Stage two of creating a business case is to analyze the alternative approaches you’ve identified. At this stage, you collect information about each alternative and document estimates, such as expected yearly cash flows.
Then you can use relevant financial metrics to help you select the best option. Stage two is important because by using financial metrics in this way, you’re analyzing your options like a CFO would.
You can use metrics to discover whether an option is financially viable. Metrics can tell you whether a course of action aligns with your organization’s strategic goals — and whether the benefits it provides outweigh its costs. They can also help you decide whether an alternative is too risky.
Finally, metrics can help you figure out which alternative is the best one to take — from both a financial and an overall risk perspective.
Three financial metrics are commonly used to analyze and compare investments required by alternative solutions. These are the payback period or PP method, net present value or NPV method, and risk analysis.
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