Project Management Assignment 1

Handstar Inc.

Kundan Kumar
PGP/22/027
 1. Which projects would you recommend Handstar pursue based on the
NPV approach?

NPV approach

Discount Rate 12%

Hourly Rate $52
Available Man Hours per year 2500*4
Life of Project in Years 3
Total Hours Required 13025

Expense Portfolio Trip

Calendar/Email Spreadsheet Browser
Project Report Tracker Planner
Yearly Growth Rate -10% 5% 5% 10% 15% 5%
Development Time(Hrs.) 1250 400 750 2500 1875 6250
Cost of Development($) 65000 20800 39000 130000 97500 325000

CASH FLOWS
Project Calendar/Email Expense Portfolio Spreadsheet Browser Trip Planner
Report Tracker
Year 0 -65000 -20800 -39000 -130000 -97500 -325000
Year 1 750000 250000 500000 1000000 2500000 1300000
Year 2 675000 262500 525000 1100000 2875000 1365000
Year 3 607500 275625 551250 1210000 3306250 1433250
NPV (@12%) $14,06,388.59 $5,42,734.03 $10,87,789.48 $22,33,057.60 $60,53,480.98 $26,28,609.79

The number of hours required for projects is 13:25 hours whereas the total
available working hours for the year with the current staff level is 10000 hours.
Thus one or more of the projects must be removed.

Taking the time constraint into consideration, according to the NPV approach the
projects that must be taken are Browser, Trip Planner, Calendar Email and
Expense Report must be chosen to maximize the NPV with the given constraint.

2. Assume the founders weigh a project’s NPV twice as much as both

obtaining/retaining a leadership position and making use of the
Internet. Use the weighted factor scoring method to rank these
projects. Which projects would you recommend Handstar pursue?

If Leadership Position and Use of Internet criteria are weighted as 0.25 then the
NPV is weighted as 0.50 which is twice as much as weightage as the other criteria.
The scoring is such that if NPV is less than or equal to $1million then the score
is 1, between $1million and to $ 2.5 million is 2 and greater than $2.5 million is
 3. For the other criteria the scoring is according to the probabilities mentioned,
low probability is scored 1, medium is scored 2 and high is scored 3.The
calculations for the scoring is shown below.

Leadership Weighted Average

Criteria NPV Position Use of Internet Score
Weight 50% 25% 25%
Calender/Email 2.00
2 2 2
Expense Report 1.50
1 3 1
Portfolio Tracker 1.75
1 3 2
Spreadsheet 1.75
2 2 1
Browser 2.50
3 1 3
Trip Planner 2.50
3 1 3

Thus from the above scoring pattern with the given constraints Browser, Trip
Planner, Calendar Email and Expense Report must be chosen.
3. In your opinion; is hiring an additional software development
engineer justified?

Using the NPV approach the chosen projects are constraints Browser, Trip
Planner, Calendar Email and Expense Report. The total hours that are required to
complete the project are 9775 hours. This leaves us with an extra time of 225
hours. If an additional software development engineer is hired it would increase
the extra time available to 2500+225 = 2725 hours. We can utilise this time and
can take extra projects. Again from the NPV approach and the scoring criteria
Spreadsheet Project can be taken up as it has higher values in both. The cost of
hiring the employee is 52*2500=$130000 per year. The NPV of Spreadsheet is
$22,33,057.60 which is greater than hiring the employee. Therefore we can
employee an additional software development engineer as there is a net benefit.