FACULTY OF SCIENCE AND TECHNOLOGY

July / 2019

EBTM3103

PROJECT MANAGEMENT

NO. MATRIKULASI :
NO. KAD PENGNEALAN :
NO. TELEFON :
E-MEL :
PUSAT PEMBELAJARAN :
 QUESTION 1

An aerospace company has received a contract from NASA for the final assembly of
a space module for an upcoming mission. A team of engineers has determined the
activities, precedence constraints, and time estimates as given in Table Q1.
Table Q1
Symbol Activity Preceeding Activity Duration (Days)
(IPA)

A Construct shell of module --- 30

B Order life support system and --- 15
scientific experimentation package
from same supplier
C Order components of control and --- 25
navigational system
D Wire module A 3
E Assemble control and navigational C 7
system
F Preliminary test of life support B 1
system
G Install life support in module D, F 5
H Install scientific experimentation D, F 2
package in module
I Preliminary test of control and E, F 4
navigational system in module
J Install control and navigational H, I 10
system in module
K Final testing and debugging G, J 8

a) Draw the precedence network for this project.

b) Calculate total floats and free floats.
c) Determine the critical path and interpret its meaning.
Answer Question 1
a) Draw the precedence network for this project.

Interpretation and analysis of CPM diagram

Step 1: Identify the Activity Network

A D G

K
B F H

C E J
I
 Step 2: CPM Network
0 3 30 30 3 31 31 10 36
A D G
3 30 33 41 5 46 46 0 54
33 1 34 K
46 8 54
0 10 15 15 10 22 31 2 33
B F H
10 15 25 25 7 32 34 2 36

36 0 46
0 0 25 25 0 32
32 0 36 J
C E
I 36 10 46
0 25 25 25 7 32
32 4 36
Step 3: Tabular Results
Activity
ID Duration ES EF LS LF TF FF
A 30 0 30 3 33 3 3
B 15 0 15 10 25 10 10
C 25 0 25 0 25 0 0
D 3 30 31 33 43 3 3
E 7 25 32 25 32 0 0
F 1 15 22 25 32 10 10
G 5 31 36 41 46 10 10
H 2 31 33 34 36 2 2
I 4 32 36 32 36 0 0
J 10 36 46 36 46 0 0
K 8 46 54 46 54 0 0

b) Calculate total floats and free floats.

Total Float = TF = LS - ES
Activity A = 3 – 0 = 3
Free Float = FF = LF – EF
Activity H = 33-30 = 3
The calculation of total float and free float for the other activities are shown in the table
above

c) Determine the critical path and interpret its meaning

Critical path: C – E – I – J – K = 54 days

(The network from task with 0 float to the next task with 0 float)
QUESTION 2

A company evaluating 3 projects as shown in Table Q2. Initially, the company invests
RM28.542 million for each project, i.e. Project A, Project B and Project C. During the
first year, Project A generates RM3 million; Project B generates RM21 million and
Project C generates RM13.5 million. Subsequently, the revenues for following years are
as shown in Table Q2.

Determine the ranking of these three projects based on the evaluation criteria of Net
Present Value (NPV), Payback and Profitability Index (PI). The firm’s cost of
capital, i = 10%.

Table Q2
Year Project A Project B Project C
(RMX 1,000,000) (RMX 1,000,000) (RMX 1,000,000)
0 -28.542 -28.542 -28.542
1 3 21 13.5
2 15 15 13.5
3 27 3 13.5
Capital, i = 10%.

Solution Q 2

a) NPV Value Calculations

Project A
PV Year 0 Year 1 Year 2 Year 3
-28.542 -50
3.3 13
12.4 3
20.28 36

PV calculation
DCF year 0 = --28.542/(1+ 10%)0 ) = -28.542
DCF year 1 = 3/(1+ 10%)¹) = 3.3
DCF year 2 = 15/(1+10%)² ) = 12.4
DCF year 3 = 27/(1+ 10%)³)= 20.28

NPV = PV (Year 0) + ( FV (Year 1)/(1+ 10%)¹) + ( FV (Year 2)/(1+10%)²) + ( FV (Year

3)/(1+ 10%)³) + ( FV (Year 4)/(1+10%)⁴) + ( FV (Year 5)/(1+10%)⁵)
NPV project A = - 7.438

Project B
PV Year 0 Year 1 Year 2 Year 3
-28.542 -28.542
19.1 21
12.4 15
2.25 3

PV calculation
DCF year 0 = --28.542/(1+ 10%)0 ) = -28.542
DCF year 1 = 21/(1+ 10%)¹) = 19.1
DCF year 2 = 15/(1+10%)² ) = 12.4
DCF year 3 = 3/(1+ 10%)³)= 2.25

NPV = PV (Year 0) + ( FV (Year 1)/(1+ 10%)¹) + ( FV (Year 2)/(1+10%)²) + ( FV (Year

3)/(1+ 10%)³) + ( FV (Year 4)/(1+10%)⁴) + ( FV (Year 5)/(1+10%)⁵)
NPV project B = 5.208

Project C
PV Year 0 Year 1 Year 2 Year 3
-28.542 -28.541
3.3 13.5
12.4 13.5
20.28 13.5
PV calculation
DCF year 0 = --28.542/(1+ 10%)0 ) = -28.542
DCF year 1 = 13.5 / (1+ 10%)¹) = 12.75
DCF year 2 = 13.5 / (1+10%)² ) = 11.16
DCF year 3 = 13.5 / (1+ 10%)³)= 10.14

NPV = PV (Year 0) + ( FV (Year 1)/(1+ 10%)¹) + ( FV (Year 2)/(1+10%)²) + ( FV (Year

3)/(1+ 10%)³) + ( FV (Year 4)/(1+10%)⁴) + ( FV (Year 5)/(1+10%)⁵)
NPV project c = 5.508

NPV Value Calculations

Project A Project B Project C
Year (Million) (Million) (Million)
0 -28.542 -28.542 -28.542
1 3 21 13.5
2 15 15 13.5
3 27 3 13.5
capital cost 10% 10% 10%
Value NPV - 7.438 + 5.208 + 5.508

Once the calculation is completed, the project with the largest NPV is prioritized ie
Project C.

b) Calculation of payback period

Payback period: is the time required for an investment to generate cash flow sufficient
to recover its initial cost.

Calculation the payback period for Project A

Year cash inflow Cumulative

 ( million ) cash inflow
0 -28.542 28.542
1 3 3
2 15 18
3 27 45

After the first 2 years, the total of the cash flows = 18 million
Therefore the project pays back sometime between the years to 2 and 3.
The total accumulated cash flows for the first 2 years = 18
Amount yet to be recovered = Initial Cost — Accumulated cash
=28.542 — 18
= 10.542 million

So the time required to recover remaining amount is calculated as:

Payback Period =
(Initial cost - opening cumulative cash flow) / (closing cumulative cash flow - opening
cumulative cash flow)
(28.542 - 18) / (45- 18)
Payback Period =2 years + 0.4 years
= 2.4 years
Therefore, the Payback Period for Project A Is 2.4 years

Calculation the payback period for Project B

cash inflow Cumulative

Year ( million ) cash inflow
0 -28.542 28.542
1 21 21
2 15 36
3 3 39

After the first 2 years, the total of the cash flows = 36 million
Therefore the project pays back sometime between the years to 2.
The total accumulated cash flows for the first 2 years = 36
Amount yet to be recovered = Initial Cost — Accumulated cash
=28.542 — 36
= 7.458 million

So the time required to recover remaining amount is calculated as:

Payback Period =
(Initial cost - opening cumulative cash flow) / (closing cumulative cash flow - opening
cumulative cash flow)
(28.542 - 36) / (39- 36)
Payback Period =2 years + 2.5 years
= 2.4 years
Therefore, the Payback Period for Project A Is 4.5 years

Calculation the payback period for Project C

cash inflow Cumulative

Year ( million ) cash inflow
0 -28.542 28.542
1 13.5 13.5
2 13.5 27
3 13.5 40.5

After the first 2 years, the total of the cash flows = 27 million
Therefore the project pays back sometime between the years to 2.
The total accumulated cash flows for the first 2 years = 27
Amount yet to be recovered = Initial Cost — Accumulated cash
=28.542 — 27
= 1.542 million

So the time required to recover remaining amount is calculated as:

Payback Period =
(Initial cost - opening cumulative cash flow) / (closing cumulative cash flow - opening
cumulative cash flow)
(28.542 - 27) / (40.5- 27)
Payback Period =2 years + 0.6 years
= 2.6 years
Therefore, the Payback Period for Project A Is 2.6 years

b) The Profitability Index Calculations (PI)

PI = Profitability of the Future

Initial Investment
• If PI> 1 project is acceptable
• If PI <1 project is not accepted
• If PI = 1 project is no profit, no loss will only return capital
Below is a calculation of PI obtained from the above 3 projects:

Project A Project B Project C

(million)
Year (million) (million)
0 -28.542 -28.542 -28.542
1 3 21 13.5
2 15 15 13.5
3 27 3 13.5

Project A
The future profit value = 3 + 15+ 27 = 45
Initial investment = 28.542
45 / 28.542 = 1.58
Project B
Future profit value = 21 + 15 + 3 = 39
Initial investment = 28.542
39 / 28.542 = 1.37
Project C
Future profit value = 13.5+ 13.5 + 13.5 = 40.5
Initial investment = 28.542
40.5 / 28.542 = 1.42

Summary
The ranking of these three projects based on the evaluation criteria of Net Present
Value (NPV), Payback and Profitability Index (PI)

Project C where it’s NPV= 5.508, PI =1.43 and payback = 2.6 years then project B where
it’s NPV= 5.208, PI =1.37 and payback = 4.5 years after that comes project A with NPV=
-7.438, PI =1.58 and payback = 2.4 years

QUESTION 3

Communication management in projects is crucial, as it is a proactive endeavour to

manage within the project life cycle and to manage the expectations and requirements of
the stakeholders involved in a project.

a) Define effective project communication in the context of project management

body of knowledge area.

Effective communication is the cornerstone of managing project human resources.

In order to achieve project goals, the project manager should communicate with
 the project team on a regular basis. Setting realistic, achievable and time-bound
goals and delegating work to the appropriate team members requires continuous
communication. Providing feedback is an important factor in managing and
motivating teams. Managing conflicts and support teams during the project
includes a large part of effective communication.
.
Project Communication Area and Process

According to the PMI [PMBoK] method: project management communication

includes the following process

b) Discuss the issues and challenges related to communication in projects which

can cause delay in project completion.

Project Communication Challenges.

1. Communication challenges in virtual project teams

In the current global economy, many projects cross borders and involve
subsidiaries of many companies that work globally. This distributed project
environment represents the challenge of effective project communication. Several
surveys have been conducted to identify the main challenges of managing
distributed/multicultural teams, and the main issues have been identified:
leadership Challenges, virtual aspects of communication, trust development,
people management, task management, language and cultural issues management,
and matrix organization management.
2. Conducting effective project meetings
Project meetings [formally or informally] are very valuable for sharing project
issues, notifying stakeholders about project status, facilitating project decisions,
and discussing possible options/solutions. However, some organizations spend too
much time at meetings. Eventually people ran from one meeting to another and
didn't have time to deal with project tasks. In addition, the organization of the
meeting is not appropriate and often fails to achieve the desired results. According
to the survey (MS Spivey 2009: 2-3) 55% of the meetings are led by one or two
people, 32% think they will be fired when they say the truth in the meeting, 39%
of the decision is after the meeting , 80% of the discussion is about people
agreeing. Unfortunately, meeting plans, group dynamics, and general promotion
skills are often not included in the project manager-training program. In order to
improve the efficiency of project meetings, project managers need to develop
meetings to promote skills and perform tasks before, during, and after the
meeting. Table below summarizes the key tasks that should be completed:

Meeting planning Meeting delivery Follow up

 Define meetings  Welcome and  Back up meeting

objectives introduce documentation
 Identify right  Review
participants
participants  Set meeting rules deliverables with
 Set date/time and  Handout meeting project sponsor
location materials  Distribute
 Develop agenda  Lead the meeting meeting
 Develop and send dialogue/create deliverables to
meetings deliverables/confi attendees and
materials [if rm decisions other relevant
necessary]  Confirm action
 Confirm stakeholders
items/owners and  Incorporate
attendance due dates
 Arrive earlier to meeting
 Validate meeting
make certain all is outcomes in the
decisions and
 ready outcomes project plan
 Gain agreement  Continue follow
on the next steps up on open issues
and action items

c) Communication in the dynamic project environment

In today’s dynamic technology-driven environments customers do not often
know, cannot articulate or are confused about project requirements. The
requirements are usually changing urging the project life cycle. Traditional,
phased project management frameworks work in stable project environments,
while in dynamic, innovative, IT projects they have limitations. Managing change
and project scope ambiguity is the key driver for emerging of agile project
management approaches. The roots of the method reach back to the year 2001
when the so-called Agile Manifesto has been published and signed by a group
of software development engineers in the USA6. Below there is a summary of
the cornerstones of Agile Manifesto:

Agile project management is mostly based on an effective team face-to-face

communication. If we consider key principles of the method: individuals and
interactions, customer collaboration and responding to change – it is clear
that communication is at the core of the agile developments. There are
several approaches to the agile project management, one of the most known is the
SCRUM methodology. Figure 6 gives an overview of the method
d) The communications gap, language challenges
The language gap in project management lies in the distance that hinders
understanding of business interests. The challenge of using language to provide
information that is often unclear and full of project management terminology this
could lead to makes some difficulties to understand the tasks related to the project.
Once the project is fully developed, a common problem is communication. Most
project teams use email to communicate their projects and tasks. The biggest
complaint here is that project communication exists in everyone's email address.
Therefore, if a new resource is added to the project, there is no centralized view of
the project history.

Executive management
Executive managers typically rely on the project manager's weekly or monthly
status reports to get project status. This will leave project information to the
project manager. Some executives complain that the project manager sees
communication as "hostage." As a project sponsor, there is no reason why
executives should not visit the project dialogue.

Project manager
It is common to use groups in emails. The project manager can send information
about the project to the entire group via email. When some team members forget
to click "Reply to Everyone" and some team members do not receive an email or
communication, the question will be answered, but we assume that all team
members have already uploaded.

Team member
Team members complain about the number of emails they receive and the burden
of organizing emails to find the emails that are most relevant to them. This
practice wastes a lot of valuable time, they can handle tasks, not by email.

The Telephone Game is a great way to demonstrate how poor and ineffective
communication can lead to misunderstandings and confusion. Being a good
communicator is a skill that can be improved upon with practice and training.
Here are some simple tips to improving your communication skills

c) Discuss the best approach of communication channel that project

managers can adopt in order to achieve the project objectives.
1. Provide centralized location for communication

At least the communication should be published in a centralized location. The

lowest common denominator seems to be the organization's network. The purpose
of centralized project communication is that if new resources are added to the
middle work, they can quickly get started by looking at the entire project history.A
better solution is a web-based collaboration and project system that provides a
centralized location for project and task communication. The software solves the
problem by publishing all relevant project information in one place.For project
teams facing customer projects, centralized communication helps solve problems
in projects and tasks. This communication can be referenced to clarify the scope,
objectives and other key decisions made during the project. For teams that must
comply with FDA or other regulatory agencies, all project communication must be
maintained in one place. The project team may also seriously consider providing a
solution to this problem.

2. Close the communications gap around business benefits.

PMO directors and senior project leaders need to take ownership and better communicate
the strategic and business benefits of projects to those responsible for their
implementation. When the gap is closed, projects are more successful. High performers
are able to optimize outcomes by relaying this information to project teams frequently
and effectively.

3. Tailor communications to different stakeholder groups.

Many organizations have difficulty communicating with the appropriate level of clarity
and detail and in the appropriate language to all stakeholders. High performers understand
that various stakeholder groups use language differently and tailor communications
accordingly; they also recognize that all groups need to have a clear vision for the project
and, ultimately, organizational success.

4. Acknowledge the value of project management, including project management

communications.

The Pulse reports that most organizations undervalue project management, which results
in poor project performance. Findings show that high performers place more importance
on project management tasks, particularly project management communications. As
demonstrated, successful communications are more apparent in high-performing
 organizations, because they recognize the importance and value of effective project
management communications, and project management.

5. Use standardized project communications practices, and use them effectively.

The Pulse reports that high performers are almost three times more likely than low-
performing organizations to use standardized practices through the organization, and have
better project outcomes as a result. One form of standardized project management
practice is a formal communications plan, which, though standardized, must be adaptable
and suitable to all stakeholders. Findings show that high performers are using formal
project communications plans more frequently and more effectively, allowing them to
successfully operate in a complex and competitive business climate

References

OUM module EBTM 3103 Projek Management- Noraini hamzah, Prof Ir Dr Arazi Idrus,
Dr Christy P Gomez . Sept 2006
David I. Cleland, Roland Gareis (2006). Global Project Management Handbook.
McGraw-Hill Professional, 2006
Joseph Phillips (2003). PMP Project Management Professional Study Guide. McGraw-
Hill Professional, 2003
http://www.datadynamica.com/irr.asp
Khan, M.Y. (1993). Theory & Problems in Financial Management
Hartman, J. C., and Schafrick, I. C., "The relevant internal rate of return," The
Engineering Economist 49(2), 2004, 139–158
http://en.wikipedia.org/wiki/Internal_rate_of_return
www.econ.upm.edu.my
Project Management Institute (2003). A Guide To The Project Management Body Of
Knowledge (3rd ed.). Project Management Institute