The total project approach is a financial analysis method that compares the profits generated by two alternative projects. The project selected is usually the one with the higher projected profit level. However, a number of additional issues should be considered when making this decision, such as:
- Do the cash flows of the projects match their profits?
- How well do the required investment levels of the two projects compare to each other?
- How long does it take each of the projects to generate a return?
- Are there differences in the variability of sales between the two projects?
- Are there differences in the risk of project failure?
Thus, there are a number of additional considerations involved, rather than just comparing profitability.