Reason being… honestly I feel like I’m “learning” so I hate to post something that I’m not 100% confident is right and it really isn’t my thing to just toss my opinions out on the web.

Well back to the point… overlap. I’m going after my PMP along with everything else and so when I have a chance I’m studying up on Project Charters, Risk Analysis, and Communication Plans. While going through all my PMP stuff a couple of nights ago I hit the section on Project Assessment that a PM needs to keep in mind to understand why executive level staff would choose to go with one project and punt on another. In that section the majority of strategies used all related to my work in Corporate Finance (my MBA’s emphasis is Finance), and I found my self cheering that some of this is all coming together. To have the existing background really helps the motivation and re-enforces the point that this non-technical work I’m doing these days does have the same relational fundamental background that the programming languages and concepts I learned in my undergrad had as well. So when you are working on the ROI, NPV, and all the other formulas LEARN THEM because they just keep popping up the more and more you do.

To save the content of this post from just being me rambling… here are the related formulas I’m referring to, specifically the economic models for Project Selection.

  • Present Value
    • Present Value = (Future Value / ( (1+rate)^n)) …. n = time periods
    • The value today of future cash flows
  • Net Present Value
    • Present Value of the total benefits minus the cost over many time periods
    • Normally a positive results implies a good investment
    • How to Calculate NPV
  • Internal Rate of Return
    • Just like a saving account, what type of return on your money do you expect?
    • I think definition is a bit odd, but after some thought it does make sense… “the rate at which the project revenues and project costs are equal.
  • Payback Period
    • The length of time it takes to recover an investment required to start the project, and thus any point past that mark would be returning profit.
  • Cost Benefit Analysis
    • Compares the expected cost of the project to the expected revenue the project would potentially bring about upon it’s completion.
    • Revenue / Cost