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An elected official has suggested that the government should develop a quantified scoring system to prioritize...

An elected official has suggested that the government should develop a quantified scoring system to prioritize capital projects. What types of factors might be included in such a system? What would be the advantages of this type of approach? What would be the limitations?

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Answer #1

For any company it is very much a necessity to decide on which capital project they should first invest and on which they should think about the later.

The first and foremost priority of any business is profit.So one of the factors which can be included in the system is Internal rate of return , projects which generates more internal rate of return can be given first priority , other parameter include risk involved in the project like operational risk , financial risk etc

The main advantage of this type of approach is company can decide easily as they need to see a single no. and decide on which projects to go ahead with first and it will be unbiased decision.

The disadvantage of this system will be it wont take into consider various projects even though not much profitable can increase the reputation of the company.

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