PROJECT MANAGEMENT
Module 02 — Numeric Models
Solved Problems with Step-by-Step Explanations
ILO 8021 — Mechanical Engineering — Final Semester
Problem Topic Model Type
19 NPV / Discounted Cash Flow Profitability Model
20 Weighted Scoring — 3 Locations (A, B, C) Scoring Model
21(a) Unweighted 0-1 Factor Model Scoring Model
21(b) Revised Unweighted Model (weight filter) Scoring Model
22(a) Sensitivity — Changed Weights Scoring Model
22(b) Sensitivity — Changed Scores Scoring Model
22(c) Adding a New Criterion (Tax) Scoring Model
23 Nina's Boutique — Weighted Scoring (4 Locations) Scoring Model
24 Sensitivity — Nina's Rent Score Change Scoring Model
■ Quick Concept Review Before We Solve
NPV (Net Present Value): Converts all future cash flows into today's money using a discount rate. If
NPV > 0 → Accept the project. If NPV < 0 → Reject. Formula: NPV = -Initial Cost + CF1/(1+r)^1 +
CF2/(1+r)^2 + ...
Weighted Scoring Model: Each project/location is scored against multiple criteria. Each criterion has a
weight showing its importance. Final Score = Sum of (Weight × Score) for all criteria. Higher score =
Better choice.
Unweighted 0-1 Model: Each criterion is either passed (1) or failed (0) — no weights used. Score =
Count of criteria passed. Limitation: Treats all criteria as equally important.
Sensitivity Analysis: Checking how the final decision changes when weights or scores are modified.
This tests how 'robust' the recommendation is.
PROBLEM 19 — Net Present Value (NPV) Calculation
A four-year financial project is forecast to have net cash inflows of $20,000; $25,000;
$30,000; and $50,000 in the next four years. It will cost $75,000 to implement the project,
payable at the beginning of the project. If the required rate of return is 0.2 (20%), conduct a
discounted cash flow calculation to determine the NPV.
Before we solve, understand the key idea: $1 today is worth more than $1 in the future because money
today can be invested and earn returns. The NPV calculation 'discounts' future cash flows back to today's
value so we can compare them fairly against the initial investment.
STEP 1 — Understand the Given Data
Year Cash Flow Meaning
0 (Today) -$75,000 Initial investment — money going OUT
1 +$20,000 Cash inflow at end of Year 1
2 +$25,000 Cash inflow at end of Year 2
3 +$30,000 Cash inflow at end of Year 3
4 +$50,000 Cash inflow at end of Year 4
Required Rate of Return (Discount Rate) = 20% = 0.2 — This is the minimum return the organization
expects from any investment.
STEP 2 — Write the NPV Formula
NPV = -Initial Investment + CF1/(1+r)^1 + CF2/(1+r)^2 + CF3/(1+r)^3 +
CF4/(1+r)^4 Where: r = discount rate = 0.2 CF = Cash Flow for each year
(1+r)^n = Discount Factor for year n
STEP 3 — Calculate the Discount Factor for Each Year
The Discount Factor tells us: 'What is $1 received in Year N worth TODAY?' We divide each cash flow
by its discount factor to get its Present Value (PV).
Year (n) Formula for Discount Factor Discount Factor = (1+0.2)^n Value
1 (1 + 0.2)^1 1.2^1 1.2000
2 (1 + 0.2)^2 1.2^2 1.4400
3 (1 + 0.2)^3 1.2^3 1.7280
4 (1 + 0.2)^4 1.2^4 2.0736
STEP 4 — Calculate Present Value (PV) for Each Year
Now divide each cash flow by its discount factor to bring it back to today's value:
Year Cash Flow (CF) Discount Factor PV = CF ÷ Discount Factor Present Value ($)
1 $20,000 1.2000 $20,000 ÷ 1.2000 $16,666.67
2 $25,000 1.4400 $25,000 ÷ 1.4400 $17,361.11
3 $30,000 1.7280 $30,000 ÷ 1.7280 $17,361.11
4 $50,000 2.0736 $50,000 ÷ 2.0736 $24,112.65
STEP 5 — Add Up All Present Values & Subtract Initial Investment
Sum of PVs = $16,666.67 + $17,361.11 + $17,361.11 + $24,112.65 = $75,501.54
NPV = Sum of PVs - Initial Investment = $75,501.54 - $75,000.00 = $501.54 ≈
$502
■ NPV = $502 → Since NPV > 0, the project is FINANCIALLY VIABLE and should be
ACCEPTED. The project earns $502 more (in today's money) than the minimum required
return of 20%.
■ NOTE: Even though $502 seems small, any positive NPV means the project earns MORE than the
required rate of return. In an exam, always state: If NPV > 0 → Accept | NPV < 0 → Reject | NPV = 0 →
Borderline.
PROBLEM 20 — Weighted Scoring Model (3 Locations: A, B, C)
A company has established a project team to identify a location for a new manufacturing
facility. Use a weighted scoring model to analyze three candidate locations (A, B, C). The
relative weights for each criterion are shown in the table. A score of 1 = unfavorable, 2 =
satisfactory, 3 = favorable.
The Weighted Scoring Model is used when you need to compare multiple options (projects, locations,
etc.) against several criteria that have different levels of importance (weights). The formula is simple:
Weighted Score = Weight × Rating for each criterion, then add them all up.
STEP 1 — Understand the Given Data Table
Category (Criterion) Weight Location A Score Location B Score Location C Score
Labor costs 20 1 (unfavorable) 2 (satisfactory) 3 (favorable)
Labor productivity 20 2 3 1
Labor supply 10 2 1 3
Union relations 10 3 3 2
Material supply 10 2 1 1
Transport costs 25 1 2 3
Infrastructure 5 2 2 2
STEP 2 — Apply the Formula: Weighted Score = Weight × Score for Each Row
For each criterion, multiply the weight by the score for each location:
Category Wt A Score Wt×A B Score Wt×B C Score Wt×C
Labor costs 20 1 20×1 = 20 2 20×2 = 40 3 20×3 = 60
Labor productivity 20 2 20×2 = 40 3 20×3 = 60 1 20×1 = 20
Labor supply 10 2 10×2 = 20 1 10×1 = 10 3 10×3 = 30
Union relations 10 3 10×3 = 30 3 10×3 = 30 2 10×2 = 20
Material supply 10 2 10×2 = 20 1 10×1 = 10 1 10×1 = 10
Transport costs 25 1 25×1 = 25 2 25×2 = 50 3 25×3 = 75
Infrastructure 5 2 5×2 = 10 2 5×2 = 10 2 5×2 = 10
STEP 3 — Add Up the Weighted Scores for Each Location
Score A = 20 + 40 + 20 + 30 + 20 + 25 + 10 = 165 Score B = 40 + 60 + 10 + 30
+ 10 + 50 + 10 = 210 Score C = 60 + 20 + 30 + 20 + 10 + 75 + 10 = 225 ←
HIGHEST
Category Weight Location A Location B Location C
Labor costs 20 20 40 60
Labor productivity 20 40 60 20
Labor supply 10 20 10 30
Union relations 10 30 30 20
Material supply 10 20 10 10
Transport costs 25 25 50 75
Infrastructure 5 10 10 10
TOTAL SCORE 165 210 225 ✓
■ Location C has the HIGHEST weighted score of 225 → Location C is the BEST choice for
the new manufacturing facility.
■ NOTE: Transport costs (weight=25) and Labor costs (weight=20) are the two most important criteria.
Location C scored 3 (favorable) on both, which is why it dominates. Location A scored only 1 on both —
making it the weakest choice.
PROBLEM 21(a) — Unweighted 0-1 Factor Model
Compare your answer in Problem 20 to the answer you would have found if you had used
an unweighted, 0-1 scoring model. Assume that a score of 1 means does NOT qualify and
a score of 2 or 3 means it DOES qualify.
In the Unweighted 0-1 Model, we forget about weights entirely. Each criterion is simply passed (mark X)
or failed (blank). The winner is whichever option passes the MOST criteria. The rule here is: Score 1 =
Fail (0) | Score 2 or 3 = Pass (X).
STEP 1 — Convert Each Score to Pass (X) or Fail (blank)
Go through each score from Problem 20: if score ≥ 2 → mark X (qualifies). If score = 1 → leave blank
(does not qualify).
Category A Score A Qualifies? B Score B Qualifies? C Score C Qualifies?
Labor costs 1 ✗ Fail 2 ✓X 3 ✓X
Labor productivity 2 ✓X 3 ✓X 1 ✗ Fail
Labor supply 2 ✓X 1 ✗ Fail 3 ✓X
Union relations 3 ✓X 3 ✓X 2 ✓X
Material supply 2 ✓X 1 ✗ Fail 1 ✗ Fail
Transport costs 1 ✗ Fail 2 ✓X 3 ✓X
Infrastructure 2 ✓X 2 ✓X 2 ✓X
STEP 2 — Count the Number of Passes for Each Location
Count A = X (productivity) + X (supply) + X (union) + X (material) + X
(infrastructure) = 5 passes Count B = X (labor costs) + X (productivity) +
X (union) + X (transport) + X (infrastructure) = 5 passes Count C = X
(labor costs) + X (supply) + X (union) + X (transport) + X (infrastructure)
= 5 passes
■ All three locations score EXACTLY 5 passes each — the 0-1 model CANNOT
differentiate between Location A, B, and C. This is a MAJOR LIMITATION compared to the
weighted model.
■ NOTE: This is a crucial exam insight: The 0-1 model ignores weights, so it loses important information
about how important each criterion is. The weighted model (Problem 20) correctly identified Location C as
best, but the 0-1 model gives us a useless tie. This proves that weighted models are more REALISTIC and
INFORMATIVE.
PROBLEM 21(b) — Revised Unweighted Model (Remove criteria with weight < 20%)
Next, revise the unweighted model by DELETING all categories that, as recommended,
have a weight of less than 20 percent. Compare to your answer in (a) and also Problem 20.
Which method seems best?
This is a refinement of the 0-1 model — instead of using ALL criteria, we only keep the most important
ones (those with weight ≥ 20%). This partially addresses the weakness of ignoring weights, but it's still not
as precise as the full weighted model.
STEP 1 — Identify Which Criteria to KEEP (Weight ≥ 20%) and Which to DROP (Weight <
20%)
Category Weight Keep or Drop?
Labor costs 20 ■ KEEP (weight = 20, exactly at threshold)
Labor productivity 20 ■ KEEP (weight = 20)
Labor supply 10 ■ DROP (weight < 20)
Union relations 10 ■ DROP (weight < 20)
Material supply 10 ■ DROP (weight < 20)
Transport costs 25 ■ KEEP (weight = 25 > 20)
Infrastructure 5 ■ DROP (weight < 20)
STEP 2 — Apply 0-1 Model Using Only the 3 Remaining Criteria
Now apply the same rule: Score 1 = Fail | Score 2 or 3 = Pass (X):
Category (Kept) Weight A Score A Qualifies? B Score B Qualifies? C Score C Qualifies?
Labor costs 20 1 ✗ Fail 2 ✓X 3 ✓X
Labor productivity 20 2 ✓X 3 ✓X 1 ✗ Fail
Transport costs 25 1 ✗ Fail 2 ✓X 3 ✓X
STEP 3 — Count the Passes
Count A = only productivity qualifies = 1 pass Count B = labor costs +
productivity + transport qualify = 3 passes ← HIGHEST Count C = labor
costs + transport qualify = 2 passes
Location Count (Revised 0-1) Rank
A 1 3rd
B 3 1st ✓
C 2 2nd
■ Revised 0-1 model selects Location B (3 passes) → BUT the weighted model selected
Location C. The revised model gives a different answer than the full weighted model!
■ NOTE: COMPARISON SUMMARY: Weighted Model → Location C (Score 225) is best. Unweighted 0-1
(all criteria) → Tie at 5 each — unusable. Revised Unweighted 0-1 (filtered) → Location B is best.
CONCLUSION: The Weighted Scoring Model (Problem 20) is the BEST method because it considers both
how well each location performs AND how important each criterion is. Non-weighted models lose critical
information.
PROBLEM 22(a) — Sensitivity Analysis: Changed Weights
Using a spreadsheet for Problem 20, what would be your recommendation if the weight for
TRANSPORTATION COST went DOWN to 10 and the weight for UNION RELATIONS went
UP to 25? (All other weights and scores remain the same.)
Sensitivity Analysis asks: 'What if the importance of criteria changes — does our recommendation
change too?' Here we swap the weights of Transport costs and Union relations.
STEP 1 — Identify What Changes
Criterion Original Weight New Weight Change
Union relations 10 25 ↑ Increased by 15
Transport costs 25 10 ↓ Decreased by 15
All others Same Same No change
STEP 2 — Recalculate Weighted Scores Using New Weights
Category NEW Wt A Score Wt×A B Score Wt×B C Score Wt×C
Labor costs 20 1 20 2 40 3 60
Labor productivity 20 2 40 3 60 1 20
Labor supply 10 2 20 1 10 3 30
Union relations 25★ 3 75 3 75 2 50
Material supply 10 2 20 1 10 1 10
Transport costs 10★ 1 10 2 20 3 30
Infrastructure 5 2 10 2 10 2 10
■ NOTE: ★ = Changed weight. Union relations went from 10→25. Transport costs went from 25→10.
STEP 3 — Sum Up the New Scores
New Score A = 20 + 40 + 20 + 75 + 20 + 10 + 10 = 195 New Score B = 40 + 60 +
10 + 75 + 10 + 20 + 10 = 225 ← HIGHEST New Score C = 60 + 20 + 30 + 50 + 10
+ 30 + 10 = 210
Location Original Score (Prob 20) New Score (22a) Change
A 165 195 +30
B 210 225 ✓ +15 ← NOW BEST
C 225 (was best) 210 -15 ← Dropped
■ With the changed weights, Location B now has the highest score (225) → Location B is
the NEW recommended choice. The decision CHANGED from C to B!
■ NOTE: WHY did the decision change? Location B scored 3 on Union relations — which now has the
highest weight (25). Location C only scored 2 on Union relations and lost its advantage on Transport costs
(which now has a lower weight of 10). This shows how sensitive the weighted model is to the importance
assigned to each criterion.
PROBLEM 22(b) — Sensitivity Analysis: Changed Transport Scores
Suppose Location A received a score of 3 for transport cost (changed from 1) and
Location C received a score of 2 for transport cost (changed from 3). Would your
recommendation change under these circumstances? (Use ORIGINAL weights from
Problem 20.)
Here we go back to the original weights from Problem 20, but change some scores. This tests what
happens when field conditions (like actual transport costs) turn out different from initial estimates.
STEP 1 — Identify What Changes (Scores Only, Original Weights)
Criterion Location Original Score New Score Change
Transport costs A 1 (unfavorable) 3 (favorable) ↑ Improved significantly
Transport costs C 3 (favorable) 2 (satisfactory) ↓ Worsened slightly
Transport costs B 2 (unchanged) 2 (unchanged) No change
STEP 2 — Recalculate Only the Affected Rows (Transport costs, Weight=25)
Only the Transport costs row changes. All other weighted scores stay the same as Problem 20:
Category Wt A Score Wt×A B Score Wt×B C Score Wt×C
Labor costs 20 1 20 2 40 3 60
Labor productivity 20 2 40 3 60 1 20
Labor supply 10 2 20 1 10 3 30
Union relations 10 3 30 3 30 2 20
Material supply 10 2 20 1 10 1 10
Transport costs★ 25 3★ 75 2 50 2★ 50
Infrastructure 5 2 10 2 10 2 10
■ NOTE: ★ = Changed score. Transport cost for A changed 1→3. Transport cost for C changed 3→2.
STEP 3 — Calculate New Total Scores
New Score A = 20 + 40 + 20 + 30 + 20 + 75 + 10 = 215 ← HIGHEST New Score B
= 40 + 60 + 10 + 30 + 10 + 50 + 10 = 210 New Score C = 60 + 20 + 30 + 20 +
10 + 50 + 10 = 200
Location Original Score (Prob 20) New Score (22b) Rank Change
A 165 (3rd) 215 ✓ ↑ Jumped to 1st!
B 210 (2nd) 210 Stayed 2nd
C 225 (1st) 200 ↓ Dropped to 3rd!
■ Yes, the recommendation CHANGED drastically! Location A is now the best choice
(215), followed by B (210) and C (200). The decision flipped completely from C to A!
■ NOTE: WHY? Transport costs have the HIGHEST weight (25) in the original model. Improving A's
transport score from 1→3 added 25×2 = +50 points to A. Worsening C's transport score from 3→2 removed
25×1 = -25 points from C. This proves: Always pay close attention to criteria with HIGH weights — they
have the biggest impact on the final decision.
PROBLEM 22(c) — Adding a New Criterion: Tax Considerations
The VP of Finance has looked at your scoring model and feels that TAX
CONSIDERATIONS should be included in the model with a weight of 15. In addition, the
VP has scored the locations on tax considerations as follows: A = 3, B = 2, C = 1. How
does this affect your recommendation? (Use original weights from Problem 20.)
Here we ADD a completely new criterion to the existing model. This is a common real-world scenario —
new stakeholders (like a VP of Finance) may identify important factors that were initially overlooked. We
simply add the new row and recalculate.
STEP 1 — Add the New Row: Tax Considerations (Weight=15)
Category Weight A Score Wt×A B Score Wt×B C Score Wt×C
Labor costs 20 1 20 2 40 3 60
Labor productivity 20 2 40 3 60 1 20
Labor supply 10 2 20 1 10 3 30
Union relations 10 3 30 3 30 2 20
Material supply 10 2 20 1 10 1 10
Transport costs 25 1 25 2 50 3 75
Infrastructure 5 2 10 2 10 2 10
Taxes (NEW)★ 15 3★ 45 2★ 30 1★ 15
■ NOTE: ★ = NEW criterion added by VP of Finance. A=3 (favorable taxes), B=2, C=1 (unfavorable taxes).
STEP 2 — Calculate New Total Scores
New Score A = 20+40+20+30+20+25+10+45 = 210 New Score B =
40+60+10+30+10+50+10+30 = 240 ← TIED HIGHEST New Score C =
60+20+30+20+10+75+10+15 = 240 ← TIED HIGHEST
Location Original Score (Prob 20) New Score (22c) Change
A 165 210 +45 (got 15×3=45 from taxes)
B 210 240 ✓ +30 (got 15×2=30 from taxes)
C 225 (was best) 240 ✓ +15 (got 15×1=15 from taxes)
■ Adding Tax considerations creates a TIE between Location B and Location C — both
score 240. The recommendation is now ambiguous — further investigation or additional
criteria needed to break the tie.
■ NOTE: KEY INSIGHT: Adding a new criterion with a weight of 15 significantly boosted Location A (which
had the best tax score of 3) and narrowed the gap. Meanwhile Location C (which originally won) gained
only +15 due to its worst tax score (1). In exam: when there is a tie, state that 'additional criteria or a
tiebreaker rule is needed.'
PROBLEM 23 — Nina's Boutique: Weighted Scoring (4 Locations)
Nina has been asked to lead a team to find a new location for a boutique concept. The
team identified FOUR candidate shopping centers. Nina believes Clientele is the MOST
important factor (assigned weight 100). Rent is 90% as important as Clientele (weight =
90). Indoor mall is 95% as important as Rent (weight = 85.5). Volume is 80% as important
as Rent (weight = 72). Determine the best location.
This problem introduces a smarter way to assign weights — based on relative importance. Instead of
arbitrary numbers, Nina uses a logical chain: if Clientele = 100 (most important), then Rent = 90% of that =
90, Indoor = 95% of Rent's weight = 90×0.95 = 85.5, Volume = 80% of Rent = 90×0.80 = 72.
STEP 1 — Calculate the Weights Using Relative Importance
Factor Relative Importance Calculation Weight Assigned
Clientele Most important — base factor 100 (given) 100
Rent 90% as important as Clientele 100 × 0.90 90
Indoor Mall 95% as important as Rent 90 × 0.95 85.5
Volume 80% as important as Rent 90 × 0.80 72
STEP 2 — Understand the Scores for Each Location (1=Poor, 2=OK, 3=Good)
Factor Weight Location 1 Location 2 Location 3 Location 4
Clientele 100 2 3 1 3
Rent 90 3 2 1 3
Indoor Mall 85.5 3 1 3 1
Volume 72 3 2 3 1
STEP 3 — Calculate Weighted Score for Each Location
Multiply Weight × Score for each row, then sum:
Factor Wt L1 Score Wt×L1 L2 Score Wt×L2 L3 Score Wt×L3 L4 Score Wt×L4
Clientele 100 2 200 3 300 1 100 3 300
Rent 90 3 270 2 180 1 90 3 270
Indoor Mall 85.5 3 256.5 1 85.5 3 256.5 1 85.5
Volume 72 3 216 2 144 3 216 1 72
STEP 4 — Sum Up Total Scores
Score Location 1 = 200 + 270 + 256.5 + 216 = 942.5 ← HIGHEST Score Location
2 = 300 + 180 + 85.5 + 144 = 709.5 Score Location 3 = 100 + 90 + 256.5 + 216
= 662.5 ← LOWEST Score Location 4 = 300 + 270 + 85.5 + 72 = 727.5
Location Clientele (×100) Rent (×90) Indoor (×85.5) Volume (×72) TOTAL SCORE
Location 1 200 270 256.5 216 942.5 ✓
Location 2 300 180 85.5 144 709.5
Location 3 100 90 256.5 216 662.5
Location 4 300 270 85.5 72 727.5
■ Location 1 has the HIGHEST weighted score of 942.5 → Nina should select Location 1
for the new boutique.
■ NOTE: WHY Location 1? It scored 3 (Good) on EVERY criterion — Clientele, Rent, Indoor Mall, and
Volume. Even though Location 2 and 4 scored better on Clientele (score 3 vs 2), Location 1 compensated
with perfect scores on all other criteria. Location 3 had the worst score on Rent (score 1) despite having a
high weight — that's why it ended up last.
PROBLEM 24 — Sensitivity for Nina: Location 3 Negotiates Better Rent
Using a spreadsheet for Problem 23, determine how Nina's ability to negotiate a LOWER
RENT at Location 3, thereby RAISING its rent ranking from 'poor' (score 1) to 'GOOD'
(score 3), will affect the overall rankings of the four locations.
This is another sensitivity analysis — what if the situation on the ground changes? Specifically, Location 3
was weak on Rent (score = 1, poor). If Nina negotiates successfully and brings the rent score up to 3
(good), how does that change everything?
STEP 1 — Identify What Changes
What Changes? Original Value New Value Impact on Score
Location 3 — Rent score 1 (poor) 3 (good) +2 in score × weight of 90
Location 1, 2, 4 Unchanged Unchanged No impact
STEP 2 — Recalculate Score for Location 3 Only
Only the Rent row for Location 3 changes. All other rows stay the same as Problem 23:
Factor Weight L3 Old Score Wt × Old L3 New Score Wt × New Change
Clientele 100 1 100 1 100 No change
Rent★ 90 1 90 3★ 270 +180 points!
Indoor Mall 85.5 3 256.5 3 256.5 No change
Volume 72 3 216 3 216 No change
■ NOTE: ★ Rent score for Location 3 changed from 1 → 3, a change of +2. Since weight = 90, this adds
90×2 = +180 points!
STEP 3 — Calculate New Score for Location 3
Old Score Location 3 = 100 + 90 + 256.5 + 216 = 662.5 Change in Score =
Weight × Change in Rent Score = 90 × (3 - 1) = 90 × 2 = +180 New Score
Location 3 = 662.5 + 180 = 842.5
STEP 4 — Compare New Rankings
Location Old Score (Prob 23) New Score (Prob 24) Old Rank New Rank
Location 1 942.5 942.5 (unchanged) 1st ✓ 1st ✓ (Still Best)
Location 2 709.5 709.5 (unchanged) 3rd 3rd
Location 3 662.5 842.5 4th (Last!) 2nd ↑
Location 4 727.5 727.5 (unchanged) 2nd 3rd
■ Negotiating a better rent at Location 3 dramatically improves its score from 662.5 →
842.5, moving it from LAST (4th) to SECOND place. HOWEVER, Location 1 still remains
the best choice with 942.5 — the overall recommendation DOES NOT CHANGE.
■ NOTE: KEY EXAM INSIGHT: Even a dramatic improvement in one criterion for Location 3 (+180 points)
was not enough to overtake Location 1. This shows that Location 1 is a ROBUST recommendation — it is
the best choice regardless of whether Location 3 negotiates better rent or not. In the exam, always state:
(1) How the score changed, (2) Whether the final recommendation changed, and (3) Why — linking it back
to weights and scores.
■ EXAM CHEAT SHEET — Quick Reference Summary
NPV FORMULA: NPV = -Initial Cost + CF1/(1+r)^1 + CF2/(1+r)^2 + ... If NPV > 0 → ACCEPT | NPV <
0 → REJECT | NPV = 0 → Borderline Always discount future cash flows BACK to present before
comparing with initial investment.
WEIGHTED SCORING MODEL: Final Score = Σ (Weight × Score for each criterion) Higher score =
Better option. Use this when criteria have different levels of importance.
UNWEIGHTED 0-1 MODEL: Score 1 = Fail (0), Score 2 or 3 = Pass (X). Count total passes.
Limitation: Treats ALL criteria as equally important — loses weight information.
SENSITIVITY ANALYSIS: Change one weight or score at a time and recalculate. State: (1) What
changed (2) How the score changed (3) Did the recommendation change? (4) WHY?
Problem Model Used Winner Key Lesson
19 NPV / DCF Project accepted (NPV=$502) Positive NPV = viable project
20 Weighted Scoring Location C (Score=225) Weights reflect importance of criteria
21a Unweighted 0-1 TIE — all score 5 0-1 model can fail to differentiate
21b Revised 0-1 (filter) Location B (Count=3) Filtering helps but still less precise
22a Weighted (new weights) Location B (Score=225) Changing weights can flip the decision
22b Weighted (new scores) Location A (Score=215) High-weight criteria drive decisions
22c Weighted (+new criterion) B & C TIE (Score=240) Adding criteria can create ties
23 Weighted (4 locations) Location 1 (Score=942.5) Relative weights — logical assignment
24 Sensitivity on Prob 23 Location 1 still best
Robust recommendation survives changes