The goal of NPV is to maximize the total
economic value of the portfolio subject to resource constraint. If there is no
such constraint the criterion would be which project has positive NPV.
NPV advantages:
·
It considers the time value of
money
·
Projects that are years away
from launch are penalized
·
Projects that are halfway
through development are favored all other things being equal
·
The method considers immediate
resources requirements
NPV drawbacks:
·
The method relies only on
financial analysis
·
The method assumes only
financial goals
Resource
estimates are inaccurate. Project teams have difficulty to make reliable
estimates