Lisa_Shaw_Assignment_Unit5

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Apr 3, 2024

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Project Calculations 1 Project Calculations By Lisa Shaw GM591 - Strategic Project Selection and Initiation Professor Simon Cleveland Assignment Unit 5

Project Calculations 2 Executive Summary The project manager has to create a bid for a project that has a projected cost of $20 million in the time span of 5 years. The plan is for the organization to borrow the money up front and to make payments annually with an interest rate of 10%. The goal is to end with a high profit and still meet the quality standards. It is imperative to stay within the controlled budget and to avoid scope creep. The projects benefits should contribute to the overall intent (Resch, 2011). The bid is for $20 million up front, and this increases the risk factor being that the amount is needed up front, without seeing the outcome or ROI. It is a blind investment, and this is the riskiest type. The scope and budget must be set at the beginning and it must be a hard line. There can be no scope creep because this can lead to massive increases in the budget. The value of the investment is calculated by the original investment, and the interest that will accumulate during the projects duration (Resch, 2011). Looking at the principal and interest, the total cost of the project at the end of the 5 years, calculated to the future value, is $32,210,200.00. This would be the amount that would need to be bidded to be able to payback the amount owed, the amount to cover expenses, and enough to show a profit. Introduction A newly hired project manager it is required that a bid proposal be created. The assigned project is $20 million dollars for a project that spans 5 years. The amount is to be lended up front, and the debt will be paid off at the completion of the 5 years of the project, with a 10%

Project Calculations 3 interest compounded annually. The bid will be outlined showing the expenses, the interest and principal, and the profit. Enough money must be earned to pay off the debt, cover the costs, and show a profit. Project Overview The overall goal is to meet the customers expectations and time restraints, all while staying within the budget and ending with a profit. Poorly planned projects can be detrimental to the business and to the workers. This can affect the budget, the timeline, and the trust in the planner for future employment with that company. The bids are necessary to request proposals for prospective workers. This is why reputation and and professionalism are important, because if the bid is comparable to other bids, the reputation and past employment can put a company above the rest. Because this is a high bid amount of $20 Million, the complexity and detail of the bid is expected to be consistent, flexible, and professional. Analysis The future value (FV) calculation determines the value of an investment and what could happen in the future to change the guessed amount. (Future value calculator, 2021). The FV is based on a rate of interest paid over a specific length of time (Resch, 2011). The formula for FV is: FV = PV (1 + r × n ) (Resch, 2011). FV = future value PV = present value r = interest rate n = number of time periods (Future Value Calculator, 2021). The commitment is high because the $20 Million up front payment makes the bid a high risk. To avoid scope creep, the scope must be set early on and must be a main focus. The basic formula for FV does not include compounding. Compounding allows the FV to be calculated

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