Decision making is increasingly more complex today because of uncertainty. Additionally, most capita! projects will involve...

Decision making is increasingly more complex today because of uncertainty. Additionally, most capita! projects will involve numerous variables and possible outcomes. For example, estimating cash flows associated with a project involves working capital requirements, project risk, tax considerations, expected rates of inflation, and disposal values. We have to understand existing markets to forecast project revenues, assess competitive impacts on the project, and determine the fife cycle of the project. If our capital project involves production, we have to understand operating costs, additional overheads, capacity utilization, and startup costs. Consequently, we cannot manage capital projects by simply looking at the numbers, i.e. discounted cash flows. Why?

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