# Choosing Innovation Projects

## 8 important questions on Choosing Innovation Projects

### What is meant with capital rationing?

### How is the rank ordering established for capital rationing?

### What are 2 quantitative discounted cash flow methods?

- Internal rate of Return (IRR), the rate of return yielded by a project, normally calculated as the discount rate that makes the net present value of an investment equal zero.

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### When do you make use of a real option?

### How does the real options looks like, in terms of costs, future investment and returns?

- The cost of future investment required to capitalize on the R&D program (such as the cost of commercializing a new technology that is developed) can be considered the exercise price.
- The returns to the R&D investment are analogous to the value of a stock purchased with a call option.

### What is the most common method for choosing a project?

### An method for using both methods is Data Envelopment analysis, what is it?

### What is the biggest advantage of using DEA (Data Envelopment Analysis)?

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