Effective Decision-Making in Project Based Environments

Abstract

Effective decision-making requires economic analysis to be beneficial in a project environment. Producing effective economic decisions is based on various factors and methods, including payback period (PBP), internal rate of return (IRR), and net present value (NPV). Once projects are identified, a managerial team can begin the financial process of determining whether the project should be accepted. The team should use one of the mentioned tools. By analyzing past research, it is concluded that NPV is a vital tool that leads to the most effective project evaluation. NPV, in comparison to PBP and IRR, provides more realistic and effective value with little marginal error. This article illustrates the superiority of NPV by presenting evidence from existing research, scenarios, limitations, and future direction to use this tool in economic decision-making.