App - B Solustions To Selected Problems

B-1
APPENDIX
B
Solutions to Selected Problems
CHAPTER 2: STRATEGIC MANAGEMENT AND PROJECT
SELECTION
Problem 2:
Average Rate of Return = $30,000/$200,000 = 0.15 = 15%
Problem 4:
i = 24%
Investment
Yr 1
Cashflow $ (75,000) $ 20,000 $
PVIF
1.0000
1.2400
PV $
$ (75,000) $ 16,129 $
NPV
$
(5,729)
Yr 2
Yr 3
25,000 $ 30,000 $
1.5376
1.9066
16,259 $ 15,735 $
Yr 4
50,000
2.3642
21,149
The addition of 4% inflation makes the investment unfavorable at a hurdle rate of 20%.
Problem 6:
Year Pessimistic Most Likely Optimistic
0
$ (65,000) $ (65,000) $ (65,000)
1
$ 14,000
$ 20,000
$ 22,000
2
$ 19,000
$ 25,000
$ 30,000
3
$ 27,000
$ 30,000
$ 36,000
4
$ 32,000
$ 35,000
$ 39,000
Rate
20%
Used
$(65,000)
$ 20,000
$ 25,000
$ 30,000
$ 35,000
PVIF
1
1.200
1.44
1.728
2.0736
NPV
PV$
$(65,000)
$ 16,667
$ 17,361
$ 17,361
$ 16,879
$ 3,268
The column labeled Used indicates the cash flow value used to calculate the net present value.
The profitability index is the sum of the discounted cash flows divided by the initial investment. For
this problem it is the sum of the PVs for years 1-4 divided by $65,000 or:
68,268/65,000 = 1.05
Since the value it greater than one, the project should be accepted.
Copyright 2015 John Wiley & Sons, Inc.
B-2
Problem 8:
Most
Year Pessimistic Likely
0
$ (65,000) $ (65,000)
1
$ 14,000
$ 20,000
2
$ 19,000
$ 25,000
3
$ 27,000
$ 30,000
4
$ 32,000
$ 35,000
Rate
20%
Optimistic
$ (65,000)
$ 22,000
$ 30,000
$ 36,000
$ 39,000
Inflation
2%
2%
2%
2%
Used
PVIF
$(65,000) 1
$ 20,000 1.220
$ 25,000 1.4884
$ 30,000 1.8158
$ 35,000 2.2153
NPV
PV$
$(65,000)
$ 16,393
$ 16,797
$ 16,521
$ 15,799
$ 510
Now the column labeled Inflation has been added. Each of these cells is individually calculated by
Crystal Ball with a normal distribution using a standard deviation of 0.33% to allow different
inflation values for each year. The result is added to the PVIF calculation used to determine the
individual PV results.
Now the forecast values for NPV look like this:
The probability that the NPV exceeds $0 is about 50%. The mean value for this distribution is -$85.
This analysis indicates that there is only a 50-50 chance that the project will qualify (meet the hurdle
rate).
B-3
Category
Consulting costs
Acquisition time
Disruption
Cultural differences
Skill redundencies
Implementation risks
Infrastructure
Weight
20
20
10
25
10
10
10
Method Options
Grade
Score
A
B
C
A
B
C
1
2
3
20
40
60
2
3
1
40
60
20
2
1
3
20
10
30
3
3
2
75
75
50
2
1
1
20
10
10
1
2
3
10
20
30
2
2
2
20
20
20
Total Score
205
235
220
Problem 10:
a)
Implementation risks = 10 and cultural differences = 25
Due to the changes in weights for implementation risks and cultural differences, Method B is now the
best option.
b)
Using the initial values from problem 6, make the changes so that Method A implementation
risks = 3 and Method C cultural differences = 2.
Category
Consulting costs
Acquisition time
Disruption
Skill redundencies
Infrastructure
Weight
20
20
10
10
10
25
10
Method Options
Grade
Score
A
B
C
A
B
C
1
2
3
20
40
60
2
3
1
40
60
20
2
1
3
20
10
30
3
3
2
30
30
20
2
1
1
20
10
10
3
2
3
75
50
75
2
2
2
20
20
20
Total Score
225
220
235
The change for As implementation risks grade was not sufficient to replace Method C as the best
option. The grade for cultural differences at Method C had already been set to 2 in the initial
evaluation of the problem.
B-4
Category
Consulting costs
Acquisition time
Disruption
Skill redundencies
Infrastructure
Tax considerations
Weight
20
20
10
10
10
25
10
15
Method Options
Grade
Score
A
B
C
A
B
C
1
2
3
20
40
60
2
3
1
40
60
20
2
1
3
20
10
30
3
3
2
30
30
20
2
1
1
20
10
10
1
2
3
25
50
75
2
2
2
20
20
20
3
2
1
45
30
15
Total Score
220
250
250
c)
Using the initial values from problem 6, insert Tax considerations = 15 and A = 3, B = 2, and
C = 1.
Due to the insertion of tax considerations, Methods B and C are now the best options.
Problem 12:
Change the grade for Location 3s rent to 3.
Category
Weight
Class of clientele 1.000
Rent
0.900
Indoor mall
0.855
Traffic volume
0.720
Grade
1 2 3 4
2 3 1 3
3 2 3 3
3 1 3 1
3 2 3 1
Total Score
Mall Options
Score
1
2
3
2.000 3.000 1.000
2.700 1.800 2.700
2.565 0.855 2.565
2.160 1.440 2.160
9.425 7.095 8.425
4
3.000
2.700
0.855
0.720
7.275
Due to the rent change, Location 3 moves up from last place to second place based upon the grades
assigned to the evaluated categories.
B-5
CHAPTER 6: PROJECT ACTIVITY AND RISK PLANNING

Problem 2:
Threat
Severity
#1
#2
#3
#4
3
5
4
7
Likelihood
5
6
3
4
Inability to detect
RPN
4
1
3
6
60
30
36
168
The main thing that changes when using this approach is that threat #2 drops significantly from
critical to possibly ignore. This is mostly due to the lack of inability to detect. Threat #2 is
somewhat severe and the likelihood is great, but since the threat is relatively easy to detect, it can be
mitigated early and possibly even removed. Thus, this is a much more realistic evaluation of the
threats than just creating a risk matrix.
Problem 4:
B-6
p = .20
$1,200
p = .30
p = .40
$3,600
$7,200
p = .10
$2,400
$14,400
Existing tools
p = .20
p = .30
p = .40
Cheap equipment
$800
$2,100
$4,000
p = .10
$1,300
$8,200
High-quality equipment
p = .20
p = .30
p = .40
p = .10
$900
$1,950
$3,400
$1,050
$7,300
Based on the analysis, the manufacturer should approve the purchase of the high-quality, special
equipment for $10,000. As a result, significant savings should occur.
B-7
Problem 6:
P
r
o
b
a
b
i
l
i
t
y
5
4
1
1
Impact
Legend:
Critical
Monitor
Ignore
Opportunity 1:
You could accept this risk and enjoy the benefits derived from it. To increase the potential for more
impact, you could enhance the risk by providing more training.
Opportunity 2:
impact, you could further exploit the database.
Opportunity 3:
impact, you could share the data by increasing sales.
B-8
CHAPTER 7: BUDGETING: ESTIMATING COSTS AND RISKS

Problem 2:
Period
1
2
3
4
5
6
7
8
Estimate Actual A(t)-F(t)-1 |(A(t) - F(t))-1| MAR

179
163
-0.08939 0.089385475
217
240
0.105991 0.105990783
0.10
91
67
-0.26374 0.263736264
0.15
51
78
0.529412 0.529411765
0.25
76
71
-0.06579 0.065789474
0.21
438
423
-0.03425 0.034246575
0.18
64
49
-0.23438
0.234375
0.19
170
157
-0.07647 0.076470588
0.17
Total -0.129
Tracking
Signal
0.17
-1.61
1.14
1.03
1.00
-0.28
-0.74
Again, the bias has reduced considerably and changed sign but the MAR is somewhat greater. Hence,
the Tracking Signal is substantially smaller and shows an acceptable level of bias on the part of this
estimator.
Problem 4:
The learning rate can only be determined in reality by trial and error.
For this problem a simple spreadsheet will be used. The learning curve factor reduces the time spent
producing the lots, from the base time of 7 hours. We also know that the total production hours for 25
units are 103.6 hours. A spreadsheet calculating the cycle time for each lot based on a learning curve
would look like this:
Unit
1
2
3
4
5
6
7
8
9
10
11
12
Base
Adjusted Trial
Time Multiplier Time
Rate
7
1.00
7.00
0.90
7
0.90
6.30
7
0.85
5.92
7
0.81
5.67
7
0.78
5.48
7
0.76
5.33
7
0.74
5.21
7
0.73
5.10
7
0.72
5.01
7
0.70
4.93
7
0.69
4.86
7
0.69
4.80
B-9
13
14
15
16
17
18
19
20
21
22
23
24
25
7
7
7
7
7
7
7
7
7
7
7
7
7
0.68
0.67
0.66
0.66
0.65
0.64
0.64
0.63
0.63
0.63
0.62
0.62
0.61
4.74
4.69
4.64
4.59
4.55
4.51
4.47
4.44
4.41
4.38
4.35
4.32
4.29
Total
124.0
Note that for this example, the multiplier for year two is calculated as:
2 (log(0.90)/log(2)) or 2 (-0.045/0.301) or 2 (-0.149) = 0.9
Each multiplier is calculated in turn based on the unit number it represents. In each case the multiplier
is used to modify the base cycle time of 7 hours and then totaled at the bottom.
The total in this example does not equal 103.6 hours because the learning rate is incorrect. One could
insert different values and find the correct value by trial and error, or use the Solver feature of
Microsoft Excel. To use Solver, the total hours are set as the Target Cell and the Trial Rate is
designated as the cell to be changed subject to the limitation that it may not exceed 1.0 using this
technique, the spreadsheet with the correct learning rate would be:
Unit
1
2
3
4
5
6
7
8
9
10
11
12
13
Base
Adjusted Trial
Time Multiplier Time
Rate
7
1.00
7.00
0.85
7
0.85
5.95
7
0.77
5.41
7
0.72
5.06
7
0.69
4.80
7
0.66
4.60
7
0.63
4.44
7
0.61
4.30
7
0.60
4.18
7
0.58
4.08
7
0.57
3.99
7
0.56
3.91
7
0.55
3.84
B - 10
14
15
16
17
18
19
20
21
22
23
24
25
7
7
7
7
7
7
7
7
7
7
7
7
0.54
0.53
0.52
0.51
0.51
0.50
0.50
0.49
0.48
0.48
0.47
0.47
3.77
3.71
3.65
3.60
3.55
3.51
3.47
3.43
3.39
3.36
3.32
3.29
Total
103.6
Problem 6:
Problem 8:
Year
0
1
2
3
4
Rate
Pessimistic Most Likely Optimistic

$ (65,000) $ (65,000) $ (65,000)
$ 14,000 $ 20,000 $ 22,000
$ 19,000 $ 25,000 $ 30,000
$ 27,000 $ 30,000 $ 36,000
$ 32,000 $ 35,000 $ 39,000
20%
Used
$(65,000)
$ 20,000
$ 25,000
$ 30,000
$ 35,000
PVIF
1
1.200
1.44
1.728
2.0736
NPV
PV$
$(65,000)
$ 16,667
$ 17,361
$ 17,361
$ 16,879
$ 3,268
Now the green (or shaded) cells in the column labeled Used (with the exception of the initial
investment of $65,000) are calculated by Crystal Ball using a triangular distribution with the end
B - 11
points selected based on the pessimistic and optimistic values given. The setup for year one looks
like this:
The net present value is then calculated for each of 1000 trials and results are displayed by
designating the NPV cell as a forecast. Typical results look like this:
By adjusting the triangular sliders it can be seen that the chance of the NPV exceeding $0 (and the
hurdle rate) is about 87%. The mean value for this distribution is $2770.
B - 12
Problem 10:
Windows
Unix
B - 13
CHAPTER 8: SCHEDULING
NOTE: Many of the AON graphics in this solutions set depict the start day of the successor activity to
be the same day as the completion of the predecessor. This is consistent with the presentation in the
text. It is not consistent with the result that would be obtained using Microsoft Project, where the
start day of the successor is always the next working day after the completion of the predecessor.
Problem 2:
Problem 4:
a)
The critical path is B-E-G.
b)
23 work periods.
c and d)
Task
A
B
C
D
E
F
G
Duration
10
7
5
7
11
3
5
ES
0
0
10
10
7
15
18
EF
10
7
15
17
18
18
23
LS
5
0
15
11
7
20
18
LF
15
7
20
18
18
23
23
Slack
5
0
5
1
0
5
0
B - 14
Problem 6:
PDM Diagram 6a
PDM Diagram 6b
Problem 8:
B - 15
Please see note about network depiction preceding Problem 2

a)
The critical path activities are A, C, E, and G.
b)
The projects duration is 22 days.
c)
Yes, activity B can be delayed one day without delaying the completion of the
project.
Problem 10:
a. The path with the longest expected duration is AC CB BE EF.

b. The only event with slack is D at 3 days.
c. If D were the final event in the network, then the critical path would be AC CB BD.
d. The following spreadsheet excerpt illustrates the calculation of the probability of completion
in 14 days:
Task
a
m
b
Expected Variance Std Dev.
AB
3
6
9
6.0
1.00
1.00
AC
1
4
7
4.0
1.00
1.00
CB
0
3
6
3.0
1.00
1.00
CD
3
3
3
3.0
0.00
0.00
CE
2
2
8
3.0
1.00
1.00
BD
0
0
6
1.0
1.00
1.00
BE
2
5
8
5.0
1.00
1.00
DF
4
4
10
5.0
1.00
1.00
DE
1
1
1
1.0
0.00
0.00
EF
1
4
7
4.0
1.00
1.00
B - 16
Sum of
Expected Variances
Desired Project Critical
Duration Duration
Path
14
16.0
4.00
Z
-1
Probability
15.9%
e. If CD slips to six days the critical path is unchanged but slack on D is reduced. If CD slips to
seven days then there are two critical paths: AC CB BE EF and AC CD DF. If CD slips to
eight days then the critical path shifts to AC CD DF and the project duration extends to 17
days.
Problem 12:
Figure 8.12a shows the PDM network for the data from Table A of Problem 8-12
assuming that the data were applied as shown in Figure 8.12b.
1)
The path with the longest expected duration is 2,3,4,5,7,8,9.
2)
The slack for activity 1 is 11.7 days. The slack for activity 6 is 4 days.
The following table shows the calculation of the expected completion time:
Activity
a
m
b
Expected
1
8
10
13
10.2
2
5
6
8
6.2
3
13
15
21
15.7
4
10
12
14
12.0
5
11
20
30
20.2
6
4
5
8
5.3
7
2
3
4
3.0
8
4
6
10
6.3
9
2
3
4
3.0
B - 17
Expected
Project
Duration
66.4
Problem 14:
Figure 8.14a shows the original network diagram for problem 14.
B - 18
1) The critical path activities are A, D, G, and J. Activities B and E should be closely monitored as a
near critical path.
Figure 8.14b shows the impact of the projects performance to date.

2) The project will be completed in 12.5 days instead of the 13 days originally expected. The near
critical path (B, E, G, J) is now critical. Activities A, D, F, and H are now near critical activities.
Problem 16:
Using critical path analysis with the data provided gives the following table:
Activity Expected
a
2.0
b
3.0
c
4.0
d
2.0
e
1.0
f
6.0
g
4.0
h
2.0
Std Dev.
2.00
1.00
0.00
3.00
1.00
2.00
2.00
0.00
Variance
4.00
1.00
0.00
9.00
1.00
4.00
4.00
0.00
B - 19
Sum of
Expected Variances
Desired Project
Critical
Duration Duration
Path
12
13.0
9.00
13
13.0
9.00
16
13.0
9.00
17.3
13.0
9.00
Z
-0.33
0.00
1.00
1.44
Probability
37.1%
50.0%
84.1%
92.5%
For this problem the variance has to be calculated from the standard deviation, and the durations
provided are assumed to be the expected durations. As can be seen there is about an 84% chance of
completing the project within the drop dead time. If a little more than a week is added to the
duration, the chance of completing the project on time rises to 92.5%.
Problem 18:
B - 20
Problem 20:
Figure 8.20 shows the network diagram for problem 20.

a)
The critical path is A, D, E, G, I, J.
b)
The slack on process confirmation (F) is 20 days.
c)
The slack on test pension plan (C) is 61 days.
d)
The slack on verify debt restriction compliance (H) is 20 days.
B - 21
Problem 22:
a)
Figure 8.22 shows the network diagram for problem 22.

b) The critical path is B, F, H.
c) Week 9.
d) If activity E requires one extra week, the time will be absorbed in free float and will not affect
any other activity. If activity E requires two extra weeks, then a second critical path will be
created for activities B, E, G. If activity E requires three weeks, negative float will be created and
the project cannot complete in nine weeks. The new completion time will rise to 10 weeks.
B - 22
Problem 24:
a)
Figure 8.24a shows the network diagram for problem 24a.

b)
The critical path is B, E, G, H.
Figure 8.24c shows the network diagram solution to problem 24c.

B - 23
c & d) Given a float value of 6 weeks, activity F seems to be the best candidate to supply resources
needed to crash the project. Since the float is almost 50% of the activitys duration, using its resources
to work other activities is unlikely to convert activity F into a near-critical activity. Since activity D is
both critical and concurrent to activity F, the resources should be transferred there.
Problem 26:
Figure 8.26a shows the network, critical path and slack times.
Tabulating the calculations for expected durations and probability looks like this:
Task
a
m
b
1-2
6
8
10
8
0.44
0.67
1-3
5
6
7
6
0.11
0.33
1-4
6
6
6
6
0.00
0.00
2-6
0
0
0
0
0.00
0.00
2-7
10
11
12
11
0.11
0.33
3-6
12
14
16
14
0.44
0.67
4-5
5
8
11
8
1.00
1.00
4-9
7
9
11
9
0.44
0.67
5-6
8
10
12
10
0.44
0.67
5-9
0
0
0
0
0.00
0.00
6-7
14
15
16
15
0.11
0.33
6-8
10
12
14
12
0.44
0.67
7-10
9
12
15
12
1.00
1.00
8-10
0
4
14
5
5.44
2.33
9-11
5
5
5
5
0.00
0.00
10-11
7
8
9
8
0.11
0.33
B - 24
Task
a
m
b
Desired Expected Project Sum of Variances
Duration
Duration
Critical Path
Z
Probability
61.69
59.0
2.67
1.65
95.0%
The next longest path is 1-3, 3-6, 6-7, 7-10, 10-11 at 55 days. It will only be a concern if under some
circumstances; its duration exceeds the path with the longest expected duration of 59 days. Using the
same technique for calculating the probability of exceeding a particular duration gives the following
table for this path:
Probability for path 1-3-6-7-10-11
Expected
Desired
Path
Sum of Path
Duration Duration Variances
Z
Probability
59
55.0
1.78
3.00
99.9%
Clearly the chance of exceeding 59 days is quite small. The same technique can be applied to the
next longest path 1-4, 4-5, 5-6, 6-8, 8-10, 10-11 which while relatively short has high variance:
Probability for path 1-4-5-6-8-10-11
Expected
Desired
Path
Sum of Path
Duration Duration Variances
Z
Probability
59
49.0
7.44
3.67
100.0%
Again it is clear that it is unlikely that this path will cause problems with the overall project duration.
Problem 28:
Figure 28a shows the PDM network diagram for problem 28.
B - 25
The following table tabulates the variances and probability for this project:
Task
a
m
b
Expected
Variance
1
6
10
14
10
1.78
2
0
1
2
1
0.11
3
16
20
30
21
5.44
4
3
5
7
5
0.44
5
2
3
4
3
0.11
6
7
10
13
10
1.00
7
1
2
3
2
0.11
8
0
2
4
2
0.44
9
2
2
2
2
0.00
10
2
3
4
3
0.11
11
0
1
2
1
0.11
12
1
2
3
2
0.11
Sum of
Expected Variances
Desired Project Critical
Duration Duration
Path
44
41.0
8.22
Z
1.05
Std Dev.
1.33
0.33
2.33
0.67
0.33
1.00
0.33
0.67
0.00
0.33
0.33
0.33
Probability
85.2%
Problem 30:
The setup for problem 30 is similar to that for problem 29. First the spreadsheet in Excel is prepared
with the calculations for the paths:
1
10
1-2-4-5
19
2
1
3
22
4
5
Activities
5
6
3
10
Paths
1-2-4-7-8-11-12 1-2-4-7-9-10-12
23
25
7
2
8
2
1-3-9-10-12
39
9
2
10
3
1-3-6
42
11
1
12
2
Project
Completion
42
Then, similar to problem 29, triangle distributions are established to calculate the durations for all
activities except 9 (no variation in the estimate).
B - 26
The resulting forecast for the duration of the project and corresponding statistics are:
Note that the probability of completing the project in 44 days has dropped to about 70%.
B - 27
To determine the probability that a path is the critical path, the simulation model can be enhanced as
follows. First, a formula can be added used Excels IF function as follows:
=IF(duration of path in question = duration of longest path,1,0)
Next the cell containing this formula can be assigned to be a Forecast cell in Crystal Ball.
Problem 32:
The Pert Entry Form in Microsoft Project is used to enter the three durations. After they are in
the Calculate Pert button is clicked to populate the Duration field with the expected durations. Note
that MSP uses the non-standard terminology Expected in lieu of Most Likely.
Using the calculated durations, the Gantt chart looks like this:
ID
1
Task Name
Start
Duration
0 days
Start
Sun 12/11/05
Finish
Sun 12/11/05
2
3
Predecessors
7.5 days
Mon 12/12/05
Wed 12/21/05
8 days
Mon 12/12/05
Wed 12/21/05
6 days
Wed 12/21/05
Thu 12/29/05
14.5 days
Thu 12/22/05
Wed 1/11/06
2,3
7 days
Wed 1/11/06
11.5 days
Fri 1/20/06
Mon 2/6/06
8 days
Tue 2/7/06
Thu 2/16/06
End
0 days
Thu 2/16/06
Thu 2/16/06
Dec '05
4 11 18
12/11
25
Jan '06
1
8
15
22
Feb '06
29 5 12
19
26
Fri 1/20/06 4,5

3,6
2/16
The figure shows the default Gantt chart view of the problem, with a project start day of Sunday
December 11, 2005. Note that MSP moves the beginning of the first task to the first workday of
Monday the 12th. This display shows the default calendar of 5 day 40 hr. weeks with no holidays. A
Start and End milestone have been inserted to insure that all activities have at least one
predecessor and successor.
B - 28
The tracking Gantt view can be used to display the critical path:
Duration
0 days
Dec '05
4 11 18
12/11
ID
1
Task Name
Start
7.5 days
0%
8 days
0%
6 days
14.5 days
7 days
11.5 days
8 days
End
0 days
25
Jan '06
1
8
15
Feb '06
29 5 12
22
19
26
0%
0%
0%
0%
0%
2/16
The network diagram can be displayed directly from MSP using the Network Diagram view. A
portion of it with the default format settings looks like this:
a
Start
Start: 12/12/05 ID: 2
Milestone Date: Sun 12/11/05
Finish: 12/21/05
ID: 1
Dur: 7.5 days
Res:
b
Start: 12/12/05 ID: 3
Finish: 12/21/05
Dur: 8 days
Res:
The slack values are automatically calculated by MSP. They can be revealed in a number of different
views:
ID
1
Task Name
Start
Start
Sun 12/11/05
Finish
Sun 12/11/05
Late Start
Mon 12/12/05
Late Finish
Mon 12/12/05
Free Slack
0 days
Nov '05
Total Slack
0 days
Mon 12/12/05
Wed 12/21/05
Mon 12/12/05
Wed 12/21/05
0 days
0.5 days
Mon 12/12/05
Wed 12/21/05
Mon 12/12/05
Wed 12/21/05
0 days
0 days
Wed 12/21/05
Thu 12/29/05
Tue 1/3/06
Wed 1/11/06
9 days
9 days
Thu 12/22/05
Wed 1/11/06
Thu 12/22/05
Wed 1/11/06
0 days
0 days
Wed 1/11/06
Fri 1/20/06
0 days
0 days
Fri 1/20/06
Mon 2/6/06
Fri 1/20/06
Mon 2/6/06
0 days
0 days
Tue 2/7/06
Thu 2/16/06
Tue 2/7/06
Thu 2/16/06
0 days
0 days
End
Thu 2/16/06
Thu 2/16/06
Thu 2/16/06
Thu 2/16/06
0 days
0 days
Fri 1/20/06
Wed 1/11/06
27
Dec '05
4 11
18
25
Jan '06
1
8
15
22
Feb '06
29 5 12
19
Mar '06
26 5 12
19
26
Apr '06
2
9
9 days
This view shows the View Detail Gantt combined with the Schedule Table. Note that the Gantt
chart also displays the slack as a green line.
16
23
B - 29
CHAPTER 9: RESOURCE ALLOCATION

Problem 2:
Activity
Crash Days
Crash $
Crash $/Day
A
1
$200.00
$ 200.00
B
2
$ 75.00
$
37.50
C
3
$150.00
$
50.00
D
2
$100.00
$
50.00
Figure 9.2 uses the data from problems 1 and 2 to answer problem 2.
b)
Task B is on the critical path and it has the lowest cost per day $37.50 to crash (additional
cost of $75.00). It enables a 13-day completion without making any other new tasks critical.
Problem 4:
Figure 9.4 shows the AON network data for problem 4.
B - 30
d) On the surface the answer is no, since the duration as calculated is one month less than the project
deadline requires. It would be prudent, however, to perform analysis as described in Chapter 8 to
determine the probability of actually achieving this schedule. Based on that analysis it may in fact be
prudent to crash some activities.
Problem 6:
Figure 9.6a shows the normal and crashed networks for problems 8.18 and 9.6.
Activity
C
F
H
I
Crash Wk
Crash $/Wk
1
$
40.00
4
$
20.00
3
$
10.00
3
$
30.00
Options
Crash $
Option 1
H3,F4,I2
$ 170.00
Option 2
H3,F3,I1,C1
$ 160.00
Option 3
H2,F4,I1,C1
$ 170.00
Figure 9.6b shows the crashing options.
B - 31
Option 2 is the most favorable option because it satisfies the time constraint and has the lowest cost.
However, it also increases the number of critical activities (Figure 9.6a). Because two critical paths
converge at event 7, completion probabilities should consider the effects of path convergence.
Problem 8:
In all cases, crashing is applied only to critical path activities (1-2, 2-4, 4-6, and 6-7).
a)
1-2 and/or 6-7
b)
4-6, assuming that duration is equivalent to resource consumption.
c)
All activities on the critical path have zero slack at present.
d)
1-2 has the most critical followers in problem 7.
e)
1-2 has the most successors in problem 7
Problem 10:
The critical path is defined by the events 1,2,3,4. The normal duration is 17 days and a normal cost of
$100 per day; a total cost of $1,700.
Activity
Completion
Date
Crash
Costs
Total Cost
Normal
17d
$
$ 1,700
3-4
16d
$ 25
$ 1,625
1-2
15d
$ 30
$ 1,555
1-2
14d
$ 50
$ 1,505
3-4
13d
$ 60
$ 1,465
2-3
12d
$ 80
$ 1,445
Figure 9.10 shows the cost-duration history for problem 10.
Since activity 2-4 is not on the critical path, it is not crashed. The table indicates that the lowest-cost
crashing option was always the first crash option taken.
B - 32
Problem 12:
Figure 9.12a shows the network history of crashing the TV commercial project.
Activity
Completion
Date
Crash
Costs
Total Cost
Normal
19d
$ $ 1,710
1-2
18d
$ 30
$ 1,650
2-3
17d
$ 40
$ 1,600
1-2
16d
$ 50
$ 1,560
1-2
15d
$ 70
$ 1,540
1-3,2-3,2-4
14d
$140
$ 1,590
Figure 9.12b shows the tabular history for Figure 9.12a.
Crashing attacks duration to compress the schedule. As slack approaches zero, the benefits of
crashing can be expected to fall below the costs required to remove time by crashing the critical path.
B - 33
Problem 14:
a. g has a slack of 1
b. e, g, and h all have 1 successor
c. e has 1 critical follower
d. g has shortest time of 4

e. f has latest start time of 29
Problem 16:
The problem with using the Normal distribution to model activity times is that with the Normal
distribution tasks are equally likely to take longer than the expected time and less than the expected
time. With many activities this is not true and it is more likely that activities will take longer than
expected time. Therefore, using distributions that can model skew in the data such as the Triangular
and Beta distributions are more appropriate for modeling project activity times.
The table below summarizes the results after modifying the model so that the activity times follow a
BetaPERT distribution with parameters 7, 10, and 15.
In comparing these results we observe that the variation (as measured by both the range and standard
deviation) went down in the BetaPERT models. Also, observe how the Min values increased in the
BetaPERT models but the Max values decreased.
B - 34
CHAPTER 10: MONITORING AND INFORMATION SYSTEMS

Problem 2:
($000)
Month
5
CV
CPI
SV
SPI
AC
$ 34
$
5
1.15
$ (3)
0.93
PV
$ 42
AC
$ 350
$ (50)
0.86
$ (175)
0.63
0.54
(6.26)
PV
$ 475
EV
$ 39
Favorable
Unfavorable
CV = EV AC
CPI = EV/AC
SV = EV PV
SPI = EV/PV
Negative variances are unfavorable. $(000).
If an index is less than one, the variance is unfavorable.
Problem 4:
($000)
Month
17
CV
CPI
SV
SPI
CSI
TV
EV
$ 300
This project is seriously delayed and also over budget.
Unfavorable
Unfavorable
Unfavorable
Months delayed
Problem 6:
($000)
Day
65
CV
CPI
SV
SPI
CSI
TV
AC = $550
AC
PV
EV
$ 550
$ 735
$ 678
$ 128
Favorable
1.23
$ (57)
Unfavorable
0.92
1.14
Favorable
(5.00)
Days behind
Day
65
CV
CPI
SV
SPI
CSI
TV
AC = $750
AC
PV
EV
$ 750
$ 735
$ 678
$ (72)
Unfavorable
0.90
$ (57)
Unfavorable
0.92
0.84
Unfavorable
(5.00)
Days behind
B - 35
The first step is to estimate EV. Starting with TV, we solve to determine SV. Once SV is known, EV
can be determined because the PV was given.
In problem 6, changing the AC value only affects cost-related measures and indices. The SV and SPI
are unaffected by a change in AC.
Problem 8:
Task
A
Total
Cumulative
Values
PV
AC
EV
PV
AC
EV
PV
AC
EV
PV
AC
EV
PV
AC
EV
PV
AC
EV
PV
AC
EV
CV
SV
CPI
SPI
TV
CSI
ETC
EAC
Total $
300
400
300
200
180
200
250
300
250
600
400
120
400
200
80
1750
1480
950
Wk 1
150
200
150
67
60
67
217
260
217
217
260
217
-43
0
0.83
1.00
0.00
0.83
1837
2097
Wk 2
150
200
150
67
60
67
217
260
217
434
520
434
-86
0
0.83
1.00
0.00
0.83
1577
2097
Wk 3
Wk 4
66
60
66
125
150
125
120
100
30
125
150
125
120
100
30
311
310
221
745
830
655
-175
-90
0.79
0.88
-0.36
0.69
1388
2218
245
250
155
990
1080
810
-270
-180
0.75
0.82
-0.73
0.61
1253
2333
Wk 5
Wk 6
Wk 7
120
100
30
100
100
40
220
200
70
1210
1280
880
-400
-330
0.69
0.73
-1.36
0.50
1265
2545
120
100
30
100
100
40
220
200
70
1430
1480
950
-530
-480
0.64
0.66
-2.01
0.43
1246
2726
120
Wk 8
100
100
220
0
0
1650
1480
950
100
0
0
1750
1480
950
Figure 10.8a shows the solution table for problem 8.

ETC = (BAC EV) / CPI. EAC = ETC + AC. TV = SV / (PV / Wks).
The weekly values for AC, EV, and PV are evenly prorated over the scheduled interval for each
activity.
B - 36
Figure 10.8b shows the network for problem 8.
Problem 10:
The solution to problem 10.8 as it might appear in MS-Project.

The table shows the results; however, there are several steps needed to create this data in Microsoft
Project that are not obvious to the casual observer.
1) Setup the network with predecessor/successor relationships and durations in the conventional
manner.
2) Enter the budget from the problem statement as a Fixed Cost in the Task Sheet, Cost Table View.
Note that the Baseline costs should be zero.
3) Save a Baseline by using the Save Baseline function in the Tools, Tracking menu.
a) If this has been performed correctly, the Baseline Cost in the Cost Table View should now be
equal to the budgets.
4) In the Task Information View, adjust the Percent Complete for each task using the data from the
problem statement.
5) In the Task Sheet, Cost Table View enter the actual costs for each task from the problem
statement.
6) Based on the starting date of the network, determine the date for the Friday at the end of the sixth
week.
7) In the Project, Project Information window adjust the Status Date to the Friday of the sixth week
of the project.
B - 37
8) By adjusting the status date, MSP will automatically calculate the standard earned value
information. The data can be displayed using the Task Sheet, Earned Value Table View. The
table in this manual was prepared with MSP 2000, which still used the traditional names for the
earned value data (i.e. BCWS, BCWP etc.). The titles were changed by double clicking on the
column and editing the Title field.
Problem 12:
This table shows the result of the 0-100 rule. Note that the actuals accrue in the same manner as the
previous problem. Here, the difference is that the EV accrues all at once when the task ends. The
graph below shows the sudden increases in EV that results.
B - 38
With this method, EV lags behind. For a large project well underway, the effect is small, but for this
tiny sample, the EV picture is not very useful.
B - 39
CHAPTER 11: PROJECT CONTROL

Problem 2:
Activity
A
B
C
D
E
Actual
4
3
2
1
2
Schedule
4
2
3
1
4
Budget
60
50
30
20
25
Actual
40
50
20
30
25
CR
1.50
1.50
1.00
0.67
0.5
Comment
Favorable, Investigate
Favorable, Investigate
OK unless time is critical
Unfavorable, Investigate
Unfavorable, Investigate
Problem 4:
Day
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
Actual
2
3
4
6
7
9
12
14
15
17
20
21
21
22
24
26
27
29
31
33
Planned
2
4
6
8
10
12
14
16
18
20
22
24
26
28
30
32
34
36
38
40
CR
1.00
0.75
0.67
0.75
0.70
0.75
0.86
0.88
0.83
0.85
0.91
0.88
0.81
0.79
0.80
0.81
0.79
0.81
0.82
0.83
The slope of the planned progress curve is 200 points divided

by 100 days, or 2 points per day. Since cost data are not
provided, the CR is simply the ratio of actual progress over
planned progress.
Based on the data in the table for problem 4, it would appear
that the project is running about 20 days behind schedule. It
is likely to require approximately 120 days (+5 days or 10
days) to complete this project.
B - 40
Problem 6:
The base data for the problem looks like this:
Note that this data is incremental rather than cumulative. The cumulative data with CR calculations
looks like this:
It is interesting to note that while Team A has incurred more cost it has also achieved more progress.
Therefore, based on the Critical Ratio, the teams are identical in their achievements to date.
However, in both cases, their critical ratios are deteriorating and should be investigated for potential
corrective actions.
Problem 8:
Figure 11.8 is the network diagram for Problem 11-8.

Based on Figure 11.8 and data from the problem, activities 1-2, 2-3, and 2-4 have been completed.
These activities account for 22 days. Activity 3-5 has been 70% completed and is expected to require
B - 41
18 days. Thus 18d * 70% = 12.6 days. So, 34.6 days of progress has been accomplished. The
schedule ratio is 34.6/40 = .865.
The budget for day 40 would include all completed activities plus 100% of activity 3-5. The planned
cost is $1,455. The actual costs are $1,480. The cost ratio is 1455/1480 = .983. Thus, CR = .865 *
.983 = .850, so the project needs attention. The cost overage is 1480 1455 = 25.

App - B Solustions To Selected Problems

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B-1

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

CHAPTER 6: PROJECT ACTIVITY AND RISK PLANNING

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

CHAPTER 7: BUDGETING: ESTIMATING COSTS AND RISKS

Estimate Actual A(t)-F(t)-1 |(A(t) - F(t))-1| MAR

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

Pessimistic Most Likely Optimistic

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

Please see note about network depiction preceding Problem 2

The critical path activities are A, C, E, and G.

The projects duration is 22 days.

a. The path with the longest expected duration is AC CB BE EF.

Copyright 2015 John Wiley & Sons, Inc.

The path with the longest expected duration is 2,3,4,5,7,8,9.

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

Figure 8.14b shows the impact of the projects performance to date.

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

Figure 8.20 shows the network diagram for problem 20.

The critical path is A, D, E, G, I, J.

The slack on process confirmation (F) is 20 days.

The slack on test pension plan (C) is 61 days.

The slack on verify debt restriction compliance (H) is 20 days.

Copyright 2015 John Wiley & Sons, Inc.

Figure 8.22 shows the network diagram for problem 22.

Copyright 2015 John Wiley & Sons, Inc.

Figure 8.24a shows the network diagram for problem 24a.

The critical path is B, E, G, H.

Figure 8.24c shows the network diagram solution to problem 24c.

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

Fri 1/20/06 4,5

Copyright 2015 John Wiley & Sons, Inc.

Start: 12/12/05 ID: 2

Milestone Date: Sun 12/11/05

Dur: 7.5 days

Copyright 2015 John Wiley & Sons, Inc.

CHAPTER 9: RESOURCE ALLOCATION

Figure 9.4 shows the AON network data for problem 4.

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.

1-2 and/or 6-7

4-6, assuming that duration is equivalent to resource consumption.

All activities on the critical path have zero slack at present.

1-2 has the most critical followers in problem 7.

1-2 has the most successors in problem 7

Copyright 2015 John Wiley & Sons, Inc.

Copyright 2015 John Wiley & Sons, Inc.