Project Initiation

This chapter focuses on issues surrounding the initiation of projects and introduces some important terminology. You will find several sources for how projects are prioritized and how objectives are defined.

Financial Considerations

ROI

Return on investment (ROI) is a performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. It is one way of considering profits in relation to capital invested.

This is calculated by subtracting the project's costs from the benefits and then dividing by the costs. For example, if you invest $100 and your investment is worth $110 next year, the ROI is (110-100)/100 = 0.1 or a 10% return.

In our example: (306,425-201,175)/ 201,175 = .52 = 52% return. That's considered a nice return on investment.