projective measure

(noun)

A personality test that is used to identify underlying personality traits; responses are highly subjective.

Related Terms

Examples of projective measure in the following topics:

  • Overview of Personality Assessment

    • Psychologists measure personality through objective tests (such as self-reports) and projective measures.
    • The most common of these methods include objective tests and projective measures.
    • Projective measures, unlike objective tests, are sensitive to the rater's or examiner's beliefs.
    • Two of the most popular projective measures are the Thematic Apperception Measure and the Rorschach test.
    • The advantage of projective measures is that they purportedly expose certain aspects of personality that are impossible to measure by means of an objective test; for instance, they are more reliable at uncovering unconscious personality traits or features.

  • Multiple IRRs

    • When cash flows of a project change sign more than once, there will be multiple IRRs; in these cases NPV is the preferred measure.
    • Examples of this type of project are strip mines and nuclear power plants, where there is usually a large cash outflow at the end of the project.
    • When a project has multiple IRRs, it may be more convenient to compute the IRR of the project with the benefits reinvested.
    • IRR, as a measure of investment efficiency may give better insights in capital constrained situations.
    • However, when comparing mutually exclusive projects, NPV is the appropriate measure.

  • HR Metrics

    • Evaluations can be viewed as company projects or investments in this case.
    • The payback period is measured by the net investment divided by the annual cash inflows as a result of that investment; this measure will give a company an idea of how long it takes the project to earn by its cost.
    • The final measure for financial metrics of HR is a net present value, "The net present value of a capital expenditure project is defined as the present value of the stream of net (operating) cash flows from the projects minus the project's net investment" (Moyer, McGuigan, & Kretlow, 2006).
    • This will put the value of the HR project in monetary terms like any other investment for the company.
    • Human resources should be treated like any other projects that a company can undertake.

  • Advantages of the Payback Method

    • Payback period as a tool of analysis is easy to apply and easy to understand, yet effective in measuring investment risk.
    • The payback period is an effective measure of investment risk.
    • The project with a shortest payback period has less risk than with the project with longer payback period.
    • Payback period method is suitable for projects of small investments.
    • The business is more likely to use payback period to choose a project.

  • Disadvantages of the IRR Method

    • In cases where one project has a higher initial investment than a second mutually exclusive project, the first project may have a lower IRR (expected return), but a higher NPV (increase in shareholders' wealth) and should thus be accepted over the second project (assuming no capital constraints).
    • In addition, IRR assumes reinvestment of interim cash flows in projects with equal rates of return (the reinvestment can be the same project or a different project).
    • This presents a problem, especially for high IRR projects, since there is frequently not another project available in the interim that can earn the same rate of return as the first project.
    • When the calculated IRR is higher than the true reinvestment rate for interim cash flows, the measure will overestimate–sometimes very significantly–the annual equivalent return from the project.
    • Project A has a higher NPV (for certain discount rates), even though its IRR (= x-axis intercept) is lower than for project B

  • Defining the IRR

    • IRR is a rate of return used in capital budgeting to measure and compare the profitability of investments; the higher IRR, the more desirable the project.
    • The internal rate of return (IRR) or economic rate of return (ERR) is a rate of return used in capital budgeting to measure and compare the profitability of investments.
    • IRR calculations are commonly used to evaluate the desirability of investments or projects.
    • The higher a project's IRR, the more desirable it is to undertake the project.
    • Assuming all projects require the same amount of up-front investment, the project with the highest IRR would be considered the best and undertaken first.

  • Reinvestment Assumptions

    • In cases where one project has a higher initial investment than a second mutually exclusive project, the first project may have a lower IRR (expected return) but a higher NPV (increase in shareholders' wealth) and, thus, should be accepted over the second project (assuming no capital constraints).
    • IRR assumes reinvestment of interim cash flows in projects with equal rates of return (the reinvestment can be the same project or a different project).
    • This presents a problem, especially for high IRR projects, since there is frequently not another project available in the interim that can earn the same rate of return as the first project.
    • When the calculated IRR is higher than the true reinvestment rate for interim cash flows, the measure will overestimate–sometimes very significantly–the annual equivalent return from the project.
    • When a project has multiple IRRs, it may be more convenient to compute the IRR of the project with the benefits reinvested.

  • Financial and Budgetary Controls

    • Determining the cost of a project is one of the most important initial steps for a project manager.
    • If a project manager cannot stay within a controlled budget, they may not have the funds to complete the project.
    • The budget may be determined on an annual or monthly basis depending on how long the project is projected to run.
    • Payback period intuitively measures how long something takes to "pay for itself."
    • Payback period is widely used because it is a simple and clear measure.

  • Defining Capital Budgeting

    • This should reflect the riskiness of the investment, typically measured by the volatility of cash flows, and must take into account the financing mix.
    • It is a commonly used measure of investment efficiency.
    • Nevertheless, for mutually exclusive projects, the decision rule of taking the project with the highest IRR, which is often used, may select a project with a lower NPV.
    • Accordingly, a measure called "Modified Internal Rate of Return (MIRR)" is often used.
    • Payback period intuitively measures how long something takes to "pay for itself. " All else being equal, shorter payback periods are preferable to longer payback periods.

  • Disadvantages of the Payback Method

    • Alternative measures of "return" preferred by economists are net present value and internal rate of return.
    • For example, two projects are viewed as equally attractive if they have the same payback regardless of when the payback occurs.
    • If both project require an initial investment of $300,000, but Project 1 has a payback of one year and Project two of three years, the projects are viewed equally, although Project 1 is more valuable because additional interest could be earned on the funds in year two and three.
    • Payback also ignores the cash flows beyond the payback period, thereby ignoring the profitability of the project.
    • Thus, one project may be more valuable than another based on future cash flows, but the payback method does not capture this.