The Economic Model of project selection not only enables you to ensure

that you select a project that has high chances of success, but also has good
economic returns.

You can use the following economic models to when selecting a project:

 Present Value (PV): In this economic model, you evaluate the current
value of the future cash flow of the project. To know more about this economic
model, refer Economic Model for Project Selection – Present Value.
 Net Present Value (NPV): In this economic model, you calculate the net
present value of a project by deducting cost incurred on the project over
multiple periods of time from the present value of the project. If the NPV of a
project is positive, it is a good idea to select the project. To know more about
this economic model, refer Economic Model for Project Selection – Net Present
Value.
 Internal Rate of Return (IRR): In this economic model, you calculate
the rate of interest at which the cash inflow to the project is equal to the cash
outflow from the project. The higher is the value of IRR more profitable is the
project. To know more about this economic model, refer Economic Model for
Project Selection – Internal Rate of Return.
 Payback Period: In this economic model, you calculate the time period
required to recover the investment the organization has made in a project before
the project starts returning profits. To know more about this economic model,
refer Economic Model for Project Selection – Payback Period.
 Benefit cost Ratio: In this economic model, you calculate the ratio
between the cost of the project and benefits form the project. The benefits
include all forms of revenue you generate from the project and not just the
profits. A benefit cost ratio greater than one indicates projects generates more
benefits than the cost incurred. To know more about this economic model,
refer Economic Model for Project Selection – Benefit-cost Ratio.