Profitability Analysis and Financial Evaluation of Projects

Abstract

This chapter presents and gives practical tools for the financial analysis and evaluation of all kinds of projects. The chapter discusses the foundations underlying modern profitability analysis, presents and illustrates the use of the three most commonly used profitability analysis methods, and explains what is the value of flexibility, or having real options, in a project and about how that value can be quantitatively analyzed. Illustrative real-world examples with detailed step-by-step explanations help understand how the presented methods should be used in practice. Best practices and the usability of the presented methods are discussed throughout the chapter. Presentation and interpretation of results are also discussed. Helpful references are given and additional supportive material is included.