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Questions and Answers
What is a primary method for companies to find projects?
What is a primary method for companies to find projects?
Which of the following is NOT a factor that should be assessed before deciding to undertake a project?
Which of the following is NOT a factor that should be assessed before deciding to undertake a project?
What does an RFQ stand for?
What does an RFQ stand for?
What is the main outcome of Module 4?
What is the main outcome of Module 4?
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Which of the following is NOT a financial term that is discussed in Module 4?
Which of the following is NOT a financial term that is discussed in Module 4?
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What is the purpose of cost-benefit analysis in environmental project management?
What is the purpose of cost-benefit analysis in environmental project management?
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What is the payback period?
What is the payback period?
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Why is the time value of money important in environmental project management?
Why is the time value of money important in environmental project management?
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What is the primary purpose of a Go/No-go decision-making checklist for an environmental consulting firm?
What is the primary purpose of a Go/No-go decision-making checklist for an environmental consulting firm?
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In the context of environmental projects, what is the most common unit used for comparing costs and benefits in a Cost-Benefit Analysis?
In the context of environmental projects, what is the most common unit used for comparing costs and benefits in a Cost-Benefit Analysis?
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Which of the following financial assessment techniques is NOT discussed in the text as being relevant for project managers involved in environmental projects?
Which of the following financial assessment techniques is NOT discussed in the text as being relevant for project managers involved in environmental projects?
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What is the typical relationship between environmental projects and profit-oriented organizations?
What is the typical relationship between environmental projects and profit-oriented organizations?
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In a Cost-Benefit Analysis, what does a Cost/Benefit ratio greater than 1 (CBA > 1) indicate?
In a Cost-Benefit Analysis, what does a Cost/Benefit ratio greater than 1 (CBA > 1) indicate?
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Study Notes
ENVS 361: Environmental Project Management - Module 4
- Module 4 focuses on financial aspects of environmental technology projects
- Module 4 objectives include cost-benefit analysis, payback period, time value of money, and net present value (NPV) calculations for project evaluation.
Module 4 Objectives
- Explain cost-benefit analysis relevant to environmental projects
- Describe the payback period as a project valuation method
- Describe and discuss time value of money's importance to project management
- Explain the net present value (NPV) method to evaluate potential projects
- Calculate and compare NPV for a described project with provided solutions
Project Assessment
- Unit 4 assesses projects from a financial perspective, deciding if a project is worthwhile
- Components of assessing a project include aligning with organizational goals, competency, potential for growth/development, profitability, competitiveness (price, quality, schedule), feasibility considering existing resources and deadlines
Finding Potential Projects
- Companies use several methods, including word-of-mouth, online project listings (e.g., merx.com, filterable by "Environmental Services"), and formal requests for quotes (RFQs) or proposals (RFPs).
- Networking also plays a crucial role in securing more projects by showcasing past work and establishing client relationships.
Project Assessment Criteria
- Not all projects are suitable for a company
- Assessment criteria: alignment with the organization's strategic goals, available skills and knowledge, potential for growth/development within the organization, potential for profitability, competitiveness (price, quality, schedule), and feasibility considering existing resources against deadlines.
Go/No-go Decision Making
- Environmental consulting firms often use go/no-go checklists or meetings to decide whether or not to propose a project
Project Financial Assessment
- Most environmental projects occur within profit-oriented organizations, making financial assessment a crucial aspect.
- Key involved financial concepts are: cost-benefit analysis, payback period, time value of money, and net present value (NPV)
Cost-Benefit Analysis
- This involves quantifying project costs and benefits.
- Generally, benefits are the project's revenue.
- Cost/benefit ratios are compared across projects; a ratio greater than 1 indicates the cost exceeds the benefit. A ratio less than 1 suggests a positive cost-benefit outcome.
- Benefits like health, aesthetics, or avoidance of legal issues cannot be trivially measured (e.g. quantified)
Payback Period
- Payback period = number of years to recoup initial investment
- Calculated as Investment ÷ Annual Benefit
Time Value of Money/Present Value
- Concept: Money spent today has a different value from future money because of potential investment earnings and the time dimension
- Prices of goods and services rise over time (inflation)
- Present value needs to be calculated to assess the worth of future money received today
Net Present Value (NPV)
- NPV combines cost-benefit analysis and present value
- Acknowledges the time value of future benefits and considers various factors when determining financial viability
- Positive NPV signifies a good investment; negative NPV denotes a poor investment; the higher the NPV the better the opportunity.
Next Steps
- Students are encouraged to read Module 4 and complete module self-tests and practice problems
- The next class will cover Module 2
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Description
This quiz covers the financial aspects of environmental technology projects, focusing on cost-benefit analysis, the payback period, time value of money, and net present value (NPV) calculations. It aims to evaluate project viability through various financial assessments crucial to project management.
