LE 2 Concepts Flashcards
Four Elements of MCDA
- Decision makers
- Objective/Goals
- Criteria
- Alternatives
Each attribute distinguishes at least two alternatives
Operationality
Each attribute captures a unique dimension or facet of the decision problem
Redundancy
Attributes, in a collective sense, are assumed to be sufficient for the purpose of selecting the best alternative
Completeness
collapses all information into a single dimension
Compensatory models
retain the individuality of the attributes as the best alternative is being determined, full dimensional analysis
Non-compensatory models
screening method for eliminating inferior alternatives
Dominance
method of feasible ranges –establishes minimum or maximum acceptable values (the standard) for each attribute
Satisficing
similar to satisficing, except this method evaluates each alternative on the “best” value achieved for any attribute
Disjunctive Resolution
especially suitable for decisions in which a single attribute is judged more important than all other attributes
Lexicography
SMART
Simple Multi-attribute Rating Technique
ranking attributes in order of decreasing importance
Ordinal Scaling
quantifying relative importance of attributes on a dimensionless scale from, say, 0 to 1, 0 to 10 or 0 to 100
Weighting attributes
quantifying how well each alternative (or investment opportunity) meets each attribute on a dimensionless scale and then summing the product of the “evaluations” and their respective “weightings” (from method 2) for each alternative
Weighted evaluation of alternatives
Formula of Weighted Evaluation
normalized attribute weight x Evaluation Rating/10
displaying a matrix of alternatives vs. objectives (attributes) together with numbers and/or other symbols to represent how well each alternative meets each objective
Alternatives-objectives score card
includes many of the recurring annual expense items associated with the operation phase of the life cycle
Operation and Maintenance Cost (O&M)
includes non-recurring costs of shutting down the operation and the retirement and disposal of assets at the end of the life-cycle
Disposal Cost
usually a policy issue resolved by the top management of an organization, minimum return that a company will accept on the money it invests
Minimum Attractive Rate of Return (MARR)
The additional risk associated with the project if you are dealing with a project with higher risk than normal project
Risk premium
The required return necessary to make an investment project worthwhile.
Cost of capital
The time it takes to recover the investment without considering the time value of money. (i= 0%)
Simple Payback Period
The time it takes to recover the initial investment considering the time value of money. (i> 0%)
Discounted Payback Period
commonly used to evaluate public projects
Benefit-Cost(B/C) Ratio Method
The interest rate for the public sector
discount rate (MARR)
For the Philippines, NEDA has a prescribed discount rate for public projects
10%
An investment in which a firm never borrows money from the project.
Pure Investment
An investment in which a firm borrows money from the project during the investment period
Mixed Investment
Several projects proposed to address the same need, Only one of the viable projects can be selected
Mutually Exclusive
Projects do not compete against each other, None, one or more than one viable projects maybe selected
Independent
Projects whose revenues depend on the choice of alternatives
Revenue (Investment) Projects
Projects whose revenues do not depend on the choice of
alternatives
Service (Cost) Projects
The time span over which the
service of an equipment (or project) will be needed.
Required Service Period (Useful Life)
The time span over which the
economic effects of an
investment will be evaluated
Analysis Period
a comparative decision-making process analyzing the difference in revenues or costs between two alternatives
Incremental Analysis
