Project Management Techniques to Practice Problem Solutions

1.1. Review principles of estimating project cash flows. Suggested reading: Ch. 9 “Capital Budgeting and Cash Flow Analysis” in “Contemporary Financial Management”, 11th ed. by Moyer, McGuigan, and Kretlow.

Free cash flows of the project for next five years can be calculated by adding depreciation values and subtracting changes in working capital from net income. In 2010, there will be a cash outflow of $2.2 million as capital expenditure. In 2011, there will be an additional one time cash outflow of $300,000 as an advertising expense. Using net free cash flow values for next five years and discount rate for discounting, NPV for the project comes out to be $2907, 100. The rate of return at which net present value becomes zero i.e.

Estimate the project’s operating cash flows for each year of the project’s economic life. (Hint: Use Table 2 as a guide)

Project A: This project is new to your company. You do not feel confident in estimating the project costs using internal resources. There are other companies that have done this type of work. Yet you still want the most accurate estimates possible.

See Table 1: Expected non-operating cash flow when the project is terminated at year 4 = 165,880$

What is the net present value of a project that contributes $10,000 at the end of the first year and $5,000 at the end of the second year? The initial cost is $8,000 and the appropriate interest rate is 10%.

Project A has an initial outlay of $100,000 receiving $160,000 cash flow over the next 5 years.

It has been two months since team B has been hired as an assistant financial analyst at Caledonia Products; the company has been pleased with our work. They are still a little hesitant to give us work without supervision. Caledonia Products Company is introducing a new product, we have been given the assignment that involves both the calculation of the cash flows associated with a new investment and the evaluation of several mutually exclusive projects. The company is currently in the 34% tax bracket with a 15% discount rate because this project is considered a fad project it will only last five years then it will be

The present value of the net incremental cash flows, totaling $5,740K, is added to the present value of the Capital Cost Allowance (CCA) tax shield, provided by the Plant and Equipment of $599K, to arrive at the project’s NPV of $6,339K. (Please refer to Exhibit 4 and 5 for assumptions and detailed NPV calculations.) This high positive NPV means that the project will add a significant amount of value to FMI. In addition, using the incremental cash flows (excluding CCA) generated by the NPV calculation, we calculated the project’s IRR to be 28%. This means that the project will generate a higher rate of return than the company’s cost of capital of 10.05%. This is also a positive indication that the company should undertake the project.

b) Calculate the net present value (NPV) of each project, assuming that the firm has a cost of capital equal

You need to make a decision on whether to invest RM146300 in Project Y or Project Z that guarantees the following cash flow and annual relevant cost at the end of each year as indicated in the table below.

The following paper analyzes a project from financial perspectives using the capital budgeting techniques like Net Present Value (NPV) and Internal Rate of Return (IRR).

The role of different project management techniques Is to implement projects successfully has been widely established in areas such as the planning and control of time, cost and quality. In spite of this the distinction between the project and project management is less than precise. This paper aims to identify the overlap between the definition of the project and project management and to discuss how the confusion between the two may affect their relationship. It identifies the different individuals involved on the project and project management, together with their objectives, expectations and influences. It demonstrates how a better appreciation of the distinction between the two will bring a higher possibility of project

Therefore, the NPV of both projects are positive. If the company has enough money to investment both of the projects, then it should accept both of them. However, if the company just has money to invest one of these projects, it should invest in the project B since it has the highest NPV.

The scope for this project is to transition from making the medium size cruisers to the larger motorcycles. The project scope will have to include the work that will have to be done to accomplish the completion of services and tasks, as well as