Project Valuation Techniques

Project valuation techniques are methods used to estimate the worth or potential profitability of a project before committing resources. They assess future cash flows, costs, and risks to determine if the project is financially viable. Key approaches include discounted cash flow analysis (projecting future earnings and adjusting them to present value), payback period (time to recover initial investment), and internal rate of return (expected annual return). These techniques help investors and managers make informed decisions by comparing potential gains against risks and costs, ensuring resources are allocated to projects with the highest value or strategic importance.