FIN.9:4.1 - Construct the alternatives that actually compete

Start with the corporation’s choice and the work or service it must accomplish. Include continuation without new investment, and retention or return of capital through FIN.21 where relevant. A mandatory service need can make “spend nothing” infeasible while still leaving several ways to meet it. A financially attractive project can be excluded by a real capacity or permission limit. Preserve the distinction between a required constraint and a sponsor’s preference.

Describe each available whole alternative before ranking it. Projects may be independent, mutually exclusive, complementary or prerequisites for later work. Two projects using the same site can exclude each other; a shared facility can make the combined cost lower than the sum; a first stage can create a later choice whose value FIN.8 must establish. Names such as “strategic” or “synergistic” do not specify those relations.

Recover the baseline used by each valuation. If two projects each count the full benefit of replacing the same old process, adding their NPVs double counts that improvement. If one project presumes that another has already paid for a facility, its apparent standalone value belongs to a different alternative. Rebuild the whole cash account or adjust the contributions explicitly before comparison. FIN.6 owns that cash construction; this Method owns which whole alternatives and combinations are compared.

A resource shortage can be a genuine external limit or a chosen internal budget. If the budget can be changed, compare the obtainable financing or additional resource with the gain it enables and the costs it creates. Do not silently relax a binding limit because the projects have positive NPV, and do not treat a discretionary budget as an immutable physical fact. Use FIN.10–12 to establish obtainable financing that could change the available set.