1-start with calculating PV. Don't use Excel NPV equation. It cannot be used in a year basis. Sum of PVs is your NPV in this case.

2-Determin the weights of each criterion. In the matrix, when evaluating a criterion against itself, the value is 1.

3-Detemining the performance of each alternative against each criterion

4-Create the multi-criteria decision-making matrix

ENMA 401-PDSA-4 A multi-project organization is seeking to fund one project out of 3 project proposals (,B,C). Following, key information about each project is provided to enable a multi-criteria decision making process that is detailed in the last section. PROJECT A: An analysis of the overall project risk resulted in classifying Project A as a "risky project" because it scores 8 in a risk scale of 10 (in the scale 1 = very low risk). Subject matter experts were asked the question: Do you think Project A has the capability to attract more projects from the current customer and from new customers? 7 out of 10 agreed it has attraction capability. Project A's life cycle is expected to be 3 years. During these 3 years project A is expected to cost: E The market life cycle of the project A's deliverable is 6 years (i.e., a product/system life cycle of 9 years). Project A is expected to start to generate revenues at the beginning of year 4 . The expected revenues of project A are: Annual costs during the market life cycle are expected to be: PROJECT B: An analysis of the overall project risk resulted in classifying Project B as a "very low risk project" because it scores 2 in a risk scale of 10 (in the scale 1= very low risk). Subject matter experts were asked the question: Do you think Project B has the capability to attract more projects from the current customer and from new customers? 8 out of 10 agreed it has attraction capability. Project B's life cycle is expected to be 5 years. During these years Project B is expected to cost: The market life cycle of the Project B is 32 year (i.e., a product/system life cycle of 37 years). Project B is expected to start to generate revenues at the beginning of year 6 . The expected revenues of Project B are: Annual costs during the market life cycle are expected to be: PROJECT C: An analysis of the overall project risk resulted in classifying Project C as a "low risk project" because it scores 3 in a risk scale of 10 ( 1 = very low risk). Subject matter experts were asked the question: Do you think Project C has the capability to attract more projects from the current customer and from new customers? 4 out of 10 agreed it has attraction capability. Project C's life cycle is expected to be 4 years. During these years Project C is expected to cost: The market life cycle of the Project C is 5 year (i.e., a product/system life cycle of 7 years). Project C is expected to start to generate revenues at the beginning of year 3 even though the project life cycle still going (the life cycles overlap). The expected revenues of Project C are: 8 9 x has an NPV greater than y and the difference between x and y ranges from >$12M to 14M x has an NPV greater than y and the difference between x and y is over >$14M Multi Criteria Decision Problem: Based on the information provided about each project proposal, please identify the best project to be funded by the multi-project organization using the AHP method covered in class. If there is a tie or a close call between two projects, please support your recommendation of which ones were the best with a brief statement. Next, there are key assumptions you need to make to evaluate these project proposals: - The 3 criterion that will be used to evaluate each project proposal are: - Capability to Attract More Projects - Net present Value (NPV) - Overall Project Risk - The following pairwise comparison scale must be used to evaluate the importance of each criterion 1Itemsx,yareofequalimportance3Itemxisweaklymoreimportant5Itemxisstronglymoreimportant7Itemxisverystronglymoreimportant9Itemxisabsolutelymoreimportant - A panel of subject matter experts agreed that: - The Capability to Attract More Project is weakly more important than the MPV - The Capability to Attract More Project weakly more important than the Overall Project Risk Factor - The Overall Project Risk Factor is absolutely more important than the NPV - With respect to the financial criteria in the selection process, the performance of the project alternative will be measured by the NPV at the end of year 5 (i.e., 5 years after the beginning of the project). The interest rate (or minimum acceptable rate of return for the project) is assumed to be fixed at 2.3%. - To evaluate the performance of each project proposal with respect to their NPV the following pairwise comparison table is provided: Equal NPV x has an NPV greater than y and the difference between x and y ranges from >$0 to 2M x has an NPV greater than y and the difference between x and y ranges from >$2M to 4 x has an NPV greater than y and the difference between x and y ranges from >$4M to 6 x has an NPV greater than y and the difference between x and y ranges from >$8M to $M x has an NPV greater than y and the difference between x and y ranges from >$8M to 10M - To evaluate the performance of each project proposal with respect to their Overall Project Risk Factor the following pairwise comparison table is provided. Note that we use "lower" as we desire a project with lower risks: x and y have equal Overall Project Risk 2x has an Overall Project Risk lower than y and the magnitude of the difference between x and y is >0 and 2 in the risk scale 3x has an Overall Project Risk lower than y and the magnitude of the difference between x and y is >2 and 3 in the risk scale 4x has an Overall Project Risk kower than y and the magnitude of the difference between x and y is >3 and 4 in the risk scale 5x has an Overall Project Risk lower than y and the magnitude of the difference between x and y is >4 and 5 in the risk scale x has an Overall Project Risk greater than y and the magnitude of the difference between x and y is >5 and 6 in the risk x has an Overall Project Risk lower than y and the magnitude of the difference between x and y is >6 and 7 in the risk scale 8 x has an Overall Project Risk lower than y and the magnitude of the difference between x and y is >7 and 8 in the risk scale 9x has an Overall Project Risk kower than y and the magnitude of the difference between x and y is >8 points in the risk scale - To evaluate the performance of each project proposal with respect to their Capability to Attract More Projects the following pairwise comparison table is provided: 1x and y have equal Attraction Capability 2x has an Attraction Capability greater than y and the magritude of the difference between x and y is >0 and 2 experts 3x has an Attraction Capability greater than y and the magritude of the difference between x and y is >2 and 3 experts 4x has an Attraction Capability greater than y and the magritude of the difference between x and y is >3 and 4 experts 5x has an Attraction Capatility greater than y and the magritude of the difference between x and y is >4 and 5 experts 6x has an Attraction Capability greater than y and the magritude of the difference between x and y is >5 and 6 experts 7x has an Attraction Capability greater than y and the magritude of the difference between x and y is >6 and 7 experts 8x has an Attraction Capability greater than y and the magritude of the difference between x and y is >7 and 8 experts 9x has an Attraction Capability greater than y and the magritude of the difference between x and y is over 8 experts x and y have equal Attraction Capability 2x has an Attraction Capability greater than y and the magritude of the difference between x and y is >0 and 2 experts 3x has an Atraction Capability greater than y and the magritude of the difference between x and y is >2 and 3 experts 4x has an Attraction Capability greater than y and the magnitude of the difference between x and y is >3 and 4 experts 5x has an Attraction Capability greater than y and the magritude of the difference between x and y is >4 and 5 experts 6x has an Atraction Capability greater than y and the magritude of the difference between x and y is >5 and 6 experts 7x has an Atraction Capability greater than y and the magnitude of the difference between x and y is >6 and 7 experts 8x has an Atraction Capability greater than y and the magnitude of the difference between x and y is >7 and 8 experts 9x has an Atraction Capability greater than y and the magnitude of the difference between x and y is over 8 experts Note: a "difference" is defined for this exercise as the magnitude of the difference between the values of x and y. Hint: 1-start with calculating PV. Don't use Excel NPV equation. It cannot be used in a year basis. Sum of PVs is your NPV in this case. 2-Determin the weights of each criterion. In the matrix, when evaluating a criterion against itself, the value is 1 . 3-Detemining the performance of each alternative against each criterion 4-Create the multi-criteria decision-making matrix