Valuing a project is both an art and a science since it tends to be predicated on uncertain future quantities. In TCP, the latitude in valuation allows for all approaches ranging from 'quick and dirty' to quantitatively-elaborated rigour.
Valuing a Project During New Project Creation
If the Initiative Details section has not been completed, and the Preliminary Project Detail has not been created yet,
Project value = 0
If, on the other hand, the information in Initiative Details is completed,
Project value = Anticipated gross benefit - Anticipated cost
Updating Project Value
Once the project starts and more financial details are discovered, the Preliminary Project Detail is created so that the earlier figures can be elaborated.
Project value = Anticipated gross benefit (estimated) - Project budget
Using Project Financials for Project Value
Things get more interesting when we utilize the full Project Financials table, which is optional. In this case, previous values for project value are replaced with,
Project value = Future NPV - Cumulative actual
What's the story here? It can be summarized as: the past is certain, the future is not. So for costs and benefits reported, TCP will simply add them up. The future, on the other hand, is uncertain. The degree of uncertainty is represented by the hurdle rate (see Project Financial Inputs ). Costs don't get discounted, while benefits are discounted according to the hurdle rate. If you don't want to discount future benefits simply set the hurdle rate as 0. This element (discounted benefits - undiscounted costs) represents the Future NPV used in the formula above.