Economic analysis of Project Planning & Managemen t

Project

From Wikipedia, the free encyclopedia

For the urban low-income housing buildings called projects, see public housing. For other uses, see Project (disambiguation). For Wikipedian Projects, see Wikipedia:WikiProject A project in business and science is typically defined as a collaborative enterprise, frequently involving research or design, that is carefully planned to achieve a particular aim.[1]Projects can be further defined as temporary rather than permanent social systems that are constituted by teams within or across organizations to accomplish particular tasksunder time constraints.[2]

Overview[edit]
The word project comes from the Latin word projectum from the Latin verb proicere, "before an action" which in turn comes from pro-, which denotes precedence, something that comes before something else in time (paralleling the Greek ) and iacere, "to do". The word "project" thus actually originally meant "before an action". When the English language initially adopted the word, it referred to a plan of something, not to the act of actually carrying this plan out. Something performed in accordance with a project became known as an "object".

Specific uses[edit]
School and university[edit]
At school, educational institute and independent work project is involved in a normal essay assignment. It requires students to undertake their own fact-finding and analysis, either from library/internet research or from gathering data empirically. The written report that comes from the project is usually in the form of a dissertation, which will contain sections on the project's inception, analysis, findings and conclusions.... [3]

Engineering project[edit]
Engineering projects are, in many countries, specifically defined by legislation, which requires that such projects should be carried out by registered engineers and/or registered engineering companies. That is, companies with license to carry out such works as design and construction of buildings, power plants, industrial facilities, installation and erection of electrical grid networks, transportation infrastructure and the like. The scope of the project is specified in a contract between the owner and the engineering and construction parties. As a rule, an engineering project is broken down into design andconstruction phases. The outputs of the design process are drawings, calculations, and all other design documentation necessary to carry out the next phase. The next phase would normally be sending the project plans to a developer who will then help construct the plans (construction phase).

Project management[edit]
In project management a project consists of a temporary endeavor undertaken to create a unique product, service or result.[4] Another definition is a management environment that is created for the purpose of delivering one or more business products according to a specified business case. Project objectives define target status at the end of the project, reaching of which is considered necessary for the achievement of planned benefits. They can be formulated asSMART criteria:[5] Specific, Measurable (or at least evaluable) achievement, Achievable (recently Agreed-to or Acceptable are used regularly as well), Realistic (given the current state of organizational resources) and Time terminated (bounded). The evaluation (measurement) occurs at the project closure. However a continuous guard on the project progress should be kept by monitoring and evaluating. It is also worth noting that SMART is best applied for incremental type innovation projects. [citation needed] For radical type projects it does not apply as well. Goals for such projects tend to be broad, qualitative, stretch/unrealistic and success driven.

Project Cycle Management

From Wikipedia, the free encyclopedia

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2013)

Project Cycle Management (PCM) is used in EuropeAid terminology describe decision-making procedures used during the life-cycle of a project (including key tasks, roles and responsibilities, key documents and decision options). Projects go through definite and describable phases. Each phase can be brought to some sense of closure as the next phase begins. Phases can be made to result in deliverables or accomplishments to provide the starting point for the next phase. Phase transitions are ideal times to update planning baselines, to conduct high level management reviews, and to evaluate project costs and prospects.

Definition of 'Compounding'
The ability of an asset to generate earnings, which are then reinvested in order to generate their own earnings. In other words, compounding refers to generating earnings from previous earnings. Also known as "compound interest".

Compound Interest Formula

P r t A

= principal amount (the initial amount you borrow or deposit) = annual rate of interest (as a decimal) = number of years the amount is deposited or borrowed for. = amount of money accumulated after n years, including interest.

n = number of times the interest is compounded per year

Example:
An amount of $1,500.00 is deposited in a bank paying an annual interest rate of 4.3%, compounded quarterly. What is the balance after 6 years?

Solution:Using the compound interest formula, we have that

P = 1500, r = 4.3/100 = 0.043, n = 4, t = 6. Therefore,

So, the balance after 6 years is approximately $1,938.84.

Measurement of Cash Flow

Mathematics of Money: Compound Interest Analysis With Applications
This site is a part of the JavaScript E-labs learning objects for decision making. Other JavaScript in this series are categorized under different areas of applications in the MENU section on this page.

Compound Interest: The future value (FV) of an investment of present value (PV) dollars earning interest at an annual rate of r compounded m times per year for a period of t years is: FV = PV(1 + r/m)mt or FV = PV(1 + i)n where i = r/m is the interest per compounding period and n = mt is the number of compounding periods. One may solve for the present value PV to obtain: PV = FV/(1 + r/m)mt Numerical Example: For 4-year investment of $20,000 earning 8.5% per year, with interest re-invested each month, the future value is FV = PV(1 + r/m)mt = 20,000(1 + 0.085/12)(12)(4) = $28,065.30

Notice that the interest earned is $28,065.30 - $20,000 = $8,065.30 -- considerably more than the corresponding simple interest. Effective Interest Rate: If money is invested at an annual rate r, compounded m times per year, theeffective interest rate is: reff = (1 + r/m)m - 1. This is the interest rate that would give the same yield if compounded only once per year. In this context r is also called the nominal rate, and is often denoted as rnom. Numerical Example: A CD paying 9.8% compounded monthly has a nominal rate of rnom = 0.098, and an effective rate of: r
eff

=(1 + rnom /m)m

(1 + 0.098/12)12 - 1

= 0.1025.

Thus, we get an effective interest rate of 10.25%, since the compounding makes the CD paying 9.8% compounded monthly really pay 10.25% interest over the course of the year. Mortgage Payments Components: Let where P = principal, r = interest rate per period, n = number of periods, k = number of payments, R = monthly payment, and D = debt balance after K payments, then R = P r / [1 - (1 + r)-n] and D = P (1 + r)k - R [(1 + r)k - 1)/r] Accelerating Mortgage Payments Components: Suppose one decides to pay more than the monthly payment, the question is how many months will it take until the mortgage is paid off? The answer is, the rounded-up, where: n = log[x / (x P r)] / log (1 + r) where Log is the logarithm in any base, say 10, or e. Future Value (FV) of an Annuity Components: Ler where R = payment, r = rate of interest, and n = number of payments, then FV = [ R(1 + r)n - 1 ] / r Future Value for an Increasing Annuity: It is an increasing annuity is an investment that is earning interest, and into which regular payments of a fixed amount are made. Suppose one makes a payment of R at the end of each compounding period into an investment with a present value of PV, paying interest at an annual rate of r compounded m times per year, then the future value after t years will be FV = PV(1 + i)n + [ R ( (1 + i)n - 1 ) ] / i

where i = r/m is the interest paid each period and n = m t is the total number of periods. Numerical Example: You deposit $100 per month into an account that now contains $5,000 and earns 5% interest per year compounded monthly. After 10 years, the amount of money in the account is: FV = PV(1 + i)n + [ R(1 + i)n - 1 ] / i = 5,000(1+0.05/12)120 + [100(1+0.05/12)120 - 1 ] / (0.05/12) = $23,763.28 Value of a Bond: Let N = number of year to maturity, I = the interest rate, D = the dividend, and F = the face-value at the end of N years, then the value of the bond is V, where V = (D/i) + (F - D/i)/(1 + i)N V is the sum of the value of the dividends and the final payment. You may like to perform some sensitivity analysis for the "what-if" scenarios by entering different numerical value(s), to make your "good" strategic decision.

discounting
Verb

present participle of discount(Verb)

Deduct an amount from (the usual price of something). Reduce (a product or service) in price.

Definition of 'Discounting'
The process of determining the present value of a payment or a stream of payments that is to be received in the future. Given the time value of money, a dollar is worth more today than it would be worth tomorrow given its capacity to earn interest. Discounting is the method used to figure out how much these future payments are worth today.

Discount Formula
Discount is defined as the deduction in the price of something as a gift to the customers. It is the product of the original price and the discount rate. The discount rate is given in percentage.

The Discount Formula is given as,

Discounting
From Wikipedia, the free encyclopedia

For discounting in the sense of downplaying or dismissing, see Minimisation (psychology). For the band of the same name, seeDiscount (band). See also: Discounts and allowances Discounting is a financial mechanism in which a debtor obtains the right to delay payments to a creditor, for a defined period of time, in exchange for a charge or fee.[1] Essentially, the party that owes money in the present purchases the right to delay the payment until some future date.[2] The discount, or charge, is simply the difference between the original amount owed in the present and the amount that has to be paid in the future to settle the debt. [1] The discount is usually associated with a discount rate, which is also called the discount yield.[1][1][2][3] The discount yield is simply the proportional share of the initial amount owed (initial liability) that must be paid to delay payment for 1 year. Discount Yield = "Charge" to Delay Payment for 1 year / Debt Liability It is also the rate at which the amount owed must rise to delay payment for 1 year. Since a person can earn a return on money invested over some period of time, most economic and financial models assume the "Discount Yield" is the same as the Rate of Return the person could receive by investing this money elsewhere (in assets of similarrisk) over the given period of time covered by the delay in payment. [1][2] The Concept is associated with the Opportunity Cost of not having use of the money for the period of time covered by the delay in payment. The relationship between the "Discount Yield" and theRate of Return on other financial assets is usually discussed in such economic and financial theories involving the inter-relation between various Market Prices, and the achievement of Pareto Optimality through the operations in the Capitalistic Price Mechanism,[2] as well as in the discussion of the "Efficient (Financial) Market Hypothesis".[1][2][4] The person delaying the payment of the current Liability is essentially compensating the person to whom he/she owes money for the lost revenue that could be earned from an investment during the time period covered by the delay in payment. [1] Accordingly, it is the relevant "Discount Yield" that determines the "Discount", and not the other way around. As indicated, the Rate of Return is usually calculated in accordance to an annual return on investment. Since an investor earns a return on the original principal amount of the investment as well as on any prior period Investment income, investment earnings are "compounded" as time advances. [1][2] Therefore, considering the fact that the "Discount" must match the benefits obtained from a similar Investment Asset, the "Discount Yield" must be used within

the same compounding mechanism to negotiate an increase in the size of the "Discount" whenever the time period the payment is delayed or extended.[2][4] The Discount Rate is the rate at which the Discount must grow as the delay in payment is extended.[5] This fact is directly tied into the "Time Value of Money" and its calculations.[1] The "Time Value of Money" indicates there is a difference between the "Future Value" of a payment and the "Present Value" of the same payment. The Rate of Return on investment should be the dominant factor in evaluating the market's assessment of the difference between the "Future Value" and the "Present Value" of a payment; and it is the Market's assessment that counts the most.[4]Therefore, the "Discount Yield", which is predetermined by a related Return on Investment that is found in the financial markets, is what is used within the "Time Value of Money" calculations to determine the "Discount" required to delay payment of a financial liability for a given period of time. BASIC CALCULATION If we consider the value of the original payment presently due to be $P, and the debtor wants to delay the payment for t years, then an r% Market Rate of Return on a similar Investment Assets means the "Future Value" of $P is $P * (1 + r %)t ,[2][5] and the "Discount" would be calculated as Discount = $P * (1+r%)t - $P
[2]

where r% is also the "Discount Yield". If $F is a payment that will be made t years in the future, then the "Present Value" of this Payment, also called the "Discounted Value" of the payment, is $P = $F / (1+r%)t
[2]

To calculate the present value of a single cash flow, it is divided by one plus the interest rate for each period of time that will pass. This is expressed mathematically as raising the divisor to the power of the number of units of time. Consider the task to find the present value PV of $100 that will be received in five years. Or equivalently, which amount of money today will grow to $100 in five years when subject to a constant discount rate? Assuming a 12% per year interest rate it follows

Discount rate[edit]
The discount rate which is used in financial calculations is usually chosen to be equal to the Cost of Capital. The Cost of Capital, in a financial market equilibrium, will be the same as the Market Rate of Return on the financial asset mixture the firm uses to finance capital investment. Some adjustment may be made to the discount rate to take account of risks associated with uncertain cash flows, with other developments. The discount rates typically applied to different types of companies show significant differences:

Startups seeking money: 50 100% Early Startups: 40 60% Late Startups: 30 50% Mature Companies: 10 25%

The higher discount rate for startups reflects the various disadvantages they face, compared to established companies:

Reduced marketability of ownerships because stocks are not traded publicly. Limited number of investors willing to invest. Startups face high risks. Over optimistic forecasts by enthusiastic founders.

One method that looks into a correct discount rate is the capital asset pricing model. This model takes in account three variables that make up the discount rate: 1. Risk Free Rate: The percentage of return generated by investing in risk free securities such as government bonds. 2. Beta: The measurement of how a companys stock price reacts to a change in the market. A beta higher than 1 means that a change in share price is exaggerated compared to the rest of shares in the same market. A beta less than 1 means that the share is stable and not very responsive to changes in the market. Less than 0 means that a share is moving in the opposite of the market change. 3. Equity Market Risk Premium: The return on investment that investors require above the risk free rate. Discount rate= risk free rate + beta*(equity market risk premium)

Discount factor[edit]
The discount factor, DF(T), is the factor by which a future cash flow must be multiplied in order to obtain the present value. For a zero-rate (also called spot rate) years), the discount factor is: , taken from a yield curve, and a time to cashflow (in

In the case where the only discount rate you have is not a zero-rate (neither taken from a zero-coupon bond nor converted from a swap rate to a zero-rate through bootstrapping) but an annually-compounded rate

(for example if your benchmark is a US Treasury bond with annual coupons and you only have its yield to maturity, you would use an annually-compounded discount factor:

However, when operating in a bank, where the amount the bank can lend (and therefore get interest) is linked to the value of its assets(including accrued interest), traders usually use daily compounding to discount cashflows. Indeed, even if the interest of the bonds it holds (for example) is paid semi-annually, the value of its book of bond will increase daily, thanks to accrued interest being accounted for, and therefore the bank will be able to re-invest these daily accrued interest (by lending additional money or buying more financial products). In that case, the discount factor is then (if the usual money market day count convention for the currency is ACT/360, in case of currencies such as USD, EUR, JPY), with zero-rate and the time to cashflow in years: the

or, in case the market convention for the currency being discounted is ACT/365 (AUD, CAD, GBP):

Sometimes, for manual calculation, the continuously-compounded hypothesis is a close-enough approximation of the daily-compounding hypothesis, and makes calculation easier (even though it does not have any real application as no financial instrument is continuously compounded). In that case, the discount factor is:

Decision Criteria Under Certainty

Decisions Under Certainty, Risk and Uncertainty

(It will be a good idea to read the previous posts on the subject for better understanding). Knowledge of Outcomes An outcome defines what will happen if a particular alternative or course of action is chosen. Knowledge of outcomes is important when there are multiple alternatives. In the analysis of decision making, three types of knowledge with respect to outcomes are usually distinguished:

1.

Certainty: Complete and accurate knowledge of outcome of each alternative. There is only one outcome for each alternative.

2. 3.

Risk: Multiple possible outcomes of each alternative can be identified and a probability of occurrence can be attached to each. Uncertainty: Multiple outcomes for each alternative can be identified but there is no knowledge of the probability to be attached to each. Taking Decisions Under Certainty If the outcomes are known and the values of the outcomes are certain, the task of the decision maker is to compute the optimal alternative or outcome with some optimization criterion in mind. As an example: if the optimization criterion is least cost and you are considering two different brands of a product, which appear to be equal in value to you, one costing 20% less than the other, then, all other things being equal, you will choose the less expensive brand. However, decision making under certainty is rare because all other things are rarely equal. Linear programming is one of the techniques for finding an optimal solution under certainty. Linear programming problems normally need computations with the help of a computer. Taking Decisions Under Risk The making of decisions under risk, when only the probabilities of various outcomes are known, is similar to certainty. Instead of optimizing the outcomes, the general rule is to optimize the expected outcome. As an example: if you are faced with a choice between two actions one offering a 1% probability of a gain of $10000 and the other a 50% probability of a gain of $400, you as a rational decision maker will choose the second alternative because it has the higher expected value of $200 as against $100 from the first alternative. Taking Decisions Under Uncertainty Decisions under uncertainty (outcomes known but not the probabilities) must be handled differently because, without probabilities, the optimization criteria cannot be applied. Some estimated probabilities are assigned to the outcomes and the decision making is done as if it is decision making under risk.

Definition of 'Net Present Value - NPV'

The difference between the present value of cash inflows and the present value of cash outflows. NPV is used in capital budgeting to analyze the profitability of an investment or project. NPV analysis is sensitive to the reliability of future cash inflows that an investment or project will yield. Formula:

In addition to the formula, net present value can often be calculated using tables, and spreadsheets such as Microsoft Excel.

Investopedia explains 'Net Present Value - NPV'

NPV compares the value of a dollar today to the value of that same dollar in the future, taking inflation and returns into account. If the NPV of a prospective project is positive, it should be accepted. However, if NPV is negative, the project should probably be rejected because cash flows will also be negative. For example, if a retail clothing business wants to purchase an existing store, it would first estimate the future cash flows that store would generate, and then discount those cash flows into one lump-sum present value amount, say $565,000. If the owner of the store was willing to sell his business for less than $565,000, the purchasing company would likely accept the offer as it presents a positive NPV investment. Conversely, if the owner would not sell for less than $565,000, the purchaser would not buy the store, as the investment would present a negative NPV at that time and would, therefore, reduce the overall value of the clothing company.

Payback period
From Wikipedia, the free encyclopedia

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Payback period in capital budgeting refers to the period of time required for the return on an investment to "repay" the sum of the original investment. For example, a $1000 investment which returned $500 per year would have a two year payback period. The time value of money is not taken into account. Payback period intuitively measures how long something takes to "pay for itself." All else being equal, shorter payback periods are preferable to longer payback periods. Payback period is widely used because of its ease of use despite the recognized limitations described below. The term is also widely used in other types of investment areas, often with respect to energy efficiency technologies, maintenance, upgrades, or other changes. For example, acompact fluorescent light bulb may be described as having a payback period of a certain number of years or operating hours, assuming certain costs. Here, the return to the investment consists of reduced operating costs. Although primarily a financial term, the concept of a payback period is occasionally extended to other uses, such as energy payback period (the period of time over which the energy savings

of a project equal the amount of energy expended since project inception); these other terms may not be standardized or widely used. Payback period as a tool of analysis is often used because it is easy to apply and easy to understand for most individuals, regardless of academic training or field of endeavour. When used carefully or to compare similar investments, it can be quite useful. As a stand-alone tool to compare an investment to "doing nothing," payback period has no explicit criteria for decision-making (except, perhaps, that the payback period should be less than infinity). The payback period is considered a method of analysis with serious limitations and qualifications for its use, because it does not account for the time value of money, risk, financingor other important considerations, such as the opportunity cost. Whilst the time value of money can be rectified by applying a weighted average cost of capital discount, it is generally agreed that this tool for investment decisions should not be used in isolation. Alternative measures of "return" preferred by economists are net present value and internal rate of return. An implicit assumption in the use of payback period is that returns to the investment continue after the payback period. Payback period does not specify any required comparison to other investments or even to not making an investment. Payback period is usually expressed in years. Start by calculating Net Cash Flow for each year: Net Cash Flow Year 1 = Cash Inflow Year 1 - Cash Outflow Year 1. Then Cumulative Cash Flow = (Net Cash Flow Year 1 + Net Cash Flow Year 2 + Net Cash Flow Year 3 ... etc.) Accumulate by year until Cumulative Cash Flow is a positive number: that year is the payback year. To calculate a more exact payback period: Payback Period = Amount to be Invested/Estimated Annual Net Cash Flow 1{[1]} It can also be calculated using the formula:

Payback Period = (p - n)p

+ ny (unit:years)

= 1 + ny - np
Where

ny= The number of years after the initial investment at which the last negative value of cumulative cash flow occurs. n= The value of cash flow at which the last negative value of cumulative cash flow occurs. p= The value of cash flow at which the first positive value of cumulative cash flow occurs. This formula can only be used to calculate the soonest payback period; that is, the first period after which the investment has paid for itself. If the cumulative cash flow drops to a negative value some time after it has reached a positive value, thereby changing the payback period, this formula can't be applied. This formula ignores values that arise after the Payback Period has been reached. Additional complexity arises when the cash flow changes sign several times; i.e., it contains outflows in the midst or at the end of the project lifetime. The modified payback period algorithm may be applied then. First, the sum of all of the

cash outflows is calculated. Then the cumulative positive cash flows are determined for each period. The modified payback is calculated as the moment in which the cumulative positive cash flow exceeds the total cash outflow.

Internal rate of return

The internal rate of return (IRR) is a rate of return used in capital budgeting to measure and compare the profitability of investments. It is also called the discounted cash flow rate of return (DCFROR) or simply the rate of return (ROR).[1] In the context of savings and loans the IRR is also called the effective interest rate. The term internal refers to the fact that its calculation does not incorporate environmental factors (e.g., the interest rate or inflation).
Contents

1 Definition 2 Uses 3 Calculation

o

3.1 Example

3.1.1 Numerical solution 3.1.2 Numerical Solution for Single Outflow and Multiple Inflows

4 Problems with using internal rate of return 5 Mathematics 6 See also 7 References 8 Further reading 9 External links

Definition

The internal rate of return on an investment or project is the "annualized effective compounded return rate" or discount rate that makes the net present value of all cash flows (both positive and negative) from a particular investment equal to zero.

In more specific terms, the IRR of an investment is the interest rate at which the net present value of costs (negative cash flows) of the investment equals the net present value of the benefits (positive cash flows) of the investment. Internal rates of return are commonly used to evaluate the desirability of investments or projects. The higher a project's internal rate of return, the more desirable it is to undertake the project. Assuming all other factors are equal among the various projects, the project with the highest IRR would probably be considered the best and undertaken first. A firm (or individual) should, in theory, undertake all projects or investments available with IRRs that exceed the cost of capital. Investment may be limited by availability of funds to the firm and/or by the firm's capacity or ability to manage numerous projects.
Uses

Important: Because the internal rate of return is a rate quantity, it is an indicator of the efficiency, quality, or yield of an investment. This is in contrast with the net present value, which is an indicator of the value ormagnitude of an investment. An investment is considered acceptable if its internal rate of return is greater than an established minimum acceptable rate of return or cost of capital. In a scenario where an investment is considered by a firm that hasequity holders, this minimum rate is the cost of capital of the investment (which may be determined by the risk-adjusted cost of capital of alternative investments). This ensures that the investment is supported by equity holders since, in general, an investment whose IRR exceeds its cost of capital adds value for the company (i.e., it is economically profitable).

Benefitcost ratio
From Wikipedia, the free encyclopedia

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A benefit-cost ratio (BCR) is an indicator, used in the formal discipline of cost-benefit analysis, that attempts to summarize the overall value for money of a project or proposal. A BCR is the ratio of the benefits of a project or proposal, expressed in monetary terms, relative to its costs, also expressed in monetary terms. All benefits and costs should be expressed in discounted present values. Benefit cost ratio (BCR) takes into account the amount of monetary gain realized by performing a project versus the amount it costs to execute the project. The higher the BCR the better the investment. General rule of thumb is that if the benefit is higher than the cost the project is a good investment.

Rationale[edit]
In the absence of funding constraints, the best value for money projects are those with the highest net present value. Where there is a budget constraint, the ratio of NPV to the expenditure falling within the constraint should be used. In practice, the ratio of PV of future net benefits to expenditure is expressed as a BCR. (NPV-toinvestment is net BCR.) BCRs have been used most extensively in the field of transport cost-benefit appraisals. The NPV should be evaluated over the service life of the project.

Problems[edit]
Long-term BCRs, such as those involved in climate change, are very sensitive to the discount rate used in the calculation of net present value, and there is often no consensus on the appropriate rate to use. The handling of non-monetary impacts also present problems. They are usually incorporated by estimating them in monetary terms, using measures such as WTP (willingness to pay), though these are often difficult to assess. Alternative approaches include the UK's New Approach to Appraisal framework. A further complication with BCRs concerns the precise definitions of benefits and costs. These can vary depending on the funding agency.

What are Decision Trees?

A flow chart or diagram representing a classification system or a predictive model. The tree is structured as a sequence of simple questions. The answers to these questions trace a path down the tree. The end product is a collection of hierarchical rules that segment the data into groups, where a decision (classification or prediction) is made for each group. The hierarchy is called a tree, and each segment is called a node. The original segment contains the entire data set, referred to as the root node of the tree. A node with all of its successors forms a branch of the node that created it. The final nodes (terminal nodes) are called leaves. For each leaf, a decision is

made and applied to all observations in the leaf. Classification Tree: Categorical Response / Target Regression Tree: Continuous Response / Target Predictor variables => Inputs What are Decision Trees?Moore, Jesse, & Kittler ASA Q&P Research Conference

Decision tree
From Wikipedia, the free encyclopedia

This article is about decision trees in decision analysis. For the use of the term in machine learning, see Decision tree learning.

Traditionally, decision trees have been created manually.

A decision tree is a decision support tool that uses a tree-like graph or model of decisions and their possible consequences, includingchance event outcomes, resource costs, and utility. It is one way to display an algorithm. Decision trees are commonly used in operations research, specifically in decision analysis, to help identify a strategy most likely to reach a goal.

Overview[edit]
Decision Tree is a flow-chart like structure in which internal node represents test on an attribute, each branch represents outcome of test and each leaf node represents class label (decision taken after computing all attributes). A path from root to leaf represents classification rules.

In decision analysis a decision tree and the closely related influence diagram is used as a visual and analytical decision support tool, where the expected values (or expected utility) of competing alternatives are calculated. A decision tree consists of 3 types of nodes: 1. Decision nodes - commonly represented by squares 2. Chance nodes - represented by circles 3. End nodes - represented by triangles Decision trees are commonly used in operations research, specifically in decision analysis, to help identify a strategy most likely to reach a goal. If in practice decisions have to be taken online with no recall under incomplete knowledge, a decision tree should be paralleled by a probability model as a best choice model or online selection model algorithm. Another use of decision trees is as a descriptive means for calculating conditional probabilities. Decision trees, influence diagrams, utility functions, and other decision analysis tools and methods are taught to undergraduate students in schools of business, health economics, and public health, and are examples of operations research or management science methods.

Decision tree building blocks[edit]

Decision tree elements[edit]

Drawn from left to right, a decision tree has only burst nodes (splitting paths) but no sink nodes (converging paths). Therefore, used manually, they can grow very big and are then often hard to draw fully by hand. Traditionally, decision trees have been created manually - as the aside example shows - although increasingly, specialized software is employed.

Decision tree using flow chart symbols[edit]

Commonly a decision tree is drawn using flow chart symbols as it is easier for many to read and understand.

Analysis example[edit]
Analysis can take into account the decision maker's (e.g., the company's) preference or utility function, for example:

The basic interpretation in this situation is that the company prefers B's risk and payoffs under realistic risk preference coefficients (greater than $400Kin that range of risk aversion, the company would need to model a third strategy, "Neither A nor B").

Another example[edit]

Decision trees can be used to optimize an investment portfolio. The following example shows a portfolio of 7 investment options (projects). The organization has $10,000,000 available for the total investment. Bold lines mark the best selection 1, 3, 5, 6, and 7, which will cost $9,750,000 and create a payoff of 16,175,000. All other combinations would either exceed the budget or yield a lower payoff. [1]

Influence diagram[edit]
A decision tree can be represented more compactly as an influence diagram, focusing attention on the issues and relationships between events.

The squares represent decisions, the ovals represent action, and the diamond represents results.

Advantages and disadvantages[edit]

Amongst decision support tools, decision trees (and influence diagrams) have several advantages. Decision trees:

Are simple to understand and interpret. People are able to understand decision tree models after a brief explanation. Have value even with little hard data. Important insights can be generated based on experts describing a situation (its alternatives, probabilities, and costs) and their preferences for outcomes.

Possible scenarios can be added Worst, best and expected values can be determined for different scenarios Use a white box model. If a given result is provided by a model. Can be combined with other decision techniques. The following example uses Net Present Value calculations, PERT 3-point estimations (decision #1) and a linear distribution of expected outcomes (decision #2):

Disadvantages of decision trees:

For data including categorical variables with different number of levels, information gain in decision trees are biased in favor of those attributes with more levels. [2] Calculations can get very complex particularly if many values are uncertain and/or if many outcomes are linked.

How to Evaluate a Decision Tree Model

by Anna Assad, Demand Media

A decision tree can help you make tough choices between different paths and outcomes, but only if you evaluate the model correctly. Decision trees are graphic models of possible decisions and all related possible outcomes in a tree form, with the outcomes shown as "branches" off each choice. You can use a decision tree to help you make all kinds of business decisions, including new product development, new marketing strategies and workforce changes.

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Features Step 1
Assign a numerical value to each possible outcome on the tree. Use dollar amounts for outcomes. For example, if one outcome would gain the company $100,000, mark "$100,000" next to it. Estimate company value for outcomes without a specific price tag.

Step 2
Label the likelihood of each outcome. Use whole percentages for each outcome on the same branch. The outcome percentages must total 100 for each set of possible outcomes for the same branch. For example, for a decision branch with four possible outcomes, the percentages of all four outcomes must equal 100. Use past experience and data to estimate the possibility of each outcome.

Step 3
Make a separate list for each decision and its possible outcomes. Calculate an adjusted outcome value by multiplying the likelihood percentage by the value. For example, label an outcome worth $300,000 that has a 30-percent chance of succeeding as $90,000 on your list.

Step 4
Review each branch on the tree for costs. You must factor in the costs of the decisions when looking at outcome values. Subtract the cost for each decision from your adjusted outcome values. Label the results "Final Outcomes."

Evaluation Step 1
Look at the possible decisions on the tree for all "Final Outcomes." Mark the decisions that carry a lot of risk and the decisions that have a low probability of a successful outcome.

Step 2
Look at the risky decisions. Consider whether your business can tolerate the amount of risk. For example, a decision with an outcome of $150,000 that costs $20,000 to attempt is dangerous if your business can't afford to lose $20,000. Eliminate outcomes with unaffordable attached risks.

Step 3
Look at the decisions for the outcomes with the lowest chance of success. Consider whether possible outcomes justify the implementation expenses for each decision. Eliminate choices that carry a high cost or a lot of risk without a significant outcome.

Step 4
Consider the remaining decisions. Refer to the "Final Outcomes" list for reference. Select the path leading to a significant final outcome that has a high chance of succeeding.
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Tip
Consider a more certain outcome, even if the value is less than the other outcomes, if you cannot take any risks with your decision.

Warning
Leaving off costs and greatly overestimating values and probability can give poor results from the tree.

Decision Rules Under Uncertainty

Decisions Under Risk and Uncertainty
When managers make choices or decisions under risk or uncertainty, they must somehow incorporate this risk into their decision-making process. This chapter presented some basic rules for managers to help them make decisions under conditions of risk and uncertainty. Conditions of risk occur when a manager must make a decision for which the outcome is not known with certainty. Under conditions of risk, the manager can make a list of all possible outcomes and assign probabilities to the various outcomes. Uncertainty exists when a decision maker cannot list all possible outcomes and/or cannot assign probabilities to the various outcomes. To measure the risk associated with a decision, the manager can examine several characteristics of the probability distribution of outcomes for the decision. The various rules for making decisions under risk require information about several different characteristics of the probability distribution of outcomes: (1) the expected value (or mean) of the distribution, (2) the variance and standard deviation, and (3) the coefficient of variation. While there is no single decision rule that managers can follow to guarantee that profits are actually maximized, we discussed a number of decision rules that managers can use to help them make decisions under risk: (1) the expected value rule, (2) the meanvariance rules, and (3) the coefficient of variation rule. These rules can only guide managers in their analysis of risky decision making. The actual decisions made by a manager will depend in large measure on the manager's willingness to take on risk. Managers' propensity to take on risk can be classified in one of three categories: risk averse, risk loving, or risk neutral. Expected utility theory explains how managers can make decisions in risky situations. The theory postulates that managers make risky decisions with the objective of maximizing the expected utility of profit. The manager's attitude for risk is captured by the shape of the utility function for profit. If a manager experiences diminishing (increasing) marginal utility for profit, the manager is risk averse (risk loving). If marginal utility for profit is constant, the manager is risk neutral. If a manager maximizes expected utility for profit, the decisions can differ from decisions reached using the three decision rules discussed for making risky decisions. However, in the case of a risk-neutral manager, the decisions are the same under maximization of expected profit and maximization of expected utility of profit. Consequently, a risk-neutral decision maker can follow the simple rule of maximizing the expected value of profit and simultaneously also be maximizing utility of profit. In the case of uncertainty, decision science can provide very little guidance to managers beyond offering them some simple decision rules to aid them in their analysis of uncertain situations. We discussed four basic rules for decision making under uncertainty in this chapter: (1) the maximax rule, (2) the maximin rule, (3) the minimax regret rule, and (4) the equal probability rule.

Payoff Matrix
An matrix which gives the possible outcome of a two-person zero-sum game when player A has possible moves and player B moves. The analysis of the matrix in order to determine optimal strategies is the aim of game theory. The so-called "augmented" payoff matrix is defined as follows:

What is a Payoff Matrix?

Answer
A payoff matrix is term used in business to refer to a decision analysis tool that summarizes pros and cons of a decision in a tabular form. This tool lists all payoffs with all possible combinations of alternative actions and external conditions.

Q&A Related to "What is a Payoff Matrix"

What is the payoff matrix?
A payoff matrix is a decision analysis tool that summarizes pros and cons of a decision in a tabular form. It lists payoffs (negative or positive returns) associated with all possible http://wiki.answers.com/Q/What_is_pay_off_matrix

What is the Nash Equilibrium for this payoff matrix?

There is no Nash equilibrium.No strategy can be coordinated. http://answers.yahoo.com/question/index?qid=201104...

How do you know if a payoff matrix doesn't have a dominant strategy?

There will be no saddle point; no point in the table will be an optimum. http://wiki.answers.com/Q/How_do_you_know_if_a_pay...

how to find the pay-off matrix?

payoff matrix : A={ 1 0 1 1 , 1 1 0 1 , 1 1 1 0 }. Therefore A! = { 1 1 1 0 , 1 1 0 1 , 1 0 1 1 }. http://answers.yahoo.com/question/index?qid=201204...

Maximin, Maximax and Minimax Regret Decision Criteria/Rules

Decision makers may use any one of the above criteria to make decisions in the following situations: Where probabilities are available but the decision maker is not interested in average, long-run values (expected values) but on actual one-off outcomes. Where it is not possible to assign meaningful probabilities to alternative courses of action.

The criterion used by the decision maker will be dependent upon his risk attitude: Risk seeker management will use maximax rule Risk averter management will use maximin rule Risk neutral management will use minimax regret rule ********************** (1) Maximax Rule It is a strategy which maximizes the maximum gain.

A risk seeker manager using the rule will select the option with the largest payoff based on the assumpt that the best possible outcome will occur for all the available options.

(2) Maximin Rule It is a strategy which maximizes the minimum gain (or minimizes the maximum loss)

A risk averse manager using this rule will select the option with the largest payoff based on the assumpt that the worst possible outcome will occur for all the available options.

(3) Minimax Regret Rule

It is a strategy which seeks to minimize the maximum possible regret ie opportunity cost that will be incurred as a result of having made the wrong decision (e.g. contribution/profit/cost savings forgone). T opportunity cost associated with each decision option will be summarized in a regret matrix (opportunity cost table).

A risk neutral manager using this rule will select the option with the lowest regret/opportunity cost base the assumption that the maximum regret will occur for all the available decision options.

The Hurwicz Rule

The Hurwicz Rule assumes that without guidance people will tend to focus on the extremes (i.e., Maximin or Maximax). Hurwicz rule allows a blending of optimism and pessimism using a selected ratio. You will choose an index of optimism, between 0 and 1, describing how optimistic you are with the remainder being pessimism. An of, say, 0.2 means that y are more pessimistic than optimistic. When = 0.1, that means that you are even more pessimistic than at = 0.2. Se

 to 0.85 means that you are very optimistic but a small amount of pessimism (15%) remains.

Network Analysis
Network analysis[edit]
Social network analysis[edit]

Social network analysis examines the structure of relationships between social entities. [1] These entities are often persons, but may also be groups, organizations, nation states, web sites, scholarly publications.

Since the 1970s, the empirical study of networks has played a central role in social science, and many of the mathematical and statistical used for studying networks have been first developed in sociology.[2] Amongst many other applications, social network analysis has been to understand the diffusion of innovations, news and rumors. Similarly, it has been used to examine the spread of both diseasesand healt related behaviors. It has also been applied to the study of markets, where it has been used to examine the role of trust inexchange relationships and of social mechanisms in setting prices. Similarly, it has been used to study recruitment into political movementsand soc organizations. It has also been used to conceptualize scientific disagreements as well as academic prestige. More recently, network anal (and its close cousin traffic analysis) has gained a significant use in military intelligence, for uncovering insurgent networks of both hierarc and leaderless nature.

Biological network analysis[edit]

With the recent explosion of publicly available high throughput biological data, the analysis of molecular networks has gained significant interest. The type of analysis in this context is closely related to social network analysis, but often focusing on local patterns in the networ For example network motifs are small subgraphs that are over-represented in the network. Similarly, activity motifs are patterns in the attributes of nodes and edges in the network that are over-represented given the network structure.

Link analysis[edit]

Link analysis is a subset of network analysis, exploring associations between objects. An example may be examining the addresses of suspects and victims, the telephone numbers they have dialed and financial transactions that they have partaken in during a given timefra and the familial relationships between these subjects as a part of police investigation. Link analysis here provides the crucial relationships associations between very many objects of different types that are not apparent from isolated pieces of information. Computer-assisted o automatic computer-based link analysis is increasingly employed by banks and insurance agencies in fraud detection, by telecommunica operators in telecommunication network analysis, by medical sector in epidemiology and pharmacology, in law enforcement investigation by search enginesfor relevance rating (and conversely by the spammers for spamdexing and by business owners for search engine optimization), and everywhere else where relationships between many objects have to be analyzed.

Organizational network analysis

From Wikipedia, the free encyclopedia

Organizational network analysis is a method for studying communication[1] and socio-technical networks within a formal organization. It is a quantitative descriptive technique for creating statistical and graphical models of the people, tasks, groups, knowledge and resources of organizational systems. It is based on social network theory[2] and more specifically, dynamic network analysis.

Bar chart

From Wikipedia, the free encyclopedia

This article contains instructions, advice, or how-to content. The purpose of Wikipedia is t present facts, not to train. Please help improve this article either by rewriting the how-to conten by moving it to Wikiversity, Wikibooks or Wikivoyage(February 2012) This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (June 2012)

Example of a bar chart, with 'Country' as the discrete data set.

A bar chart or bar graph is a chart with rectangular bars with lengths proportional to the values that they represent. The bars can be plotted ver or horizontally. A vertical bar chart is sometimes called a column bar chart. What it is:

A bar graph is a chart that uses either horizontal or vertical bars to show comparisons among categories. One axis of the chart shows the specifi categories being compared, and the other axis represents a discrete value. Some bar graphs present bars clustered in groups of more than one (grouped bar graphs), and others show the bars divided into subparts to show cumulate effect (stacked bar graphs). How to use it:

Determine the discrete range. Examine your data to find the bar with the largest value. This will help you determine the range of the vertical axis the size of each increment. Then label the vertical axis. Determine the number of bars. Examine your data to find how many bars your chart will contain. These may be single, grouped, or stacked bars. Use this number to draw and label the horizontal axis. Determine the order of the bars.

may be arranged in any order. (A bar chart arranged from highest to lowest incidence is called a Pareto chart.) Normally, bars showing frequenc

be arranged in chronological (time) sequence. Draw the bars. If you are preparing a grouped bar graph, remember to present the information in t

same order in each grouping. If you are preparing a stacked bar graph, present the information in the same sequence on each bar. Bar charts pr

a visual presentation of categorical data.[1] Categorical data is a grouping of data into discrete groups, such as months of the year, age group, sh

sizes, and animals. In a column bar chart, the categories appear along the horizontal axis; the height of the bar corresponds to the value of each category.

Bar graphs can also be used for more complex comparisons of data with grouped bar charts and stacked bar charts. [1] In a grouped bar chart, fo

each categorical group there are two or more bars. These bars are color-coded to represent a particular grouping. For example, a business own

with two stores might make a grouped bar chart with different colored bars to represent each store: the horizontal axis would show the months o

year and the vertical axis would show the revenue. Alternatively, a stacked bar chart could be used. The stacked bar chart stacks bars that repre different groups on top of each other. The height of the resulting bar shows the combined result of the groups. A bar chart is very useful for recording discrete data. Bar charts also look a lot like a histogram, which record continuous data. The difference is that bar charts (can) have spaces between columns and histograms don't (have to have) spaces, the difference is the type of data that each represent. Discrete data is categorical data, and answers the question, "how many?". Continuous data is measurement data and answers the question, "how much?" For more on the difference, please see the excellent description fromshodor.org

The first bar graph appeared in the 1786 book The Commercial and Political Atlas, by William Playfair (1759-1823). Playfair was a pioneer in the of graphical displays and wrote extensively about them

Dependency Table

The dependency table is the dependency map in a tabular form. In addition to the virtual machine name and services installed, it displays the virtual mac state, virtual machine status, discovery status, and the time elapsed since last successful discovery of the selected virtual machine. The name of the sel virtual machine appears at the top of the dependency table. In the Application Dependencies tab, select Table View from the Application Dependencies drop-down menu to view the first level application dependency table of the selected virtual machine along with the incoming dependency table and outgoing dependency table. The three tables displayed are the sub tables of the inventory table. The Incoming dependencies table displays the details of all virtual machines that depend on the selected virtual machine. The Virtual Machine name table displays the details of the selected virtual machine. The Outgoing dependencies table displays the details of all virtual machines that the selected virtual machine depends on.

If the virtual machine has no incoming dependencies, a No incoming dependencies message is displayed in place of the Incoming dependencie table. If the virtual machine has no outgoing dependencies, a No outgoing dependencies message is displayed in place of the Outgoing dependencies table.

Activity/Task (project management)

From Wikipedia, the free encyclopedia
(Redirected from Activity (project management))

This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (September 2007)

In project management, a task is an activity that needs to be accomplished within a defined period of time or by a deadline. A task can be broke

down into assignments which should also have a defined start and end date or a deadline for completion. One or more assignments on a task pu

the task under execution. Completion of all assignments on a specific task normally renders the task completed. Tasks can be linked together to create dependencies. In most projects, tasks may suffer one of two major drawbacks:

Task dependency: Which is normal as most tasks rely on others to get done. However, this can lead to the stagnation of a project when many tasks cannot get started unless others are finished.

Unclear understanding of the term complete: For example, if a task is 90% complete, does this mean that it will take only 1/9 of the time already spent on this task to finish it? Although this is mathematically sound, it is rarely the case when it comes to practice.

Project network
From Wikipedia, the free encyclopedia

"Network Chart" redirects here: for the 1980s and early 1990s British radio show of that name, see The Network Chart Show.

A project network is a graph (flow chart) depicting the sequence in which a project's terminal elements are to be completed by showing ter elements and their dependencies.

The work breakdown structure or the product breakdown structure show the "part-whole" relations. In contrast, the project network shows th "before-after" relations. The most popular form of project network is activity on node, the other one is activity on arrow.

The condition for a valid project network is that it doesn't contain any circular references. Project dependencies can also be depicted by a predecessor table. Although such a form is very inconvenient for human analysis, project management software often offers such a view for data entry. An alternative way of showing and analyzing the sequence of project work is the design structure matrix.

Program Evaluation and Review Technique

From Wikipedia, the free encyclopedia

For other uses, see Pert (disambiguation).

PERT network chart for a seven-month project with five milestones (10 through 50) and six activities (A through F).

The Program (or Project) Evaluation and Review Technique, commonly abbreviated PERT, is a statistical tool, used in project management,

is designed to analyze and represent the tasks involved in completing a given project. First developed by the United States Navy in the 1950s, it commonly used in conjunction with the critical path method(CPM).

History[edit]
Program Evaluation and Review Technique

The Navy's Special Projects Office, charged with developing the Polaris-Submarine weapon system and the Fleet Ballistic Missile capability, has develo

statistical technique for measuring and forecasting progress in research and development programs. This Program Evaluation and Review Technique (c named PERT) is applied as a decision-making tool designed to save time in achieving end-objectives, and is of particular interest to those engaged in research and development programs for which time is a critical factor. The new technique takes recognition of three factors that influence successful achievement of research and development program objectives: time, resources, and technical performance specifications. PERT employs time as the variable that reflects planned resource-applications and performance specifications. With units of time as a common denominator, PERT quantifies knowledge about the uncertainties involved in developmental programs

requiring effort at the edge of, or beyond, current knowledge of the subject - effort for which little or no previous experience exists.

Through an electronic computer, the PERT technique processes data representing the major, finite accomplishments (events) essential to achieve en objectives; the inter-dependence of those events; and estimates of time and range of time necessary to complete each activity between two successive events. Such time expectations include estimates of "most likely time", "optimistic time", and "pessimistic time" for each activity. The technique is a

management control tool that sizes up the outlook for meeting objectives on time; highlights danger signals requiring management decisions; reveals an defines both criticalness and slack in the flow plan or the network of sequential activities that must be performed to meet objectives; compares current

expectations with scheduled completion dates and computes the probability for meeting scheduled dates; and simulates the effects of options for decisio before decision.

The concept of PERT was developed by an operations research team staffed with representatives from the Operations Research Department of Boo Allen and Hamilton; the Evaluation Office of the Lockheed Missile Systems Division; and the Program Evaluation Branch, Special Projects Office, of the Department of the Navy.

Willard Fazar (Head, Program Evaluation Branch, Special Projects Office, U. S. Navy), The American Statistician, April 1

Overview[edit]
PERT is a method to analyze the involved tasks in completing a given project, especially the time needed to complete each task, and to identify minimum time needed to complete the total project.

PERT was developed primarily to simplify the planning and scheduling of large and complex projects. It was developed for the U.S. Navy Specia

Projects Office in 1957 to support the U.S. Navy's Polaris nuclear submarine project. [2] It was able to incorporate uncertainty by making it possibl schedule a project while not knowing precisely the details and durations of all the activities. It is more of an event-oriented technique rather than and completion-oriented, and is used more in projects where time is the major factor rather than cost. It is applied to very large-scale, one-time, complex, non-routine infrastructure and Research and Development projects. An example of this was for the 1968 Winter Olympics in Grenoble applied PERT from 1965 until the opening of the 1968 Games. [3]

This project model was the first of its kind, a revival for scientific management, founded by Frederick Taylor (Taylorism) and later refined by Hen Ford (Fordism). DuPont's critical path method was invented at roughly the same time as PERT.

Conventions[edit]

A PERT chart is a tool that facilitates decision making. The first draft of a PERT chart will number its events sequentially in 10s (10, 20, etc.) to allow the later insertion of additional events.

Two consecutive events in a PERT chart are linked by activities, which are conventionally represented as arrows (see the diagram abov The events are presented in a logical sequence and no activity can commence until its immediately preceding event is completed. The planner decides which milestones should be PERT events and also decides their proper sequence.

A PERT chart may have multiple pages with many sub-tasks.

PERT is valuable to manage where multiple tasks are occurring simultaneously to reduce redundancy

Terminology[edit]

PERT event: a point that marks the start or completion of one or more activities. It consumes no time and uses no resources. When it m the completion of one or more tasks, it is not reached (does not occur) until all of the activities leading to that event have been completed.

predecessor event: an event that immediately precedes some other event without any other events intervening. An event can have mult predecessor events and can be the predecessor of multiple events.

successor event: an event that immediately follows some other event without any other intervening events. An event can have multiple successor events and can be the successor of multiple events.

PERT activity: the actual performance of a task which consumes time and requires resources (such as labor, materials, space, machine can be understood as representing the time, effort, and resources required to move from one event to another. A PERT activity cannot be performed until the predecessor event has occurred.

optimistic time (O): the minimum possible time required to accomplish a task, assuming everything proceeds better than is normally exp pessimistic time (P): the maximum possible time required to accomplish a task, assuming everything goes wrong (but excluding major catastrophes).

most likely time (M): the best estimate of the time required to accomplish a task, assuming everything proceeds as normal. expected time (TE): the best estimate of the time required to accomplish a task, accounting for the fact that things don't always proceed normal (the implication being that the expected time is the average time the task would require if the task were repeated on a number of occasions over an extended period of time). TE = (O + 4M + P) 6

float or slack is a measure of the excess time and resources available to complete a task. It is the amount of time that a project task can

delayed without causing a delay in any subsequent tasks (free float) or the whole project (total float). Positive slack would indicate ahea schedule; negative slack would indicate behind schedule; and zero slack would indicate on schedule.

critical path: the longest possible continuous pathway taken from the initial event to the terminal event. It determines the total calendar ti

required for the project; and, therefore, any time delays along the critical path will delay the reaching of the terminal event by at least th same amount.

critical activity: An activity that has total float equal to zero. An activity with zero float is not necessarily on the critical path since its path

from expert elicitation, although even then it may be hard to build distributions with great confidence. The subjectivity of probability distributions or ranges will strongly affect the sensitivity analysis.

Unclear purpose of the analysis. Different statistical tests and measures are applied to the problem and different factors

rankings are obtained. The test should instead be tailored to the purpose of the analysis, e.g. one uses Monte Carlo filte if one is interested in which factors are most responsible for generating high/low values of the output.

Too many model outputs are considered. This may be acceptable for quality assurance of sub-models but should be av when presenting the results of the overall analysis.

Piecewise sensitivity. This is when one performs sensitivity analysis on one sub-model at a time. This approach is non conservative as it might overlook interactions among factors in different sub-models (Type II error).