Ranking projects
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There are three criteria for ranking projects and it is important to know what they are:

net present value (NPV); i.e. the projects value after all discounted costs and benefits have been calculated. Any project with an NPV greater than zero is profitable;

benefit cost ratio (B/C ratio); i.e. the return on each dollar invested in the project. So for every dollar invested you receive x number of dollars in return. Any project with a B/C ratio greater than 1 is profitable.

internal rate of return (IRR); i.e. the level at which the discount rate will make the NPV equal to zero. Any IRR greater than the discount rate used should be accepted.

The following table represents a hypothetical situation where the differences in NPV, B/C ratio and IRR are presented. In this situation it may be best to choose project B because it is ranked first in NPV and IRR, even though it does not have the best B/C ratio. However, this is subjective comment and perhaps project C should be chosen because it has a greater return per dollar invested (i.e. B/C ratio).


Project NPV B/C ratio IRR
A $10,000 2:1 18%
B $11,000 3:1 19%
C $9,000 5:1 17%


Note: It is important that the risk aspects are also taken into account, using some form of sensitivity analysis, to assess the risks of failure to find, import and release agents to successfully control the target pest. 

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David Adamson