Assessing Value

When assessing value, it is crucial to understand that one of the most common ways is through financial metrics, particularly in terms of money.

Key Financial Metrics for Assessing Value

• Return on Investment (ROI)
  • Measures the benefits received from an investment compared to the money invested.
  • Usually represented as a percentage.
  • Example: If ROI is 20%, investing $10,000 means getting back $12,000 (initial $10,000 + $2,000 profit).
• Internal Rate of Return (IRR)
  • Represents the interest rate required to achieve a future amount based on today's investment.
  • The higher the IRR, the better the project in terms of financial returns.
• Present Value (PV) & Net Present Value (NPV)
  • Determines the value of future money in today's terms.
  • Helps in decision-making regarding whether to receive money now or in the future.
  • Example: Would you prefer $10 now or $15 in 10 years? Due to inflation, $10 now might have more purchasing power.
• Earned Value Management (EVM)
  • A project management approach for tracking project performance.
  • Key metrics include:
    • Planned Value (PV) - Budgeted cost of work planned.
    • Earned Value (EV) - Value of work actually completed.
    • Schedule Performance Index (SPI) - Indicates if the project is on schedule.
    • Cost Performance Index (CPI) - Measures cost efficiency.
  • Used extensively in PMP exams but not a major focus for ACP exams.

Note: While it's important to be familiar with these terms, detailed formula calculations are not expected for the ACP exam.