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is there any method that monitor the actual return that we got from project since one of the decision method that used to start the project is IRR?
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on of the decision method to determine go or no go the project is calculated IRR. if the IRR is exceed the required return then we should go for the project and vice versa. my question is, there is any method that enable us to know the actual return of the project so we can monitor is the IRR as we expected or not? thank you
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Hamzah -

Sure - if you are tracking revenue or cost savings directly originating from the project and you know the project actual costs, you can calculate this.

Kiron
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1 reply by Hamzah Abdul Baits
Sep 23, 2019 8:39 PM
Hamzah Abdul Baits
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thanks for responding my question, but the context of the cost that you mentioned is it the cost that paid for finish the project or the cost for operating the deliverable of the project ?
Network:354



It is entirely dependent on the nature of the project, and the measurment/accounting required to determine the impact. For example, if the project is reducing the cost of materials, you know the price of the materials, the contracted price, and the volume purchased. That's an easy one to measure.

By contrast, a project to improve efficiency may impact 1 process step out of dozens. Measuring the total time of the process won't necessarily tell you about the actual impact of the one step you changed. You might take a measure a statistical sample, but measuring that one step over and over could erase your entire IRR. Changes involving overhead are very difficult to measure.
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1 reply by Hamzah Abdul Baits
Sep 23, 2019 8:43 PM
Hamzah Abdul Baits
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yes, this is actually the problem that i face, it is difficult to measure the overhead
Network:106485



It's a fairly straightforward accounting calculation, Hamzah. As Kiron and Keith stated, all you need is to know you cash flows.
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1 reply by Hamzah Abdul Baits
Sep 23, 2019 8:42 PM
Hamzah Abdul Baits
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what should i do next after i know the cash flow? it is possible to use the IRR formula to measure the return of the investment or there is another method that can be used? thank you
Network:11



Sep 23, 2019 7:06 AM
Replying to Kiron Bondale
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Hamzah -

Sure - if you are tracking revenue or cost savings directly originating from the project and you know the project actual costs, you can calculate this.

Kiron
thanks for responding my question, but the context of the cost that you mentioned is it the cost that paid for finish the project or the cost for operating the deliverable of the project ?
Network:11



Sep 23, 2019 11:41 AM
Replying to Stéphane Parent
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It's a fairly straightforward accounting calculation, Hamzah. As Kiron and Keith stated, all you need is to know you cash flows.
what should i do next after i know the cash flow? it is possible to use the IRR formula to measure the return of the investment or there is another method that can be used? thank you
Network:11



Sep 23, 2019 10:45 AM
Replying to Keith Novak
...
It is entirely dependent on the nature of the project, and the measurment/accounting required to determine the impact. For example, if the project is reducing the cost of materials, you know the price of the materials, the contracted price, and the volume purchased. That's an easy one to measure.

By contrast, a project to improve efficiency may impact 1 process step out of dozens. Measuring the total time of the process won't necessarily tell you about the actual impact of the one step you changed. You might take a measure a statistical sample, but measuring that one step over and over could erase your entire IRR. Changes involving overhead are very difficult to measure.
yes, this is actually the problem that i face, it is difficult to measure the overhead

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