NPV, IRR, CPI, SPI -- effect on project execution

Submitted by vijayavadrevu on Sun, 05/26/2013 - 15:59

 Your project is in the execution stage. NPV of your project is -$200,000 and IRR is 5%. CPI is 1.2 and SPI is 0.8. What is the recommended action?


1.    

Cancel the project since NPV is negative


2.    

Cancel the project since IRR is very low


3.    

Crash your project


4.    

Try to improve the NPV

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sanskrit

Sun, 05/26/2013 - 17:11

 3.     Crash your project

vijayavadrevu

Sun, 05/26/2013 - 17:20

 Yes, you are correct. Can you please provide the explanation?

Geethika

Sun, 05/26/2013 - 18:01

NPV and IRR used for Project selection during Initiating stage.

When your project is already into execution stage, we need to look for CPI and SPI,

With SPI being too low and CPI is good, we can crash the project to make up the schedule delay.

Although crashing increases project cost, CPI is >1, it should be manageable

vijayavadrevu

Sun, 05/26/2013 - 18:04

 Thank You Geethika!!!