Project Attractiveness

Abstract

When faced with opportunities to fund projects, organisations should address two questions: �Which candidate projects are suitable for funding?� And �How are they to be ranked in terms of their attractiveness for investment?� To answer these questions, it is necessary to assign each proposed project of some overall measure of �attractiveness for investment�. The proposed attractiveness measure is a function of two variables: expected return and riskiness . Project return is analogous to the financial investment concept of Return on Investment ({RoI}), while riskiness is similar to investment risk. Unlike the situation in investment theory, however, the calculation of a specific value for return is, in general, extremely difficult because often projects also have non-monetary benefits and disbenefits. Despite this, because they can be systematically and consistently traded off against each other, the concepts of attractiveness, return and riskiness provide us with a useful conceptual framework for thinking about the valuation of projects. Every organisation will have a lower bound on attractiveness�below which a proposed project would not be funded.