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Project Management - Chapter 3 Key Terms

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Key Terms

Analytical Hierarchy Process (AHP): developed by Dr. Thomas Saaty to address many of the technical and managerial problems frequently associated with decision making through scoring models. An increasingly popular method for effective project selection, the AHP is a four-step process.

Checklist: a list of criteria that pertain to our choice of projects, and then applying them to different possible projects.

Discounted cash flow (DCF) method: to estimate cash outlays and expected cash inflows resulting from investment in a project.

Discounted payback method: the time period in which we are interested is the length of time until the sum of the discounted cash flows is equal to the initial investment.

Efficient frontier: set of project portfolio options that offers either a maximum return for every given level of risk or the minimum risk for every level of return.

Internal rate of return (IRR): an alternative method for evaluating the expected outlays and income associated with a new project investment opportunity.

Lead time: effective methods for aligning profit objectives and strategic plans is the development of a proactive project portfolio, or an integrated family of projects, usually with a common strategic goal.

Net present value (NPV) method: projects the change in the firm’s value if a project is undertaken.

Nonnumeric models: do not employ numbers as decision inputs, relying instead on other data.

Numeric models: seek to use numbers as inputs for the decision process involved in selecting projects.

Pairwise comparison approach: this procedure, argue the researchers, permits more accurate weighting because it allows managers to focus on a series of relatively simple exchanges—namely, two criteria at a time.

Payback period: the estimated amount of time that will be necessary to recoup the investment in a project,

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