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Assignment 1 - Project Management

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114 views

Assignment 1 - Project Management

Uploaded by

Saumya Singh
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Program: MGMT8770-22F-Sec1-IT Project Management

Assignment-1

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Question 1. What is project management? Briefly describe the project management framework,
providing examples of stakeholders, knowledge areas, tools and techniques, and project success
factors.
Answer:
PROJECT MANAGEMENT: Projects are temporary endeavors to build new software or products
that require a manager to ensure success. The project manager must have an eye for every detail
throughout the project, from the initiation phase to completion. To put it all together, "Project
Management" is a collection of knowledge, procedures, skills, tools, techniques, and resources that
offer direction and structures for any project execution to meet its requirements.

PROJECT MANAGEMENT FRAMEWORK: The project management framework covers every


project facet, from gathering necessary tools, tasks, processes, and resources used to take a project
from beginning to end. Three key components of project management are required for planning,
managing, and governing projects:
 Project life cycle – The project life cycle offers a schedule with objectives and benchmarks,
which has five distinct stages.
 Initiation
 Planning
 Execution
 Monitoring and Controlling
 Closure

 Project control cycle - The project control cycle offers management and monitoring tools.
 Tools and templates – Project plans, reports, and risk logs are standard tools and templates for
managing any project.
Also, Project stakeholders, knowledge domains, as well as the integration of successful projects into
the organization, are essential components of the framework.

EXAMPLES OF STAKEHOLDERS: Stakeholders in the projects are the people involved in or


affected by the project operations. Below are a few examples that can be considered Stakeholders:
 Project’s sponsor
 Support personnel
 Project manager
 Banks and other financial institutions
 Clientele
 Users
 Distributors
 Even project critics

KNOWLEDGE AREA: Every project manager needs to be familiar with some critical areas of
expertise related to project management that will help them to simplify and prioritize project
management procedures, which leads to effective and successful project execution. The key
competencies project managers need to develop are described in the “Knowledge Area.” Thus, there
are ten knowledge areas of project management involving Cost, Schedule/time, Scope,
Communication, Human resources, Quality, Procurement, Stakeholder management, Risk
management, and Project integration management.

TOOLS AND TECHNIQUES: Project managers and their teams can use project management tools
and techniques to help with various project management-related tasks. These tools and techniques
include:
 Return on investment estimates
 Net present value
 Project budgets
 Payback analyses
 Network diagrams
 Gantt charts
 Work breakdown structures
 Project charters
 Project review meetings
 Change control boards
 Crash analysis
 Critical path diagrams
 Lean, critical chain project management, and other methods can also be used.

PROJECT SUCCESS FACTORS: A project is considered adequate when it is completed within


the specified scope, budget, and time constraints and completely to the client's satisfaction. Thorough
planning, distinct business goals, ongoing open and honest communication with all stakeholders,
proactive risk management, adherence to agile methodologies, using qualified resources, and project
management expertise all contribute to success.
Question 2. Perform a financial analysis for a project using the format provided in Figure 4-5
(shown below). Assume that the projected costs and benefits for this project are spread over four
years as follows: Estimated costs are $300,000 in Year 1 and $40,000 each year in Years 2, 3, and 4.
Estimated benefits are $0 in Year 1 and $120,000 each year in Years 2, 3, and 4. Use a 7 percent
discount rate, and round the discount factors to two decimal places. Create a spreadsheet (based on
the template attached) to calculate and clearly display the NPV, ROI, and year in which payback
occurs. In addition, write a paragraph explaining whether you would recommend investing in this
project, based on your financial analysis. (3.5 Marks)
Figure 4-5: JWD Consulting net present value and return on investment example

Answer:
In the below excel sheet, I have calculated Net Present Value (NPV), Return on Investment (ROI),
and the year in which payback occurs or not using the estimated costs, estimated benefits, and
discount rate provided in the question.
Discount rate 7%
Year
1 2 3 4 Total
Costs 3,00,000 40,000 40,000 40,000
Discount factor 0.93 0.87 0.82 0.76
Discounted costs 2,79,000 34,800 32,800 30,400 3,77,000

1,20,00
Benefits 0 1,20,000 1,20,000 0
Discount factor 0.93 0.87 0.82 0.76
Discounted benefits 0 104400 98400 91200 2,94,000

(2,79,000 NP
Discounted benefits - costs ) 69,600 65,600 60,800 (83,000) V
(2,79,000 (2,09,400 (83,000
Cumulative benefits - costs ) ) (1,43,800) )

ROI -22% No Payback year


The estimated cost for the first year is $300,000, followed by $40,000 in the second, third, and fourth
years. Similarly, in the first year, the estimated benefits are $0, whereas for the next three years, it is
$120,000, and the discount rate is 7%.
 
First, I have calculated the discount factor using the below formula for each year:
Discount factor = 1/ (1+Discount rate/100) ^year
The discount factor for the first year is 0.93, for the second 0.87, for the third 0.82, and for the fourth
0.76.
 
After calculating the discount factor for each year, I have calculated the discounted cost, which is the
product of costs and discount factor.
Discounted Cost = Costs * Discounted Costs
 
The discounted benefit is calculated using the below formula:
Discount Benefits = Benefits * Discount factor
 
Discounted benefits – costs is the subtraction of discounted benefits and discounted costs.
 
NPV is calculated by taking the total discounted benefit and subtracting the total discounted costs. 
NPV = Total of Discounted benefits – Total of Discounted costs
For the above example, the NPV is ($2,94,000 - $3,77,000) = -$83,000
 
ROI is the result of subtracting the project costs from benefits and then dividing them by the cost. The
above example shows an ROI of -22%. ROI is determined using the following formula:
ROI = (total discounted benefits – total discounted costs)/discounted costs
ROI = ($2,94,000 - $3,77,000)/ $3,77,000 = -22%
 
Payback occurs when the net discounted cumulative benefits and costs reach zero. As per the above
example, the cumulative benefits minus cost for all four years are negative 
 (-$2,79,000), (-$2,09,400), (-$1,43,800), (-$83,000) respectively.
 
Recommendation: "NPV is negative -$83,000, ROI is -22%, and No payback occurs in 4
years. Therefore, based on the aforementioned financial analysis, I would not advise investing in this
project."
Reference:
 Information Technology Project Management, Ninth Edition. © 2019 Cengage
 https://en.wikipedia.org/wiki/Project_management
 Referred IT-Project management course ppt slides
 https://www.pmi.org/pmbok-guide-standards/foundational/PMBOK

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