ADL 53 Project Management & Control V1.doc

ADL-53 Project Management and Control

Assignment – A

1. Describe briefly the aspects of a business environment that needs to be monitored as well as the dimensions along which a firm may appraise its strengths and weaknesses for identifying investment opportunities.

Aspects of a business environment, which needs to be monitored:a) A new market demand which is identified for a specific product or service

offering

b) A competing company closes or changes in business direction

c) Changes in legislation or regulation

Factors depend on which a firm may appraise its strengths and weaknesses for identifying investment opportunities:

Primary Factors:1) Feasibility study over alternative solutions

2) Identification of risk involved, probable likelihood of happening risk, risk impact & responsive actions required to mitigate, time & cost involved.

Other important Factors:1) Location advantage

2) Market demand for the desired product / service

3) Customer preferences / database available

4) Raw material / suppliers availability

5) Manpower resources availability

6) Finance availability from financial institutions

7) Local laws, taxes & statutory compliance.

2. The sales of a certain product during a 14 year period have been as follows:

Period Sales (Rs)

1 2,0002 2,2003 2,1004 2,3005 2,5006 3,2007 3,6008 4,0009 3,90010 4,00011 4,20012 4,30013 4,90014 5,300

Find out the least square regression line for the data given.For the data given above assume that forecast for the period 1 was Rs 2,100. If the constant (α) is equal to 0.3, derive the forecast for the periods 2 to 14.

Period

Sales (Rs)

Let it be 'X'

Let it be 'Y'

X - x (mean)

Y - y (mean)

[(X-x)(Y-y)]

(X - x) square

1 2,000 -6.5 -1464 9518 42.25

2 2,200 -5.5 -1264 6954 30.25

3 2,100 -4.5 -1364 6139 20.25

4 2,300 -3.5 -1164 4075 12.25

5 2,500 -2.5 -964 2411 6.25

6 3,200 -1.5 -264 396 2.25

7 3,600 -0.5 136 -68 0.25

8 4,000 0.5 536 268 0.25

9 3,900 1.5 436 654 2.25

10 4,000 2.5 536 1339 6.25

11 4,200 3.5 736 2575 12.25

12 4,300 4.5 836 3761 20.25

13 4,900 5.5 1436 7896 30.25

14 5,300 6.5 1836 11932 42.25 Total 105 48500 57850 227.5 Count / 'n' 14 14 Mean (total/'n') 7.5 3464

Regression line is given as: y = mx + b M is the slope which can be computed using = (Total of [(X-x)(Y-y)]) / Total of (X - x) square = 57850 / 227.5 Therefore slope 'm' = 254.29 therefore point of intercept or regression line = y = mx + b = 3464 = 254.29*7.5 + b b = 3464-1907

Therefore b = 1557/-

Where 'm' is the slope, 'm' & 'b' provide a best fit line for the data 'Y' is a sales & 'X' is a period

3. What is Project Implementation Schedule? How it is important? What information is required for preparing the project implementation schedule?

Project implementation/execution: This is the very important and longest phase in which deliverables are physically built and presented to the customer for acceptance.

During this process, a group of management processes (managing time, cost, quality, change risks & issues, procurement-handling suppliers, customer acceptance etc.,) are undertaken to monitor and control the deliverables.

Project manager is responsible for the deliverables. Project Manager has to prepare & be ready with the following information in order to prepare project implementation schedule.

a) Documentation of project plan. b) Work Breakdown structure (WBS) – include a hierarchical set of phases,

activities and tasks to be undertaken on the project.c) Resources (labor, equipment and materials) with quantities, specifications,

roles, responsibilities and skill sets in respect of human resources etc.,d) Quantity of money required for each stage in the project.e) Quality target provide a set of criteria and standards, which must be

achieved to meet the expectations of the customer.f) Set of actions to be taken formulated to prevent risk from occurrence.g) Criteria to judge each deliverable for customer acceptanceh) The types of information to be distributed, the methods & frequency of

distributing information to stakeholders & responsible person for delivering information.

i) Description of the products (goods and services) to be procured from suppliers, make or buy arrangements, schedule of procurement etc.,

4. What are replacement decisions? Explain three components of the cash flow stream of a replacement decision.

Replacement decisions: It is a type of capital budgeting decision is made when existing machinery / project is going to be replaced with new machinery/project.

In simple, whether replacement of a machine can be done in place of existing machine at a particular point of time for additional benefits. This is being decided by Replacement decision.

Replacement decision can be carried out by 2 methods:

A) Incremental cash flow method

B) Based on Equated Annual cost method (EAC) = [net present value (NPV) / present value annuity factor] – a project/machinery with EAC can be selected.

Components of the cash flow stream of replacement decision:

1) Incremental Initial outflows = [Purchase of new asset + Working capital expenditure in new asset – Sale/realizable value of old asset – Working capital re-capture of old asset].

2) Operational incremental net flows = [year wise operational cash flows from new asset – year wise operational cash flows from old asset] which is being discounted at time value of money.

3) Incremental Terminal flows = [Salvage value of new asset + Working capital re-capture of new asset – scrap value of old asset – Working capital re-capture of old asset] which is being discounted at time value of money.

4) Net present value (NPV) = 1 + 2 + 3

5) Replacement decision: If NPV is positive, then replace the existing machinery / project with new one, else continue with the existing.

5. A company is considering an investment proposal to install new milling controls at a cost of Rs 50,000. The facility has a life expectancy of 5 years and no salvage value. The tax rate is 35 percent. Assume that the firm uses straight-line depreciation method and the same is followed for tax purposes. The estimated cash flows before depreciation and tax (CFBDT) from the investment proposal are as follows:

Year CFBDT

1 Rs 10,0002 Rs 11,0003 Rs 12,5004 Rs 13,5005 Rs 21,000

a. Compute the following

(i) Payback period(ii) Accounting Rate of Return(iii) IRR(iv) NPV at 10 % discount rate.

(i) Payback period:

Year CFBDT Depreciation* PBTTaxes @

35% PAT CFATCumulativ

e CFAT

(A) (B) ( C) (D) = (B) -

(C ) (E)

(F) = (D) - (E)

(G) = (F) + (C )

0 (50,000

) (50,000) (50,000) 1 10,000 10000 - 0 - 10,000 (40,000) 2 11,000 10000 1,000 350 650 10,650 (29,350) 3 12,500 10000 2,500 875 1,625 11,625 (17,725) 4 13,500 10000 3,500 1225 2,275 12,275 (5,450) 5 21,000 10000 11,000 3850 7,150 17,150 11,700

Total 11,700

Payback period = Base year +( [unrecoverd cashflow of base year / cash flow of next year of unrecovered year] * 12)

= 4 + ([5450 / 11700]*12) there fore payback period = 4 years + 5.5897months = 4 years 6 months CFBDT = Cash flows before depreciation & taxes * depreciation - adopted SLM method & no salvage value, therefore Rs.50000/5 years (i.e.) Rs.10,000/- at the end of every year PBT = Profits before taxes PAT = Profits after taxes CFAT = Cash flows after taxes Base year = (just previous year of unrecovered cashflows turns into 0 or +ve)

(ii) Accounting rate of return : (Average profits after depreciation & taxes / Initial Investment (net)) * 100 Average profits after depreciation & taxes = Total Profits after tax / no of years = 11700 (as could be seen above) / 5 years = Rs.2340/- per year

Initial investment = Rs.50,000/- Therefore, accounting rate of return per year = (Rs.2340 / Rs.50,000) * 100 = 4.68%

(iv) NPV at 10% discount Rate :

Year CFAT Discount rate *Discounte

d cash flows

(refer (i) @ 10% (TVM)

0 (50,000) 1.000 (50,000)

1 10,000 0.909 9,091 2 10,650 0.826 8,802 3 11,625 0.751 8,734 4 12,275 0.683 8,384 5 17,150 0.621 10,649

NPV (4,341)

Net present value = Present value of inflows - Present value of outflowsTherefore, NPV = 45,659 - 50,0000

* Time value of money is calculated as 1 / (1+r) power n

(iii) IRR: IRR is the rate of return at which NPV = 0 Which is calculated as follows: L1 + [NPV L1 / NPV L1 - NPV L2] (L2 - L1) Where L1 = 1st discount guess rate L2 = 2nd discount guess rate L1 assumed as 7% Therefore NPV computed at 7% discount rate as below: NPV at 7% discount rate:


d cash flows


0 (50,000) 1.000 (50,000)

1 10,000 0.935 9,346 2 10,650 0.873 9,302 3 11,625 0.816 9,489 4 12,275 0.763 9,365 5 17,150 0.713 12,228

NPV (270) L2 assumed as 6% Therefore NPV computed at 6% discount rate as below: NPV at 7% discount rate:


d cash flows


0 (50,000) 1.000 (50,000)

1 10,000 0.943 9,434 2 10,650 0.890 9,478 3 11,625 0.840 9,761 4 12,275 0.792 9,723 5 17,150 0.747 12,815

NPV 1,211 Applying the above in IRR formulae, we get = 7 + [-270/(-270+1211)](7 - 6) = 7 +[ -270 / 941](1)

therefore IRR = 7 - 0.287

= 6.713%

ASSIGNMENT - B

1. (a) What are key issues considered by financial institutions while appraising a project for term financing?

The primary aspect considered by financial institutions is feasibility of the project. They review feasibility of the project in the following aspects:

1) Technical aspects (product/service demand, potential etc.,)

2) Commercial aspects (how margins are expected to yield, pricing etc.,)

3) Economic aspects (government rules & regulations regarding such product or service etc.)

4) Financial implication (source of finances & mode of funding, etc)

5) Managerial aspects (managerial team behind the project/ capability of management etc)

6) Security going to be offered, repayment terms & capability etc.

7) Time period etc.

1 (b) Discuss the key consideration in determining the debt-equity ratio of the firm.

Debt – equity ratio of the firm:

From management’s perspective, Debt funds are always cheaper & it doesn’t result in dilution of control. Raising debt fund enhances the financial risk with the firm, since obligation towards capital & interest repayments. Debt funds are secured against assets of the company.

On the other side, Raising fund through equity involves low risk but result in dilution of control. Repayment arises only in the event of liquidation

Ideal ratio for the firm 2 : 1 (i.e.) a firm can have two times of equity as its debt funds.

2. What is Performance review and control in respect of the projects? What are advantages of conducting it? What problems are encountered in performance review and how can they overcome?

Performance review and control in respect of the projects:

The Performance review & control is undertaken to determine whether all the planned activities and tasks have been successfully completed and to proceed further in the project. In simple, this is basically a checkpoint to ensure that the project has achieved its stated objectives as planned.

Advantages of Performance review: The following can be determined:

a) Is the project currently on schedule

b) Is the project currently within budget

c) Any critical project risks

d) Any high priority issues

e) Any substantial changes etc.,

Problems encountered in performance review and how can they overcome:

A performance review is a critical step in delivering a successful project. If reviews are not undertaken formally within the project life cycle, then the project board will have reduced control over the progress of the project, thereby increasing the level of risk to the overall project delivery.

To overcome the above, a project manager will present the performance review at a board meeting detailing the below:

a) The original project vision, objectives, scope and deliverables

b) The deliverable completed by the project to date

c) The progress of the project against the delivery dates

d) Areas of slippage in terms of time, cost and quality

e) Key issues and risks that require attention.

3. A project has the following time schedule:

Activity Time in weeks

1-2 41-3 12-4 13-4 13-5 64-9 55-6 45-7 86-8 17-8 28-9 1

8-10 89-10 7

Construct PERT network and compute

TE (Tail Event) and TL (Head Event) for each event. Float for each activity. Critical path and its duration

Note: Network diagram is given in excel format:

From the above network diagram, following paths have been identified :

Activity: Time in weeks Breakup Total 1 1 - 2 - 4 - 9 - 10 4+1+5+7 17 2 1 -3 -4 -9 -10 1+1+5+7 14 3 1 - 3 - 5 - 7 - 8 - 9 - 10

1+6+8+2+1+725 Critical path & its

duration4 1 - 3 - 5 - 7 - 8 - 10 1+6+8+2+8 25 Critical path & its duration5 1 - 3 - 5 - 6 - 8 - 9 - 10 1+6+4+1+1+7 20

6 1 - 3 - 5 - 6 - 8 - 10 1+6+4+1+8 20

Activityduratio

n

Tail even

t

Head even

t

EST LFT EFT LST

Total

float1 2 3* 4* 5 6 7

(3 + 2)

(4 - 2)

(6 - 3)

1 - 2 4 0 12 4 8 8 1 - 3 1 0 1 1 0 0 2 - 4 1 4 13 5 12 8 3 - 4 1 1 13 2 12 11 3 - 5 6 1 7 7 1 0 4 - 9 5 5 18 10 13 8 5 - 6 4 7 16 11 12 5 5 - 7 8 7 15 15 7 0 6 - 8 1 11 17 12 16 5 7 - 8 2 15 17 17 15 0 8 - 9 1 17 18 18 17 0

8 - 10 8 17 25 25 17 0 9 - 10 7 18 25 25 18 0

Note: Activities with '0' float are critical & cannot be delayed * Refer working note 1 EST - Earliest start time LFT - Latest finish time EFT- Earliest finish time LST- Latest start time

Working Note: 1 EST - Computed from tail to head LFT - Computed from head to tail

head node EST (in weeks)

(Breakup)Tota

l

1 0 0

2 0+4(EST of head node 1 + duration of activity 1-2) 4


4 Highest of (4+1) or (1+1) 5

5 1+6 (EST of head node 3 + duration of activity 3-5) 7

6 7+4 (EST of head node 5 + duration of activity 5-6) 11


8 Highest of (15+2) or (11+1) 17 9 Highest of (5+5) or (17+1) 18 10 Highest of (18+7) or (17+8) 25

Tail node LFT (in weeks)

(Breakup)Tota

l 1 Least of (1-1) or (12-4) 0 2 13-1 12 3 Least of (7-6) or (13-1) 1 4 18-5 13 5 Least of (16-4) or (15-8) 7 6 17-1 16 7 17-2 15 8 Least of (25-8) or (18-1) 17 9 25 – 7 18 10 Critical path duration 25

Case Study

1. Detailed Report:

Introduction:

Any project will have following stages like INITIAION, PLANNING, EXECUTION & CLOSURE collectively known as the project life cycle.

a) Preliminary Activities to be taken up before a large infrastructure project can be started:

Proposed project needs to be studied in detail in respect of requirements, feasible results, assess & select the desired result & obtaining a approval from project sponsor.

CURRENT SCENARIO:

1) Proposed project: Task of Metro Project

2) Customer: Government of India

3) Requirements: To be completed with in a period of seven years.

4) Feasibility study:

Problem / constraint before me (project manager): to be completed within a period of seven years

In this regard, Delhi metro project implementation (completed/delivered with in a targeted time limit) history has been studied. From the study, it is observed that the reasons that have contributed for completion with in time schedule & budget is as follows:

a) Funding to the project very well frozen before commencement.

b) Proper & effective systems are put in place to overcome disputes, corruption Political interference etc., & which has resulted in smooth progress of the project.

c) Good professionalism & accountability

Solution for the current scenario: Before taking an approval from Government of India for the metro project task, the issues in respect of funding, approval for systems etc., needs to be put in place for smooth implementation; needs to be agreed on, so as to complete the task with a scheduled period of seven years.

b) Understanding the significance of the role of a project manager in project execution:

The key objectives for the project manager are:

1. Project Initiation, which include defining the project scope, structure & approach towards implementation.

2. Project Planning, which include freezing budget requirements & time scheduling.

3. Project execution &4. Closure of the project, which include releasing staff, resources and

equipment.

Role of a project manager in project execution:

a) Deployment of staff, assets and processes to the projectb) Regular monitoring of project progress against schedulec) Control expenditure to ensure project delivery within budgetd) Ensure that defined quality targets are achieved, by undertaking quality

assurance and quality control.e) Monitor, control and manage the implementation of project change

requestsf) Responsible for ascertaining risks & implement responsive actionsg) Gain customer acceptance of each deliverableh) Keep project stakeholders regularly and suitably informed of project

progress.

c) Understanding the importance of the right work culture in successful project management:

The following ensures right work culture exists, which is very important for project success:

1) Roles and responsibilities of the team members need to be clearly defined and communicated.

2) Time bound targets defined for each member3) Clear criteria for rewards will promote and reinforce desired behavior.

Recognition and Rewards should be based on activities and performance ensures improved work culture.

4) Policies and Procedures needs to be framed such that protect team members from safety hazards.

The implementation study of Delhi Metro Project reveals that: during the process of implementation, the project team faced many number of technical and systematic challenges during the construction of the metro. However, through thorough planning and an effective project design and a good work culture, they were able to overcome all these hurdles. Further, organizational culture was based on punctuality, honesty and a strict adherence to deadlines.

Conclusion: As could be seen from the above facts, right work culture is very important for project to achieve deadlines and overall success.

d) Recognize the importance of managing the various stake holders in a project:

A stakeholder is a person or entity outside the project with a Specific Key Interest or stake in the project.

Effective project management is not only completing the project on schedule and with in the budget, but also managing the project’s stakeholders.Project manager is responsible to communicate to the stakeholders very regularly through various reports such as;

a) Status reports (indicates how much of the work has been done), b) Progress reports (indicates whether the project is on track, behind/ahead of schedule, over/under budget etc.,c) Trend analysis (indicates, from past performance data, predicts whether performance is going to improve or fade in future, necessitates action to be taken)d) Forecast reports (indicates, based on current performance, how the project will perform in future)e) Variance reports (indicates, what the actual performance is compared with the planned performance)f) Earned value report (indicates the earned value of the project)

The study of Delhi Metro Project reveals that: the project team done well in managing the project’s stakeholders. The stakeholders included the governments, contractors, the funding agencies and the general public. Despite assurances that the team would enjoy autonomy, it faced political pressure not only in its recruitment processes, promotions, and contract awarding but also in land acquisition. The successful completion of the project effectively silenced the critics who had been skeptical about the ability of an Indian public sector organization to complete any project, let alone one as complex and costly as the Delhi Metro, on time and within the budget.

e) Understand the difficulties involved in the execution of large infrastructure projects in developing countries, and how these can overcome:

This is the phase in which deliverables are physically built and presented to the customer for acceptance.

During this process, a group of management processes (managing time, cost, quality, change risks & issues, procurement-handling suppliers, customer acceptance etc.,) are undertaken to monitor and control the deliverables.

Project manager is responsible for the deliverables. During the execution process, he has to overcome following hurdles by performing above group of management processes.

a) Risk issues (which include identification of risks, Risk analysis & risk response planning): these issues can be overcome by Performing Risk Management

b) Quality issues: The quality of the outcome is very important in order to meet customer’s acceptance for the project. This can be achieved by planning, training, product design validation, process validation, tests & evaluation, quality audits, inspection etc. some of the techniques like, sampling, standard deviation or sigma, control charts, scatter diagram are all being used to achieve quality.

c) Procurement issues: It is one of the important and major project execution processes. This include decisions like make or buy, type of suppliers etc., These issues can be overcome by performing procurement process which include planning, contracting, request seller responses, select sellers etc.,

Project manager also has to overcome Political influences & legal & statutory compliance issues to successfully execute the project with in the time schedule & budget.

f) Importance of Financial Management tools:

Financial management tools are very important while accepting the project & during the execution phase of the process.

Some of the tools like financial ratios, Net present value (present worth of expected future cash flows at discounted rate), IRR (expected rate of return out of the project) etc., are useful for decision-making.

Following Project financial tools are useful to review the progress and performance of the project is as below:

Description IndicatesCost Variance (CV)

Planned expenditure vs. actual spent. Negative indicates spent over budget, Positive means spent under budget.

Schedule Variance (SV)

Difference between planned to be in schedule vs. actual scenario. Negative is behind schedule, Positive is ahead of schedule.

Cost Performance Index (CPI)

The rate at which the project is performing in comparison to how expect it to perform in terms of costs. (means getting X cents out of every $1)

Schedule Performance Index (SPI)

The rate at which the project is performing in comparison to how expect it to perform in terms of the schedule.

2. Similarities between the two projects and dissimilarities.

A) SIMILARITIES:

a) Both are large infrastructure metro projectsB) DISSIMILARITIES:

a) Delhi metro project was a joint venture project between Government of India & government of the national capital territory of Delhi collectively formed a Delhi metro rail corporation to execute a project, whereas proposed Government of India sponsors metro project.

b) Delhi metro project was a 10-year project, whereas proposed metro project is scheduled to complete with in a period of 7 years.

3. Activities required immediately:

Assumptions: Project cost: 100 billion, Time Schedule: Seven Years, Project estimated to complete in 3 phases. Each Phase is expected to take 2.3 years appx & estimated to cost 33 billion each. (Appx.)

1. After obtaining an approval from sponsor, the first activity to start with is Develop Project Charter, which defines the vision, objectives, scope and deliverables for the project. It also provides the organization structure (roles & responsibilities) and a summarised plan of the activities; resources and funding required undertaking the project. Further, risks, issues, planning assumptions and constraints are listed.

2. Develop Preliminary project scope statement which include planning, definition, create a WBS (work breakdown structure)-subdividing the major project deliverables into smaller, more manageable components.

3. Develop project management plan which include a group of plans such as Resource plan, financial plan, quality plan, risk plan, acceptance plan, communications plan, procurement plan etc.,

4. Direct and manage project execution, which include implementation of various management processes (cost, quality, risk, communication, procurement etc.,) to monitor and control the activities being undertaken.

Assignment - C

1. Risks will be identified during which risk management process(es)?

a) Quantitative risk analysis and risk identificationb) Risk identification and risk monitoring and controlc) Qualitative risk analysis and risk monitoring and controld) Risk identificatione) None of the above.

Answer: (d) Risk Identification

2. Who is ultimately responsible for quality management on the project?

a) Project engineerb) Project managerc) Quality managerd) Team member

Answer: (b) Project manager

3. A project manager has just been assigned to a new project and has been given thepreliminary project scope statement and the project charter. The first thing the projectmanager must do is:

a) Create a project scope statement.b) Confirm that all the stakeholders have had input into the scope.c) Analyze project risk.d) Begin work on a project management plan.

Answer: (d) Begin work on a Project management plan

4. You are taking over a project during the planning process group and discover that six individuals have signed the project charter. Which of the following should most concern you?

a) Who will be a member of the change control boardb) Spending more time on configuration managementc) Getting a single project sponsord) Determining the reporting structuree) Both (a) and (b)

Answer: (d) Determining the reporting structure

5. A project manager is employed by a construction company and is responsible for the furnishing of the completed building. One of the first things that the project manager for this project should do is to write a:

a) Work breakdown structure.b) Budget baseline.c) Project charter.d) Project plan.

Answer: (c) Project Charter

6. All of the following are characteristics of a project EXCEPT:

a) Temporaryb) Definite beginning and endc) Interrelated activitiesd) Repeats itself every month

Answer: (d) Repeats itself every month

7. The equivalent of cost reimbursable contracts is frequently termed:

a) Back charge contracts.b) Fixed price contracts.c) Progress payment contracts.d) Cost plus contracts.

Answer: (d) cost plus contracts

8. A buyer extends a formal invitation that contains a scope of work that seeks a response that will describe the methodology and results that will be provided to the buyer. This is called:

a) Invitation to bid.b) Request for information.c) Request for proposal.d) Request for bid.

Answer: (c) Request for proposal

9. A project manager must have some work done by an outside contractor. This work has a great deal of risk associated with it, and it has become very difficult to find a contractor willing to take on the job. Which of the following types of contract would offer the greatest incentive to the contractor?

a) Cost plus percentage of cost as an award feeb) Cost plus fixed feec) Cost plus incentive feed) Firm fixed price.

Answer: (c) Cost plus incentive fee

10. The project management process groups are:

a) Initiating, planning, expediting, and control.b) Plan, organize, develop, and control.c) Plan, do, observe, commit.d) Initiating, planning, executing, controlling, and closeout.

Answer: (d) Initiating, planning, executing, controlling, and closeout

11. In which project management process group is the detailed project budget created?

a) Initiatingb) Before the project management processc) Planningd) Executing

Answer: (b) Before the project management process

12. Contract closure is different from administrative closure in that contract closure:

a) Occurs before administrative closure.b) Is the only one to involve the customer?c) Includes the return of property.d) May be done more than once for each contract.

Answer: (a) Occurs before administrative closure

13. During the full life cycle of the project, a plot of the project’s expected expenditures will usually follow a characteristic..S.. shape. This indicates that:

a) There is a cyclic nature to all projects.b) Problems will always occur in the execution phase.c) There are high expenditures during closeout.d) The bulk of the project budget will be spent in the execution phase.

Answer: (d) The bulk of the project budget will be spent in the execution phase

14. What conflict resolution technique is a project manager using when he says, "I cannot deal with this issue now!"

a) Problem solvingb) Forcingc) Withdrawald) Compromising

Answer: (c) Withdrawal

15. A group of related projects that are managed in a coordinated way that usually include an element of ongoing activity is called a:

a) Major project.b) Project office.c) Program.d) Group of projects.

Answer: (a) Major Project

16. To control the schedule, a project manager is reanalyzing the project to predict project duration. She does this by analyzing the sequence of activities with the least amount of scheduling flexibility. What technique is she using?

a) Critical path methodb) Flowchartc) Precedence diagrammingd) Work breakdown structuree) Both (a) and (b).

Answer: (a) Critical Path Method

17. A project manager has just been assigned to a project. The document that recognizes the existence of the project is called:

a) The statement of work.b) The project assignment.c) The project charter.d) The product description.

Answer: (c) The Project charter

18. A manager that manages a group of related projects is called a:

a) Project manager.b) Project expediter.c) Program coordinator.d) Program manager.

Answer: (a) Project manager

19. If project A has a net present value (NPV) of Rs 30,000 and project B has an NPV of Rs 50,000, what is the opportunity cost if project B is selected?

a) Rs 23,000b) Rs 30,000c) Rs 20,000d) Rs 50,000

Answer: (b) Rs 30,000

20. A project manager is using weighted average duration estimates to perform schedule network analysis. Which type of mathematical analysis is being used?

a) Critical path methodb) PERTc) Monte Carlod) Resource leveling

Answer: (b) PERT

21. An activity has an early start (ES) of day 3, a late start (LS) of day 13, an early finish (EF) of day g, and a late finish (LF) of day ig. The activity:

a) Is on the critical path.b) Has a lag.c) Is progressing well.d) Is not on the critical path.

Answer: (d) Is not on the Critical Path

22. Which phase of the project is likely to have the greatest amount of its funding spent?

a) Initiatingb) Executingc) Planningd) Closeout

Answer: (b) Executing

23. Which of the following represents the estimated value of the work actually accomplished?

a) Earned value (EV)b) Planned value (PV)c) Actual cost (AC)d) Cost variance (CV)

Answer: (a) Earned value (EV)

24. A project manager is managing a project. The original scope baseline of the project was budgeted at Rs 100,000. Since works on the project started there have been seventeen authorized and approved changes to the project. The changes have a value of Rs 17,000 and the cost of investigating them prior to their approval was Rs 2,500. What is the current budget (in Rs) for the project?

a) 100,000b) 114,500c) 117,000d) 119,500e) None of the above

Answer: (c) 117,000

25. You are managing a project in a just in time environment. This will require more attention, because the amount of inventory in such an environment is generally:

a) 45 percent.b) 10 percent.c) 12 percent.d) 0 percent.

Answer: (d) 0 percent

26. A task was scheduled to use two persons, full time, and take two weeks to complete.Instead, the project manager was only able to assign one person to this task. At the end of two weeks, the person assigned to the task was 75% complete. What is the costperformance index?

a) 0.75b) 1.50c) 0.25d) 1.15

Answer: (a) 0.75

27. Which of the following is considered to be a simulation technique?

a) PERT analysisb) GERT analysisc) Monte Carlo analysisd) Critical path method

Answer: (c) Monte Carlo analysis

28. Project A has an internal rate of return (IRR) of 21 percent. Project B has an IRR of 7percent. Project C has an IRR of 31 percent. Project D has an IRR of ig percent. Which of these would be the BEST project?

a) Project Ab) Project Bc) Project Cd) Project D

Answer: (c) Project C

29. The program evaluation and review technique (PERT) method of scheduling differs from the critical path method (CPM) because the PERT method:

a) Uses weighted averages of activity durations to calculate project duration.b) Uses dummy activities to represent logic ties.c) Uses free float instead of total float in the schedule calculations.d) Uses bar charts instead of logic diagrams to portray the schedule.

Answer: (a) uses weighted averages of activity durations to calculate project duration

30. In attempting to complete the project faster, the project manager looks at the costassociated with crashing each activity. The best approach to crashing would also include looking at the:

a) Risk impact of crashing each activity.b) Customer's opinion of which activities to crash.c) Boss's opinion of which activities to crash and in which order.d) Project life cycle phase in which the activity is due to occur.

Answer: (a) Risk impact of crashing each activity

31. The project is not completed until:

a) The project scope is completed, administrative closure is completed and payment is received.

b) Formal acceptance is received, and any other requirements for project closure as stated in the contract are met.

c) The customer is satisfied and final payment is received.d) Lessons learned are completed.

Answer: (d) Lessons learned are completed

32. During project executing, a team member comes to the project manager because he is not sure of what work he needs to accomplish on the project. Which of the following documents contain detailed descriptions of work packages?

a) Work breakdown structure (WBS) dictionaryb) Activity listc) Preliminary project scope statementd) Project scope management plan

Answer: (a) Work breakdown structure (WBS) dictionary

33. You are asked to prepare a budget for completing a project that was started last year and then shelved for six months. All the following would be included in the budget except?

a) Fixed costsb) Sunk costs

c) Direct costsd) Variable costs

Answer: (b) Sunk costs

34. During the project life cycle, in which part of the life cycle will risk be the lowest?

a) Initiationb) Planningc) Executiond) Closeout

Answer: (a) Initiation

35. A project manager managing any project should perform risk analysis at what stage of the project:

a) Just before any major meeting with the client.b) On a regular basis throughout the project.c) Only when justified by the awareness of new risks becoming a possibility.d) When preparing the project plan.e) None of the above

Answer: (b) On a regular basis throughout the project

36. You are the project manager for a high visibility project. The margin on this project is low, and it is extremely important that the cost estimates for the work on the project be accurate. While reviewing the cost estimates for this project you notice that one of the cost estimates for an element in the WBS is 10% higher than two previous projects for very similar work. What should you do?

a) Accept the estimate because you trust all of the people on your project team, and they are responsible for estimates.

b) Reduce the estimate and add the additional budget to the management reserve.c) Ask the person responsible for the estimate to explain the difference

and bring supporting information to you.d) Reduce the estimate and add the additional budget to the contingency reserve.

Answer: (c) Ask the person responsible for the estimate to explain the difference and bring supporting information to you.

37. The project life cycle differs from the product life cycle in that the project life cycle:

a) Does not incorporate a methodology.b) Is different for each industry.c) Can spawn many projects.d) Describes project management activities.

Answer: (d) Describes project management activities

38. A manager and the head of engineering discuss a change to a major work package. After the meeting, the manager contacts you and tells you to complete the paperwork to make the change. This is an example of:

a) Management attention to scope management.b) Management planning.c) A project expediter position.d) A change control system.

Answer: (d) A change control system

39. All of the following are parts of direct and manage project execution except?

a) Identifying changesb) Using a work breakdown structurec) Implementing corrective actionsd) Setting up a project control system

Answer: (a) Identifying changes

40. A project manager does not have much time to spend planning before the mandatory start date arrives. He therefore wants to move through planning as effectively as possible. Which of the following would you recommend?

a) Make sure you have a completed preliminary project scope statement and then start the WBS.

b) Create an activity list before creating a network diagram.c) Document all the known risks before you document the high-level assumptions.d) Finalize the quality management plan before you determine quality metrics.

Answer: (a) Make sure you have a completed preliminary project scope statement and then start the WBS.

41. Which of the following is not a typical project milestone?

a) Completion of designb) Production of a prototypec) Training of project membersd) Completed testing of the prototypee) Approval of a pilot run

Answer: (e) Approval of a pilot run

42. Which of the following are organizational structures used to tie the project to the parent firm?

a) Pure projectb) Functional projectc) Matrix projectd) Only A and Be) Only B and Cf) A, B, and C

Answer: (c) Matrix project

43. The advantages of pure project include all but:

a) The project manager has full authority over the project.

b) Team pride, motivation, and commitments are high.c) Decisions are made quickly.d) A team member can work on several projects.e) Team members report to one boss.

Answer: (a) The project manager has full authority over the project

44. The advantage(s) of the network planning models over the Gantt chart is (are) that:

a) they are easy to use and quite widely understoodb) the precedence relationships in network scheduling are explicitly shownc) they are less costly to used) both A and Be) both B and C

Answer: (d) both A and B

45. "Slack" refers to the difference between:

a) latest and earliest timesb) finish and start timesc) observed and predicted timesd) optimistic and pessimistic timese) none of the above

Answer: (e) none of the above

46. Which of the following would not be considered in deciding how far to minimum-cost schedule (crash) a project?

a) Project overrun penaltiesb) Incentives for early completionc) Indirect project costs (e.g. interest on a construction loan)d) The normal duration times of tasks not on a critical pathe) How far individual tasks can be crashed

Answer: (d) The normal duration times of tasks not on a critical path

47. Which statement is true about Project Scheduling?

a) Slack is defined as the difference between the earliest start and the latest finish of a task.

b) The critical path seldom has a slack time of zero.c) Project crashing is an effort to maximize project duration.d) The earliest finish for a task is equal to the early start plus the task duration.e) None of the above statements are true.

Answer: (e) None of the above statements are true

48. There is an activity "A". The earliest activity "A" can be completed is 8 minutes, the most likely time is 10 minutes, and the latest activity "A" can be completed is 12 minutes. Assume that a Beta Distribution is used to describe the activity time. What is the expected time needed to complete activity A?

a) 8 minutesb) 10 minutesc) 12 minutesd) 11 minutes

e) None of the aboveAnswer: (b) 10 minutes

49. There is an activity "A". The earliest activity "A" can be completed is 8 minutes, the most likely time is 10 minutes, and the latest activity "A" can be completed is 12 minutes. Assume that a Beta Distribution is used to describe the activity time. Which of the following is the standard deviation of this activity A?

a) sqrt (4/36)b) sqrt (16/36)c) sqrt (10/36)d) 4/36e) 16/36

Answer: (b) sqrt (16/36)

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ADL 53 Project Management & Control V1.doc