SJTUEngineeringEconomics-The3rdLectureDr.HuHaoShanghaiJiaoTongUniversitySJTUAgendaReview(15)S1:PrinciplesandProcedureofProjectEvaluation(30)1stBreak(1:45-1:55pm)S2:ComparingAlternativesPartI(50)2ndBreak(2:50-3:00pm)S3:ComparingAlternativesPartII(60)S4:DiscussionsandMakeup(30)SJTUSession1PrinciplesandProcedureofProjectEvaluationSJTUPrinciples1&2Principle1:Developthealternatives.Thechoice(decision)isamongalternatives.Thealternativesneedtobeidentifiedandthendefinedforsubsequentanalysis.Principle2:Focusonthedifferences.Onlythedifferencesinexpectedfutureoutcomesamongthealternativesarerelevanttotheircomparisonandshouldbeconsideredinthedecision.SJTUPrinciples3&4Principle3:Useaconsistentviewpoint.Theprospectiveoutcomesofthealternatives,economicandother,shouldbeconsistentlydevelopedfromadefinedviewpoint(perspective).Principle4:Useacommonunitofmeasure.Usingacommonunitofmeasurementtoenumerateasmanyoftheprospectiveoutcomesaspossiblewillmakeeasiertheanalysisandcomparisonsofthealternatives.SJTUPrinciples5&6Principle5:Considerallrelevantcriteria.Selectionofapreferredalternative(decisionmaking)requirestheuseofacriterion(orcriteria).Thedecisionprocessshouldconsidertheoutcomesenumeratedinthemonetaryunitandthoseexpressedinsomeotherunitofmeasurementormakeexplicitinadescriptivemanner.Principle6:Makeuncertaintyexplicit.Uncertaintyisinherentinprojecting(orestimating)thefutureoutcomesofthealternativesandshouldberecognizedintheiranalysisandcomparison.SJTUPrinciple7RevisityourdecisionImproveddecisionmakingresultsfromanadaptiveprocess；totheextentpracticable,initialprojectedoutcomesoftheselectedalternativeandactualresultsachievedshouldbesubsequentlycompared.SJTUAnalysisProcedure1.Problemrecognition,formulation,andevaluation1.Problem/needdefinition2.Problem/needformulationandevaluation.2.Developmentofthefeasiblealternatives.3.Synthesisofpossiblesolutions(alternatives)3.Developmentofthenetcashflowforeachalternatives.4.Selectionofacriterion(orcriteria).4.Analysis,optimization,andevaluation.5.Analysisandcomparisonofthealternatives.6.Selectionofthepreferredalternative.5.Specificationofpreferredalternative.6.Com