Course Code & Title: BUAD 810: Investment And Project Analysis

STUDY MODULES
1.0 Module 1: A Conspectus to Investment Opportunities and Investment Decisions under Risk and
Uncertainty situations
Study Session 1: Investment and Projects
Study Session 2: Basic Investment Appraisal Techniques Study
Session 3: Probability Index
Study Session 4: Risk and Uncertainty

2.0 Module 2: Investment Decision’s programming approach and Investment Cost of Capital Evaluation
Study Session 1: Linear Programming
Study Session 2: Simplex Approach to solving Linear Programming Study Session
3: Cost of Capital
Study Session 4: Cost of Short-term Borrowing

3.0 Module 3: Evaluation of Non-monetary Aspects of Projects and Further Issues on Investment
and Project Appraisal
Study Session 1: Cost-benefit Analysis
Study Session 2: of Market Price in the Valuation of Costs and Benefits Study
Session 3: Choice of Interest Rates and Relevant ConstraintsCost-benefit Analysis
Study Session 4: Technical Analysis
Study Session 5: Feasibility Studies

Module 1: Study Session 1 - Investment and Projects

2.1 Investment

 Definition: Commitment of funds in expectation of a positive return. Investments can be real (e.g., land,
machinery) or financial (e.g., stocks, bonds).
 Real Investments: Involves tangible assets like plants and equipment, contributing to economic growth.
 Financial Investments: Involves purchasing financial instruments to generate income or capital
appreciation.
 Economic Investment: Net addition to the economy’s capital stock, contributing to production capabilities.

2.2 Types of Investments

 Autonomous Investment: Remains constant regardless of income level; typically government-funded

projects like infrastructure.
 Induced Investment: Varies with income levels; higher income leads to increased investment in capital
goods.
 Financial Investment: Involves buying new financial instruments, impacting employment and economic
growth.
 Real Investment: Involves physical assets like machinery and buildings, promoting employment and
economic development.
 Planned Investment: Based on concrete plans for economic sectors; opposed to unplanned investment,
which lacks specific objectives.
 Gross Investment: Total expenditure on new capital assets.
 Net Investment: Gross investment minus depreciation, reflecting the actual increase in capital stock.

2.3 Determination of Economic Cost of Projects

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  Capital Budgeting: Critical for deciding on expanding or replacing fixed assets. Involves large amounts of
money and is difficult to reverse.
 Time Value of Money: Money's value changes over time, necessitating careful investment evaluation.
 Financial Evaluation: Involves setting profit goals and using techniques to assess and rank projects based
on profitability and desirability.

2.4 Computation of the Economic Life of a Project

 Steps in Decision Making:

1. Economic Cost Calculation: Determine cash outflows required for project initiation.
2. Economic Life Computation: Measure the duration of expected benefits from the project.
3. Rate of Return Measurement: Calculate by dividing the project’s cost by net cash inflow.
4. Acceptance or Rejection: Choose projects based on a balance of return and risk, favoring secure
returns over higher, riskier ones.

MODULE 1 STUDY SESSION 2 : BASIC APPRAISAL TECHNIQUES INVESTMENT

Basic Investment Appraisal Techniques

 Accounting Rate of Return (ARR):

o Definition: Ratio of average annual profit (after depreciation) to capital invested.
o Variations: Profit may be before or after tax; capital may or may not include working capital.
o Alternative Name: Sometimes called Return on Capital Employed (ROCE).
 Payback Period (PP):
o Definition: Time required for net cash inflows to equal the original cash outlay.
o Decision Rule: Accept the project with the shortest payback period.
 Net Present Value (NPV):
o Definition: Present value of cash inflows minus the present value of cash outflows, discounted at
the cost of capital.
o Decision Rules:
 Positive NPV: Accept the project.
 Negative NPV: Reject the project.
 Zero NPV: Project meets the cost of capital but provides no surplus.
 Internal Rate of Return (IRR):
o Definition: Discount rate at which the present value of cash flows equals the present value of
capital invested, making NPV zero.
o Decision Rules:
 IRR > Cost of Capital: Accept the project.
 IRR < Cost of Capital: Reject the project.
 IRR = Cost of Capital: Project meets the required return but provides no surplus.
 Risk and Uncertainty:
o Types:
 Risk: Associated with insurable events (e.g., fire, theft) with estimable probabilities.
 Uncertainty: Involves unknown outcomes with no past experience to guide decisions.
o Types of Uncertainty:
 Human Uncertainties: Competitor reactions, regulatory changes, employee attitudes.
 Physical Uncertainties: Potential bottlenecks, product performance issues.
o Methods to Assess Risk:
 Risk-adjusted discount rate method.
 Certainty equivalents.
 Probability analysis.

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MODULE 1 : STUDY SESSION 3 PROFITABILITY INDEX

2.1 The Profitability Index (PI)

 Definition:
o The Profitability Index (PI) is the ratio of the present value of cash inflows to the present value of
cash outflows.
o Formula: PI=Present Value of InflowsPresent Value of OutflowsPI = \frac{\text{Present Value of
Inflows}}{\text{Present Value of
Outflows}}PI=Present Value of OutflowsPresent Value of Inflows
 Decision Rules:
o For Independent Projects:
 PI > 1: Accept the project.
 PI = 1: Indifferent.
 PI < 1: Reject the project.
o For Mutually Exclusive Projects:
 Choose the project with the highest PI, provided it is greater than 1.

Net Present Value (NPV)

 Definition:
o NPV represents the value of all future cash flows of a project discounted back to present value,
minus the initial investment.
o Formula: NPV=Present Value of Cash Inflows−Present Value of Cash OutflowsNPV = \
text{Present Value of Cash Inflows} - \text{Present Value of Cash
Outflows}NPV=Present Value of Cash Inflows−Present Value of Cash Outflows
 Comparison with Profitability Index:
o Both NPV and PI are used for project evaluation and provide the same accept-reject decisions:
 NPV Positive: Accept.
 PI > 1: Accept.
o For mutually exclusive projects, PI is preferred to determine the most profitable option when
projects have different investment scales.
 Comparison with Internal Rate of Return (IRR):
o NPV and IRR can give competing results:
 NPV: Based on the minimum required yield and shows the increase in assets.
 IRR: Shows the rate of return on invested capital.
o NPV is generally preferred for calculating excess profits above the required rate of return.

MODULE 1 STUDY SESSION 4 : RISK AND UNCERTAINTY

Risk and Uncertainty

 Definitions:
o Risk:
 Involves choices with multiple outcomes where the probability of each outcome is known
or can be estimated.
 Types include fire risk, financial risk, technical risk, commercial risk, and investment
risk.
 Examples: investing in new machines, acquiring new companies, developing new
products, entering new markets.
o Uncertainty:
 Involves multiple outcomes where the probability of each outcome is unknown or cannot
be estimated.
 Uncertainty with Complete Ignorance: No assumptions about the probabilities of
outcomes can be made.
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  Uncertainty with Partial Ignorance: Subjective probabilities can be assigned based on
personal knowledge, intuition, or experience.

Methods of Evaluating Risk and Uncertainty

 Variance and Standard Deviation:

o Variance: Measures the dispersion of possible outcomes from the mean. It is the weighted average
of the squared deviations from the mean.
o Standard Deviation: The square root of variance; a common measure of risk.
 Coefficient of Variation:
o Used to compare the relative riskiness of projects with different expected values. The project with
the lowest coefficient of variation is considered least risky.
 Risk Preferences:
o Risk Averse: Prefers a certain payoff over a risky prospect with the same expected value.
o Risk Lover: Prefers the expected value of a risky prospect over its certainty equivalent.
o Risk Neutral: Indifferent between a certain payoff and its expected value.

Risk-Adjusted Discount Rate Method

 Concept:
o Adjusts the discount rate based on project risk.
o Average-Risk Projects: Discounted at the firm's corporate cost of capital.
o Above-Average-Risk Projects: Discounted at a higher rate.
o Below-Average-Risk Projects: Discounted at a lower rate.

Certainty Equivalents

 Concept:
o Evaluates the cash flow risk and determines how much certain money would make the decision-
maker indifferent between riskless and risky cash flows.
 Process:
o Estimate the certainty equivalent cash flow for each period.
o Discount these certainty equivalents by the risk-free rate to obtain the project NPV.

MODULE 2 ; Investment Decision’s programming approach and Investment Cost of Capital Evaluation :
Linear Programming

1.1. Linear Programming

 Definition:
o Linear programming (LP) or linear optimization involves maximizing or minimizing a linear
function over a convex polyhedron specified by linear and non-negativity constraints.
 Duality Theory:
o Every primal linear programming problem has a corresponding dual problem.
o A profit maximization primal problem has a cost minimization dual, and vice versa.
o Dual solutions are known as shadow prices, reflecting the change in the objective function value
per unit change in constraints.
o Optimal values of primal and dual objectives are equal.
 Solution Methods:
o Optimal solutions can be found at the vertices (corners) of the feasible region.
o The simplex method identifies binding constraints and unused slack variables.
Characteristics of Linear Programming Problems
1. Optimization:
o LP problems focus on maximizing or minimizing a specific value (e.g., profit, resource use,

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 utility).
o Applicable in economics, business, and resource management.
2. Linearity:
o Variables appear to the first power in linear equations.
o Relationships between variables are linear (e.g., no squares or roots).
3. Objective Function:
o A function representing the value to be maximized or minimized.
o Written in terms of decision variables (e.g., profit, cost).
4. Constraints:
o Inequalities that restrict the feasible region for the objective function.
o Define the domain for decision-making (e.g., resource limits, capacity).
o

MODULE 2 SESSION 2 SIMPLEX METHOD TO SOLVING LINEAR PROGRAMMING

.
USING SIMPLEX METHOD TO SOLVE LINEAR PROGRAMMING
.

Simplex Method for Maximizing Z = 3x + 2y

Problem Statement

 Objective Function: Maximize Z=3x+2yZ = 3x + 2yZ=3x+2y

 Subject to Constraints:
o 2x+y≤182x + y \leq 182x+y≤18
o 2x+3y≤422x + 3y \leq 422x+3y≤42
o 3x+y≤243x + y \leq 243x+y≤24
o x≥0x \geq 0x≥0, y≥0y \geq 0y≥0

Steps and Tableau:

1. Change of Variables:
o Rename variables: x→X1x \rightarrow X_1x→X1, y→X2y \rightarrow X_2y→X2
o No need to adjust independent terms as they are all positive.
2. Normalize Constraints:
o Convert inequalities to equalities by adding slack variables X3X_3X3, X4X_4X4, X5X_5X5:
 2X1+X2+X3=182X_1 + X_2 + X_3 = 182X1+X2+X3=18
 2X1+3X2+X4=422X_1 + 3X_2 + X_4 = 422X1+3X2+X4=42
 3X1+X2+X5=243X_1 + X_2 + X_5 = 243X1+X2+X5=24
3. Objective Function Adjustment:
o Z−3X1−2X2−0X3−0X4−0X5=0Z - 3X_1 - 2X_2 - 0X_3 - 0X_4 - 0X_5 = 0Z−3X1−2X2−0X3
−0X4−0X5=0
4. Initial Simplex Tableau:

Base Cb P0 P1 P2 P3 P4 P5
3 2 0 0 0 0
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Base Cb P0 P1 P2 P3 P4 P5
P3 0 18 2 1 1 0 0
P4 0 42 2 3 0 1 0
P5 0 24 3 1 0 0 1
Z 0 -3 -2 0 0 0

5. Iteration 1:
o Input Base Variable: Choose X1X_1X1 (most negative coefficient in Z row)
o Pivot Column: Column for X1X_1X1
o Calculate Ratios:
 18/2=918 / 2 = 918/2=9
 42/2=2142 / 2 = 2142/2=21
 24/3=824 / 3 = 824/3=8 (minimum positive ratio)
o Pivot Row: X5X_5X5 (row with minimum ratio)
o Pivot Element: 3

Update Tableau:

Base Cb P0 P1 P2 P3 P4 P5
3 2 0 0 0 0
P3 0 18 2 1 1 0 0
P4 0 42 2 3 0 1 0
P1 3 8 1 1/3 0 0 1/3
Z 24 0 -1 0 0 1

6. Iteration 2:
o Input Base Variable: Choose X2X_2X2 (most negative coefficient in Z row)
o Pivot Column: Column for X2X_2X2
o Calculate Ratios:
 2/1/3=62 / 1/3 = 62/1/3=6
 26/7/3=78/7≈11.1426 / 7/3 = 78/7 \approx 11.1426/7/3=78/7≈11.14
 8/1/3=248 / 1/3 = 248/1/3=24 (minimum positive ratio)
o Pivot Row: X3X_3X3
o Pivot Element: 1/3

Update Tableau:

Base Cb P0 P1 P2 P3 P4 P5
3 2 0 0 0 0
P2 2 6 0 1 3 0 -2
P4 0 12 0 0 -7 1 4
P1 3 6 1 0 -1 0 1
Z 30 0 0 3 0 -1

7. Iteration 3:
o Input Base Variable: Choose X5X_5X5 (most negative coefficient in Z row)
o Pivot Column: Column for X5X_5X5
o Calculate Ratios:
 6/−2=−36 / -2 = -36/−2=−3
 12/4=312 / 4 = 312/4=3
 6/1=66 / 1 = 66/1=6 (minimum positive ratio)
o Pivot Row: X4X_4X4
o Pivot Element: 4
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 Update Tableau:

Base Cb P0 P1 P2 P3 P4 P5
3 2 0 0 0 0
P2 2 12 0 1 -1/2 1/2 0
P5 0 3 0 0 -7/4 1/4 1
P1 3 3 1 0 3/4 -1/4 0
Z 33 0 0 5/4 1/4 0

8. Optimal Solution:
o The last tableau shows that all coefficients in the Z row are non-negative.
o Optimal Z value: 33
o Optimal values for X1X_1X1 and X2X_2X2 are 3 and 12 respectively.
o Solution: x=3x = 3x=3, y=12y = 12y=12, and maximum Z=33Z = 33Z=33
o

MODULE 2: STUDY SESSION 3: COST OF CAPITAL COST OF CAPITAL

Cost of Capital Overview

 Definition:
o The rate of return a company must pay to its fund suppliers.
o Minimum return needed to maintain market value per share and shareholder wealth.
 Also Known As:
o Cut-off rate
o Target rate
o Hurdle rate
o Minimum required rate of return
o Standard return
 Components:
o Risk-free return
o Risk premium (additional return for business and financial risks)
 Perspectives:
o Organizational: Rate needed to invest in projects and cover interest and dividends.
o Investor: Expected return on capital invested in the organization.
 Significance for Management:
o Capital budgeting decisions
o Capital requirements
o Optimum capital structure
o Resource mobilization
o Project duration determination
Measurement of Cost of Capital

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 1. Cost of Equity Capital:
o Definition: Return required by ordinary shareholders.
o Methods:
 Dividend Yield Method: Discount rate equates expected dividends with market price.
 Dividend Growth Model: Accounts for growth in dividends.
 Price-Earnings Method: Uses EPS and market price to estimate return.
 Capital Asset Pricing Model (CAPM): Combines risk-free return with risk premium,
adjusted by beta factor.
2. Cost of Retained Earnings:
o Definition: Opportunity cost of reinvested earnings instead of distribution.
o Equivalence: Cost of retained earnings = Opportunity rate of earnings forgone.
3. Cost of Preference Shares:
o Definition: Fixed dividend capital.
o Types:
 Redeemable: Refundable at redemption terms.
 Irredeemable: Not refunded.
4. Cost of Debt Capital:
o Definition: Cost incurred to compensate creditors.
o Estimation:
 Historical cost: Ratio of interest expenses to debt balances.
 Market approach: Yields on bonds from similar companies.
o Regulatory Approaches:
 Embedded Debt: Covers actual borrowing costs.
 Market Rates: Based on market yields for comparable bonds.

MODULE 2: SESSION 4: COST OF SHORT-TERM BORROWING DEBT AND EQUITY

Differences Between Debt and Equity

 Repayment:
o Debt: Repayable to providers.
o Equity: Not repayable.
 Compulsory Payments:
o Debt: Mandatory interest payments.
o Equity: Dividends are not compulsory.
 Tax Treatment:
o Debt: Interest is tax-deductible.
o Equity: Dividends are not tax-deductible.
 Financial Risk:
o Debt: Increases financial risk.
o Equity: Does not increase financial risk.
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  Issuing Cost:
o Debt: Generally cheaper to issue.
o Equity: Higher issuing cost.
 Control Dilution:
o Debt: No control dilution.
o Equity: New issues may dilute control.
 Future Financing Flexibility:
o Debt: Less flexibility.
o Equity: More flexibility.
 Issuance Ease:
o Debt: Often easier to issue to financial institutions.
o Equity: Harder to issue compared to debt.

Cost of Capital as an Investment Criterion

 Uniform Risk:
o Use firm’s overall required rate of return if risks are similar across projects.
 Cost of Equity Capital:
o Minimum return needed on equity-financed investments to maintain stock price.
o Estimated using models like CAPM or APT.

Cost of Depreciation Funds

 Definition:
o Value of an asset net of accumulated depreciation.
 Formula:
o Depreciation Cost = Purchase Price - Cumulative Depreciation.
 Also Known As:
o Net book value or adjusted cost basis.
 Economic Cost:
o Total capital used up in a given period.
o

MODULE 3 : EVALUATION OF NON-MONETARY ASPECTS OF PROJECTS AND FURTHER ISSUES

ON INVESTMENT AND PROJECT APPRAISAL :STUDY SESSION 1: COST-BENEFIT ANALYSIS

Cost-Benefit Analysis

 Definition:
o Identifies, measures, and discounts future costs and benefits to present values to calculate the net
economic worth of project options.
 Purpose:
o Evaluates total anticipated costs versus expected benefits to determine if implementation is
worthwhile.
 Steps:

1. Identify Costs:
 List monetary costs (start-up fees, licenses, payroll, etc.).
 List non-monetary costs (time, risk, reputation).
 Assign monetary values to these costs in present value terms.
 Total all costs.
2. Identify Benefits:
 List monetary benefits (direct profits, decreased costs, etc.).
 List non-monetary benefits (customer satisfaction, reputation).
 Assign monetary values to these benefits in present value terms.
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  Total all benefits.
3. Evaluate:
 Compare total costs and benefits.
 If benefits > costs, the project may be worthwhile.
 If costs > benefits, reconsider the project.
 If costs ≈ benefits, reevaluate for potential errors.
4. Spillover Effects:
 Consider secondary benefits like increased activities.
 Use market prices or impute values if market prices don’t reflect benefits.
5. Valuation Issues:
 Use current prices for accurate revenue estimation.
 Adjust for market imperfections and divergence between social and private costs.

Ratio Analysis

 Definition:
o A technique to evaluate financial performance by comparing various statistics.
 Categories:

1. Short-Term Solvency or Liquidity Ratios:

 Current Ratio: Current Assets / Current Liabilities.
 Quick Ratio: (Current Assets - Inventories) / Current Liabilities.
2. Debt Management Ratios:
 Debt Ratio: Total Debt / Total Assets.
 Debt-Equity Ratio: Total Debt / Total Owners' Equity.
 Equity Multiplier: Total Assets / Total Owners' Equity.
3. Asset Management Ratios:
 Receivables Turnover: Sales / Accounts Receivables.
 Days' Receivables: 365 / Receivables Turnover.
 Fixed Assets Turnover: Sales / Net Fixed Assets.
 Total Assets Turnover: Sales / Total Assets.
4. Profitability Ratios:
 Profit Margin: Net Income / Sales.
 Return on Assets (ROA): Net Income / Total Assets.
 Return on Equity (ROE): Net Income / Shareholders' Equity.
5. Market Value Ratios:
 Price-Earnings Ratio (P/E Ratio): Market Price per Share / Earnings per Share (EPS).
 Market-to-Book Ratio: Market Value per Share / Book Value per Share

MODULE 3 : STUDY SESSION 2 : Role of Market Price in the Valuation of Cost and Benefit

Valuation of Costs and Benefits and How It Affects Market Price

 Estimation of Revenue:
o Use expected prices of inputs and outputs, not changes due to overall price fluctuations.
o Current prices may underestimate overall value due to effects on consumer and producer surplus.
 Impact of Large Investments:
o Major investments (e.g., new power projects) can alter price structures, potentially leading to
lower prices and overestimated revenues.
 Market Imperfections:
o Distortions in price structure may occur, affecting the reflection of social benefits.
o Example: Government-controlled prices (e.g., water) may not reflect true marginal costs, requiring
corrections to project costs and benefits.
 Social vs. Private Costs:
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 o Divergence between social and private costs, especially in cases of unemployment.
o Include social benefits (e.g., job creation) in the overall benefits of a project.
 Intangible Costs and Benefits:
o Include unquantifiable elements (e.g., scenic effects) or those difficult to value in market terms
(e.g., life-saving impacts).

Incorporation of Political and Social Judgment into the Valuation Process

 Environmental Goods Valuation:

o Use demand for complementary or substitute private goods to estimate latent demand for
environmental goods.
o Example: Travel costs to recreational sites as a proxy for value.
 Travel Cost Method:
o Estimating value by treating travel costs as a price for visiting recreational sites.
o Analyze the relationship between travel costs and visit frequency to estimate demand.
 Hedonic Methods:
o Valuation based on differences in characteristics (e.g., housing features) using econometric
techniques.
o Example: Estimating value of environmental features by comparing property prices.
 Challenges with Hedonic Methods:
o Less reliable in regulated markets where prices may not reflect true willingness to pay.
o Example: Housing and labor markets in some European countries.
 Use of Substitutes for Environmental Goods:
o Valuing environmental goods through demand for private substitutes (e.g., water purification
devices).
o Note: Perfect substitutes for environmental goods are often not available.
o

MODULE 3 STUDY SESSION 3 : Choices of Interest Rate and Relevant Constraints of Cost-

Limitations of Cost-Benefit Analysis

 Potential Inaccuracies in Identifying and Quantifying Costs and Benefits:
o Difficulty in identifying all costs and benefits, especially indirect or causal relationships.
o Ambiguity in assigning monetary values to intangible items, leading to inaccurate analyses and
inefficient decision-making.
 Increased Subjectivity for Intangible Costs and Benefits:
o Subjective estimation required for non-monetary benefits (e.g., customer satisfaction).
o Reliance on past experiences and expectations can introduce bias, leading to misleading analyses.
 Inaccurate Calculations of Present Value:
o Present value calculations may be based on unrealistic discount rates.
o Miscalculations can distort the assessment of costs and benefits, despite accurate present value
calculations.
 Potential for Project Budget Misinterpretation:
o Cost-benefit analysis might be mistaken for a project budget by leadership teams.
o This misinterpretation can lead to unrealistic cost expectations and goal setting, causing difficulties
in cost control for project managers.
o
o
o
o
MODULE 3 STUDY SESSION 4 : TECHNICAL ANALYSIS

Technical Analysis

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  Definition:
o Evaluates securities using statistics from market activity (e.g., past prices, volume).
o Focuses on historical data rather than intrinsic value.
 Approach:
o Uses charts, technical indicators, and oscillators to identify patterns.
o Primarily concerned with historical price and volume data.
 Key Assumptions:
o The Market Discounts Everything:
 Price reflects all factors (fundamental, economic, psychological).
 Price movement alone is analyzed, assuming all relevant information is already factored
in.
o Price Moves in Trends:
 Price movements follow trends; future movements are likely to align with existing trends.
 Technical strategies are based on this assumption.
o History Tends to Repeat Itself:
 Price movements repeat over time due to consistent market psychology.
 Chart patterns used to analyze and predict future movements based on historical patterns.

MODULE 3 : STUDY SESSION 5 : FEASIBILITY STUDIES

2.1. Feasibility Studies

 Definition: Analysis of the viability of an idea or project.

 Purpose: Answers the essential question of whether to proceed with

a proposed project.

 Focus:

o Helps determine if the business will generate adequate cash

flow and profits.

o Assesses the ability to withstand risks and remain viable

long-term.

o Aims to meet the goals of the founders.

 Process:

o Outlines and analyzes several alternatives or methods for

achieving business success.

o Narrows the scope to identify the best business scenarios or

alternatives.

2.2. Project Conceptualisation

 Definition: Initial process of designing a project leading to a project

concept document.

 Purpose: Secures interest from potential donors.

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  Components:

o Situation analysis.

o Stakeholder analysis.

o Theory of change (includes problem analysis and logic of

intervention).

o Indicative budget.

2.3. Project Design

 Definition: Process of planning the steps and resources needed to

address the identified problem and achieve the expected outcome.

 Key Aspects:

o What work will be performed?

o Who will do it?

o When will it be done?

o Who is responsible for what?

o How the project will be managed, monitored, and

controlled.

2.4. Project Marketing

 Definition: Marketing activities related to large and complex

projects before securing a contract.

 Focus:

o Identifying and developing project opportunities.

o Understanding long-term consequences of projects on the

customer’s business.

 Scope:

o Involves internal or external actors.

o Customer and stakeholder-based.

 Current Status: A developing concept, not widely practiced in the

industry today.

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