Software Project Pricing models
With the current focus on demonstrating the value of the projects we do for Con-Edison, I have been reading up on the different methodologies that can be used for evaluating projects. In addition, as part of the Technology in Business Management course that I am taking, we had gone through 2 of them - the Net Present Value and the Options Pricing Model. The book - Strategic Decision Making for IT Managers by Lucas (1999), briefly explains these two methods as well. While the Net Present Value method is a straight-forward way of calculating the value of a project, which assumes that the cost of capital remains constant throughout the years, this is hardly used by any of the organizations. The Options Pricing Model on the other hand is a little more complex in its calculation, and is modeled very much around how you might exercise a stock option at any given point of time.