Do you remember the Las Vegas Outlaws? On February 3, 2001, the World Wrestling Federation (WWF) and NBC debuted the Xtreme Football League, or XFL, their challenge to the NFL. Led by Vince McMahon, the games featured a race to the ball instead of a coin toss, a live view of the locker room at halftime, and interviews with cheerleaders. The XFL roared out of the gate, initially drawing 16 million viewers for its first broadcast, but the audience quickly tired of the league. NBC's March 31 telecast drew the lowest rating for a prime-time program on a major network in modern television history. In May 2001, WWF and NBC announced the league was terminating operations. Losses for the group were estimated to be at least $70 million.

Obviously, the WWF and NBC didn't plan to lose $70 million in 10 weeks, but it happened. As the short life and quick death of the XFL show, projects don't always go as companies think they will. This chapter explores how this can happen and what companies can do to analyze and possibly avoid these situations.

In our previous chapter, we discussed how to identify and organize the relevant cash flows for capital investment decisions. Our primary interest there was in coming up with a preliminary estimate of the net present value for a proposed project. In this chapter, we focus on assessing the reliability of such an estimate and on some additional considerations in project analysis.

We begin by discussing the need for an evaluation of cash flow and NPV estimates. We go on to develop some tools that are useful for such an evaluation. We also examine some additional complications and concerns that can arise in project evaluation.

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