What is expected commercial value in SAP PPM-PFM - Portfolio Management?

SAP Term: expected commercial value

• Component: PPM-PFM

• Component Name: Portfolio Management

• Description: A metric that seeks to maximize the value or commercial worth of the project portfolio, subject to certain budget constraints. The expected commercial value ECV is calculated using the formula ECV = [NPV * pcs - C * pts - D] where NPV = net present value of the project's future cash flows discounted at the weighted average cost of capital WACC pcs = probability of commercial success pts = probability of technical success C = commercialization launch costs D = development costs remaining in the project

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• Key Concepts: 
  Expected Commercial Value (ECV) is a metric used in SAP Portfolio and Project Management (PPM-PFM) to measure the expected financial return of a project. It is calculated by multiplying the estimated revenue of a project by its probability of success. ECV is used to compare projects and prioritize them based on their expected financial return.
  
  How to use it: 
  To calculate the ECV of a project, you need to first estimate the expected revenue of the project. This can be done by estimating the total cost of the project and subtracting it from the expected total revenue. Then, you need to estimate the probability of success for the project. This can be done by looking at factors such as market conditions, customer demand, and competition. Finally, you need to multiply these two values together to get the ECV of the project.
  
  Tips & Tricks: 
  When calculating ECV, it is important to be as accurate as possible with your estimates. This will help ensure that you are making decisions based on accurate data. Additionally, it is important to consider all factors that could affect the success of a project when estimating its probability of success.
  
  Related Information: 
  ECV is closely related to other metrics such as Net Present Value (NPV) and Internal Rate of Return (IRR). These metrics are used to measure the financial performance of projects and can be used in conjunction with ECV to make more informed decisions about which projects should be prioritized.