Amit Dudhaiya Assignment

8/6/2019 Amit Dudhaiya Assignment

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Project Management

Assignment 1

AMIT DUDHAIYA

KTI-SYMBIOSIS BATCH-2

1. Two Projects project A and project B are being appraised for investment.

The cash flows for each project are as follows:

Project A ($): Investment is 60,000.

Revenue (cash in) for 5 year: 30000, 60000,90000,120000 and 200000 respectively

Expenses (cash out) for 5 year: 10000,40000,70000,80000,120000 respectively.

Project B ($): Investment is 120,000.

Revenue (cash in) for 5 year: 50000, 75000,125000,150000, and 175000 respectively

Expenses (cash out) for 5 year: 40000, 50000, 85000,100000, and150000 respectively.

The discount rate is 10%.

1. What are the discount factors for first 5 years?

2. What is the NPV for project A and B? Which project would you select based on this parameter?

3. What is the ARR for project A and B? Which project would you select based on this parameter?

4. What is the ROI for project A and B? Which project would you select based on this parameter?

5. What is the Simple Payback period* for project A and B? Which project would you select based on

this parameter?

7. What will be the NPV if the discount rate changes to 12%?

8. What will be the Simple Payback Periodif the discount rate reduces to 8%?

*Simple Payback Period does not consider discount factors for the future cash flows.

ANS:

From Above:

The discount factors for first 5 years are

YEAR 1 2 3 4 5

Discounting Factor@10% 0.909091 0.826446 0.751315 0.683013 0.620921

The NPV for project A and B are:

NPV@10%

Project-

A66731.3

Project-

B-10521.6

Project-A would you select based on this parameter.


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The ARR for project A and B are:

ARR

Project-

A0.6

Project-B

0.25


The ROI for project A and B are:

ROI

Project-

A2

Project-

B0.25

Project-Awould you select based on this parameter.

The Simple Payback period* for project A and B are:

PAYBACK

PERIOD

Project-

A3

Project-

B4


NPV if the discount rate changes to 12%

NPV@12%

Project-

A58851.5

Project-

B-16708.8


The discount factors@ 12% for first 5 years are

YEAR 1 2 3 4 5

Discounting Factor@12%0.892857143 0.797193878 0.711780248 0.635518078 0.567426856

Simple Payback Period if the discount rate reduces to 8%

PAYBACK PERIOD

Project-A 5

Project-B More than 5 years


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2. Following are details of a project that is to be completed in 2years at a total cost of $500,000.

The project is being reviewed at the end of each quarter (from project start).

Quarter *BCWS (PV) % Complete *ACWP (AC)

1 70,000 50 40,0002 125,000 70 80,000

3 175,000 75 130,000

4 250,000 80 200,000

a) Please calculate

o The schedule variance - at the end of 1st

quarter

o The cost variance at the end of 2nd quarter

o Cost Performance Index at the end of 3rd quarter

o Schedule Performance Index at the end of 4th quarter

b) What is the status of the project at the end of 1st

year? (put it in word and justify with calculations

as appropriate)

c) Forecast the time when the project can be expected to be completed based on currentperformance i.e. status as of 4th

quarter.

d) Forecast the expected cost of the project based on current performance

e) Forecast the expected cost of the project if the efficiency changes to 90% from 5th quarter

ANS:

a)

o The schedule variance - at the end of 1st quarter = $-35,000

o The cost variance at the end of 2nd quarter = $ -20,000

o Cost Performance Index at the end of 3rd quarter = 0.75

o Schedule Performance Index at the end of 4th quarter = 0.8

b)

Status of the project at the end of 1st year

Cost Status: Project would require $ 10, 00,000 to complete the project.

Time Status: Project would require 4 Year to complete the project.

c)

Status of the project at the end of 4th year

Time Status: Project would require 2.6 Year to complete the project.

d)

The expected cost of the project based on current performancei.e4th year

Cost Status: Project would require $ 6,25,000to complete the project.

e)

The expected cost of the project if the efficiency change to 90% from 5th quarter is $555,555.55


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3. Ajmira Fabricators have been offered a contract to fabricate and supply a paint booth by a furniture

manufacturing unit for a contract price of Rs. 350,000. The activity times and costs are given below.

The project indirect cost is estimated at Rs.1500 per week.Direction from top management is to

optimize on total project cost.

ActivityPrecedingActivity

NORMAL Duration CRASH DurationTime

(Weeks)Cost (Rs.)

inthousands

Time(Weeks)

Cost (Rs.)in

thousands

A - 3 25 1 27.5

B A 4 38 2 44

C A 3 29 3 29

D A 8 36 7 37

E B 4 28 2 30

F C 6 22 4 23

G D 5 20 4 24

H E,F,G 3 18 1 22

a) Draw network diagram indicate ES,EF,LS,LF& float for each activity. Considering the normal

durations, what is the minimum duration in which project can be completed?

b) What would be the total cost of the project considering normal durations?

c) If the expected delivery period is 16 weeks for the client, how can Ajmira fabricators meet

the schedule expectation?

Clearly specify logic applied in deciding which activities should be crashed, by how much.

ANSWER ON NEXT page:


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Ans:

a) Network diagram indicating ES, EF, LS, LF& float for each activity is below:

Considering the normal durations, the minimum duration in which project can be completed is 19 days.

b)

Total cost of the project considering normal durations is Rs. 244,500.00

c)

If the expected delivery period is 16 weeks for the client, how can Ajmira fabricators meet the schedule

expectation?

If we change duration of activity coming in critical path above by 1 additional day the minimum required to

complete the project will be 16 days.

Please see next page for Network diagram showing 16 days to complete the project. We changed

duration of activity from 7 days to 8 days. ( 1 additional day).

NORMAL

URATION

ES

U EF ES

U EF

4 4 7 8 4 11

B E9 5 12 13 5 16

C

ES

U EF ES

U EF ES

U EF

ES

U EF 4 3 6 7 6 12 17 3 19

1 3 3 C F H

A 8 4 10 11 4 16 17 19

1 0 3 LS FLOAT LF LS FLOAT LF LS FLOAT LF

LS FLOAT LF ES

U EF ES

U EF

4 8 11 12 5 16

G CRITICAL

ATH

4 0 11 12 0 16

LS FLOAT LF LS FLOAT LF

CRASH

URATION

ES

U EF ES

U EF

3 2 4 5 2 6

B E

10 7 11 12 7 13


ES

U EF ES

U EF ES

U EF

A 3 3 5 6 4 9 14 1 15

1 1 2 C F H

7 4 9 1 4 13 14 15


ES

U EF ES

U EF

3 7 9 10 4 13

D G

3 0 9 10 0 13 CRITICAL

ATH



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CRASH DURATION = d

y

16 d

y

ES DU EF ES DU EF

3 2 4 5 2 6

B E

10 7 11 12 7 13


ES DU EF ES DU EF ES DU EF

A 3 3 5 6 4 9 15 1 16

1 1 2 C F H

7 4 9 1 4 13 14 15


ES DU EF ES DU EF

3 8 10 11 4 14

D G

2 0 9 10 0 13 CRITICAL

ATH


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Amit Dudhaiya Assignment