Question

Discuss how (or whether) it is possible to combine these three different ways of evaluating a project into a single final decision.

For example, creating a new line of subway transportation (Social -> Good, Ecological -> Reduce CO2, Economical -> Very expensive).

Answer 1

The three different ways of evaluating a project into a single final decision can be done by doing a combined quantitative and qualitative analysis.

The quantitative analysis will involve doing a financial analysis through tools like NPV (net present value), return on investment and benefit cost ratio. The project will be regarded as economically feasible if the benefits outweigh the costs and so that the benefit cost ratio is greater than 1. The NPV of the project should be positive and its return on investment should be greater than the hurdle rate.

Qualitative analysis will involve determining the social impact and ecological impact of the project. Social impact analysis will involve doing a utility analysis for the project and determining if the project will create utility for the society. Ecological impact can be analyzed by doing an environmental impact analysis and determining the carbon footprint of the project.

These three aspects of the project can then be combined and the project can be analyzed and evaluated on an overall basis. The project will be considered good only if it has economical value, social value and ecological value and benefits.