As we discovered this week from our readings and video’s, not all cost-benefit decisions can be made from strictly financial data. Thinking about a project you have worked on or proposed, or a project which you feel is critical in your company or community, give an example of a non-financial metric which should be considered and why you think that non-financial metric should result in the approval of the project.
– OR –
Your New Product Development initiative is at the stage where a Cost-Benefit Analysis is needed to prepare for the final presentation to management. There are multiples metrics you could use to quantify the benefit of your proposal (incremental sales, nominal payback, discounted payback, NPV and IRR). Choose the one that you feel is most crucial and would best help Management see the value in your proposal. Explain what the metric shows and then discuss how you would go about gathering the data and calculating this for your new initiative (and, if you have already done this in real life, share what you did and what response you got from Management).
Post your initial response by Wednesday, midnight of your time zone, and reply to at least 2 of your classmates’ initial posts by Sunday, midnight of your time zone.
Cost-Benefit Analysis and Capital Budgeting
How do you know if your great idea is really worth the investment it will take to make it happen? Ensuring that potential investments will provide a positive economic payout is the first step in analyzing your options, selling your idea, and making strategic business decisions. This week we will focus on key Cost-Benefit Analysis – aka Capital Budgeting – concepts and tools, including: (1) time value of money; (2) return on investment; (3) discounted cash flow techniques; (4) payback period; and (5) internal rate of return. Every business leader must know how to use these tools to assess the potential return for any project they are considering investing in. This week you will:
- Learn key terms and concepts associated with Cost-Benefit Analysis
- Apply tools and analysis techniques such as Net Present Value, Internal Rate of Return, and Payback to assess contribution
!st person to respond to
In last week’s DQ, I briefly mentioned one of my friends in response to another student’s DQ. He recently started his own nonprofit, where I am an honorary advisor. The Atlanta Family Foundation is a charitable social enterprise supporting marginalized families in Atlanta by Providing Food, Shelter & Other Essentials (1).
Before starting the project, I engaged him on the “Why” of wanting to start the nonprofit. It could not be just a feel-good project; he had to put some effort and thought behind mission, vision, impact, and influence. According to the National Council of Non-Profits, “Charitable nonprofits embody the best of America,” shapes our boldest dreams, highest ideals, and noblest causes (2). The primary non-financial metric was Goodwill and Legacy, having a more prominent presence in the local community. Realizing the organization’s short- and long-term objectives tied into the Slogan of “Transforming Communities One Child at a time” (1).