4 Technological Change and Project Value Free Online FlashCards

When do technological performance gains create project value?

Performance gains create value only when they meet a real need and can be achieved in practice; distinguish demonstrated results from vendor claims and early projections.

How can a high-cost technology lower a project’s total costs?

A technology may require greater initial investment yet reduce maintenance, labor, energy, or replacement costs over its life.

What evidence should support an expected technology learning effect?

Do not assume costs will fall automatically with scale or experience. Support learning-effect estimates with relevant historical evidence, since other factors may explain observed declines.

How do an asset’s physical life and economic life differ?

Physical life is how long an asset remains functional; economic life is how long it remains useful and worthwhile.

Which future items belong in an asset’s whole-life cost estimate?

Include likely upgrades, replacements, downtime, and disposal or residual value in whole-life costs.

What can limit the competitive value of a new technology?

A project may gain an advantage through better service, lower prices, or unique capabilities, but the advantage may be temporary and require new skills, infrastructure, or complementary investment.

How can a competitor’s innovation harm a project?

A rival’s innovation may reduce demand for the project’s output or make the project’s assets less efficient by comparison.

What comparison framework should an appraisal use?

Compare feasible options over the same appraisal period and include a “do nothing” or baseline case.

What should an appraisal estimate for each technology option?

Estimate each option’s relevant capital and operating costs, benefits, delivery time, replacement needs, and residual value.

How is net present value calculated?

Net present value is the present value of benefits minus the present value of costs: $\mathrm{NPV}=\text{PV of benefits}-\text{PV of costs}$.

Which uncertainties can technology appraisal scenarios test?

Test scenarios such as faster or slower performance improvement, different adoption rates, higher maintenance costs, shorter useful life, delayed implementation, and early obsolescence.

What should an appraisal reveal about its assumptions?

Show which assumptions would make the preferred option cease to be worthwhile; this reveals how sensitive the decision is to uncertainty.