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AMEER ABBAS
Course MBA-Semester-3
Introduction to Project
Subject
Management
Subject
Code
PM 0001-Set-1
1.What are the various types of models followed in project
management:
Define: The project is discussed fully with all the stakeholders and the key
objectives are identified. The costs and timescales are also established at this
stage and there is often a feasibility study as well. This stage is complete
when the project brief has been written and agreed.
Team: The team members are usually involved in developing the plan and
are often able to contribute specialist knowledge and expertise. The building
of this team and its motivation and leadership also continue until the project
is finished.
Control: Implementation takes place during the control stage (stage 4 in the
model). During this stage, the tasks and activities of the team will be
monitored against the plan to assess the actual progress of the project
against the planned progress. Control is essential to ensure that the
objectives are met within the scheduled timescales, budgeted costs and
quality. Regular reviews are usually held to enable the plan to be revised and
for any difficulties that emerge to be resolved.
Review and exit: The review is held to evaluate whether all the intended
outcomes of the project have been met. It is also important because it
enables information to be gathered about the processes used in carrying out
the project from which lessons can be learned for the future. The exit from
the project has to be managed to ensure that:
Business challenge
Solution
This approach involves a full risk assessment every few weeks, and the
development of plans that focus on producing executable code to minimize
risk. Involving key stakeholders in these reviews helps address project-wide
risks effectively.
Collaboration overview
Sample implementation
These are the factors we can use for risk mitigation of software
projects
Benefits
Each organization uses its own terminology for classifying WBS components
according to their level in the hierarchy. For example, some organization
refer to different levels as takes, sub –tasks , and work packages, as shown
in the above outline. Others use the terms phases, entries, and activities.
The WBS may be organized around deliverables or phases of the project life
cycle. Higher levels in the structure generally are performed by individual,
though a WBS that emphasizes deliverables does not necessarily specify
activities.
Level of Detail
The breaking down of a project into its component parts facilitates resource
allocation and the assignment of individual responsibilities. Care should be
taken to use a proper level of detail when creating the WBS. On the one
extreme, a very high level of detail is likely to result in micro –management.
On the other extreme, the tasks may become to large to manage effectively.
Defining tasks so that their duration is between several days and a few
months works well for most projects.
The preliminary Project Scope Statement specifies what should be the goals
and objectives of the project and what needs to be accomplished for the
project.
The preliminary project scope statement can be created on the basis of the
information from the client side. The inputs used here are:
A clear and well defined scope is very important for the completion of any
minor or major project on time.
* Scope Planning
* Scope Definition
* Create work break down structure
* Scope Verification
* Scope Control
* Scope interface
Course MBA-Semester-3
Introduction to Project
Subject
Management
Subject
Code
PM 0001-Set-2
1.What are the various methods of demand forecasting? Explain in
detail with some practical tools:
Methods
• Unaided judgment
• Prediction market
• Delphi technique
• Game theory
• Judgmental bootstrapping
• Simulated interaction
• Intentions and expectations surveys
• Conjoint analysis
Delphi method:
First applications of the Delphi method were in the field of science and
technology forecasting. The objective of the method was to combine expert
opinions on likelihood and expected development time, of the particular
technology, in a single indicator. One of the first such reports, prepared in
1964 by Gordon and Helmer, assessed the direction of long-term trends in
science and technology development, covering such topics as scientific
breakthroughs, population control, automation, space progress, war
prevention and weapon systems. Other forecasts of technology were dealing
with vehicle-highway systems, industrial robots, intelligent internet,
broadband connections, and technology in education.
Later the Delphi method was applied in other areas, especially those related
to public policy issues, such as economic trends, health and education. It was
also applied successfully and with high accuracy in business forecasting.
Prediction markets
People who buy low and sell high are rewarded for improving the
market prediction, while those who buy high and sell low are punished for
degrading the market prediction. Evidence so far suggests that prediction
markets are at least as accurate as other institutions predicting the same
events with a similar pool of participants.
Game theory:
Extrapolation:
2. The net cash flow accrues to the firm only after paying tax.
Hence, net cash flow must be computed in post- tax terms.
A. Discounting criteria:
t= 1 to t = N, Initial investment
where CFt = Cash flow in year t, t varying from 0 to N i.e. the no. of
years of project life.
CF0 will be the investment made in year 0 and will be (-), the
investments may continue to be made in year 1, year 2 etc. in which
case CF1, CF2 etc.
If there are 2 or more mutually exclusive projects, the one with the
higher NPV is selected. It can be noted that the NPV decreases as the
cost of capital increases, can increases as the cost of capital
decreases.
The assumption in the NPV method above is that the cash flows are
reinvested at a rate of return equal to k i.e. cost of capital. In case the
reinvestment rate is ‘r’, then the Terminal Value (TV) of the cash
inflows of the project has to be computed, then the TV has to be
reduced to its present value and the NPV will be equal to the present
value of TV minus the present investment (assuming the entire
investment is made in year 0). The formula for modified NPV (denoted
as NPVn) is
I = investment outlay
It can be noted that if the reinvestment rate is higher than the cost of
capital, the NPVn will be higher than NPV and vice versa.
Internal Rate of Return (IRR)
By way of a formula, the IRR is the value of ‘k’ derived from the
equation hereunder:
Although the IRR can be considered as the case for NPV=0, we must
understand the differences between the implication of NPV and IRR.
The company sets a cut –off rate for comparing with the IRR
computed. The project is accepted if IRR is greater than the cut –off
rate. For more than one project being evaluate, the project with the
highest IRR is selected.
The IRR method shown above is based on the assumption that the
cash inflows of the project are reinvested at the same IRR rate. If the
reinvestment rate (r) is different, then the modified IRR i.e. IRRn is to
be computed after calculating TV as explained in the NPVn method
above. The formula for IRRn is
And PVC is the present value of the costs associated with the project
i.e.
This is the ratio of the present value of future cash benefits to the
initial investment. The present value of future cash benefits is
computed using the same Time-value of money technique used in the
NPV method. The NPV method computes the differences between the
present value (PV) of the future cash benefits and the initial
investment, whereas the BCR method calculated the ratio of future
cash benefits to the initial cash flow. The formula for BCR is thus:
If there are two or more projects being evaluated, the one with the
highest BCR will be selected.
NBCR = BCR – 1
It measures the ratio of the net benefit of the project rather than the
gross benefit. It is advantageous when capital rationing is used.
Rejected if NBCR is – ve
In case of more than one project, the project with the highest +ve
NBCR is selected.
In this method, the present value of future cash flows are calculated
and added. The number of years for which this total becomes equal to
the initial investment I is considered as the payback period. This can
include a fraction of the year. This payback period is compared to the
payback period set as the standard for accepting the project.
If the discounted payback period is less than the standard, the project
is Accepted. If it is more than the standard, the project is Rejected.
Payback Period
Here, the future annual cash flows are algebraically added without
considering the time–value of money. If the annual cash inflows are
equal,
Then
The criteria foe project selection is the same as the mentioned under
The formula is
Benefits and costs are often expressed in money terms, and are
adjusted for the time value of money, so that all flows of benefits and flows
of project costs over time (which tend to occur at different points in time) are
expressed on a common basis in terms of their “present value.” Closely
related, but slightly different, formal techniques include cost-effectiveness
analysis, economic impact analysis, fiscal impact analysis and Social Return
on Investment (SROI) analysis. The latter builds upon the logic of cost-
benefit analysis, but differs in that it is explicitly designed to inform the
practical decision-making of enterprise managers and investors focused on
optimising their social and environmental impacts.