Abstract
This paper explores a method of evaluating R&D cost effectiveness which incorporates the financial technique called Present Value Analysis. To achieve this, cost effectiveness evaluation proposed in this paper involves a discounted cash flow procedure relying on the notion that money has a time value. This notion is called ``Time Value of Money (TVM)'' to reflect the proper effect of timing and varying risk levels associated with R&D's cost and profit. By actually applying this method to product-oriented R&D evaluation, authors conclude that the TVM notion can give a clearer picture of objective R&D evaluation results, especially in time and risk-sensitive high-technology R&D and in the cost-sensitive global capital market.
