TABLE OF CONTENTS Over the years, a large number of mathematical models for selecting projects have been developed. Some of these models are actually being used to select projects in the industrial sector. For example, a survey of 40 high-level staff members from 29 Fortune 500 companies revealed that 80% of the respondents reported using one or more financial models in research and development related project decision making [3, 8]. Nonetheless, often reasons such as those listed next are cited for rarely using the mathematical models in project selection in industry or government [9 10,11]:
Inadequate reliable estimates for cost, performance, utility, and time;
Inadequate recognition of the interrelationships between projects;
Dynamic nature of project selection and review;
Poor handling of uncertainty and risk;
Poor consideration given to the relationship between the effort applied to a project and the chance for success;
Necessity for multiple criteria for evaluation.
Past experience indicates that in choosing a mathematical model for use in project selection, considerations must be given to factors such as realism, ease of use, flexibility, capability, cost, and easy computerization [3, 12]. This section presents a number of mathematical models that can be useful in making project selection decisions [3, 11 13 19].
This simple model is concerned with performing analysis to determine if benefits from a given project outweigh its cost. More specifically, it is only worthwhile to consider a project for development if its benefits are far greater than the investments. Nonetheless, the benefit/cost ratio is...
