06-03-2015, 05:27 PM
Many postings gets me thinking but Specuvestor, your words really linked it up for me!
When picking projects to do R&D for company, we look at many figures such as IRR, ROI, NPV, and cash flow payback period. NPV would look better if it pays off sooner. We can't accept new projects solely on the basis of projected positive ratio while ignoring whether the company can absorb further depletion of resources within a certain time frame or not. "Low hanging fruit" projects that could bring money in fast are preferred as they not only pay for themselves - the cash flow they generate can be used to support other projects that looks much better in the future.
My profession has been teaching me to build portfolio and I did not know it!
When picking projects to do R&D for company, we look at many figures such as IRR, ROI, NPV, and cash flow payback period. NPV would look better if it pays off sooner. We can't accept new projects solely on the basis of projected positive ratio while ignoring whether the company can absorb further depletion of resources within a certain time frame or not. "Low hanging fruit" projects that could bring money in fast are preferred as they not only pay for themselves - the cash flow they generate can be used to support other projects that looks much better in the future.
My profession has been teaching me to build portfolio and I did not know it!