Unity University

Department of Management (MBA Program)

Project Management (MBA 711)
Home taken Exam (20 points)

Student Name: Edom Girma

ID NO: 0176/12
Section:-I

- These are Individual assignment. Answer all questions.

- Copying from each other subjected to penalties.
- Submission date will be before Dec 20/2020
- Mode of submission will be hard copy

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 Questions

1. Describe the concept of project & its characteristics?

Answer

What is a project

Project is a great opportunity for organizations and individuals to achieve

their business and non business objectives more efficiently through
implementing change project help us make desired in an organized
manner and with reduced probability of failure.
A project is temporary unizue and progressive attempt or endeavor made
to produce some kind of a tangible or intangible result (a unique product
service benefit competitive advantage etc.) it usually includes a series of
interrelated task that are planned for execution over a fixed a period of
time and with in certain requirements and limitations such as cost quality
performance others.

Characteristics

As follows from the given definition an project can be characterized by these

characteristics:

Temporary:- this key characteristic means that every project has a finite
start and finite end the start is the time when the project is initiated and its
concept is developed the end is reached when all objectives of the project
have been (ornament if it’s obvious that the project cannot be completed
then it’s terminated)

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 Unique deliverable (S):- any project aim to produce some deliverables
which can be a product service or some another result deliverable should
address a problem or need analyzed before project start.
Progressive elaboration: - with the progress of a project continuous
investigation and improvement become available and all this allows
producing more accurse and comprehensive plans. This key characteristics
means that the successive iterations of planning processes result in
developing more effective solution to progress and develop projects.

In addition to the listed characteristics a conventional project is

 Logical as it has a certain life cycle

 Limited by available resource
 Risk as it involves and element of risk
 Conflict as it tries to solve a problem that creates some kind of
conflict
2. How are project linked to an organization strategic plan? Discuss
using an appropriate example?

Answer

The projects and programs that a business pursues are the

implementations of a strategic plan in other word projects are the concrete
actions that a business takes to execute its strategic plan in this case the
advertising company is a project that is implemented as a result of the
strategic planning process.

For example during strategic planning managers might see a certain weakness in
a competitor that they might be able to exploit to gain more customer in this case

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the advising campaign is a project that is implemented as a result of the strategic
planning process

3. Described different ways of classifying a project and the difference

between project and programs?

Answer

Classification of project

There are many ways to classifying a project such as:-

I. Based on scope and significance

 New expansion updating
 Location (Rural Urban)
 National international
 Resource (in frastructura, Production service)
II. Based on type
New maintenance, upgrade, strategic, technical, operational)
III. Based on size and scale
Cost duration team , business value number of departments
affected and soon
Large scale medium scale small scale
IV. Based on application
Soft ware development new product development equipment
installation and soon
V. Based on ownership and control
Public sector private sector joint sector

VI. Based on degree of change

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 Inventive discovery innovation adaption
VII. Based on beneficiary
Industrial ancillary consumers
VIII. Based on speed
Normal crash disaster
IX. Based on purpose
New project mergers diversification modernization replacement
renewal up gradation maintenance
X. Based on technology involved
Conventional non conventional research and development
project/ developing a new technology high technology and low
technology
 The difference b/n project and programs
Programme:- usually a long – term series of interventions, some
time with no defined end point.
Project:- a discrete a activity aimed at a specific objective with a
defined budget and limited time frame

Comparison chart

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 Feature Projects Programmes
Purpose Attain objectives and terminate Sustain the
organization
Time Temporary Ongoing
Out come Unique product service or result Non- unique
product service or
result
People Dynamic temporary teams formed to Functional teams
meet project needs generally not generally aligned
aligned with organizational structure with
organizational
structure
Authority of Varies by organizational structure Generally formal
manager generally minimal if any direct line direct line of
authority authority

4. Practically if you are mandated to do so what measure you will take

to improve the reasons fore project failure in your area / country

Answer

Poor preparation:- you need to have a clear picture of what you are
going to do in advance – as much as possible otherwise you may find
yourself up steam without a paddle you need to know what project
success looks like at the beginning and don’t loose focus of it hence if you
don’t have a clear focus at the earliest sage of the process you are making
thing shard on your self
Inadequate documentation and tracking:- this is the responsibility of
the project manager tracking milestones is how you are going to know
whether you are meeting expectations proper record and monitoring les

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 the pm ( project manager) identify where more resource are need to
complete a project on time
Bad leadership:- when we see this word leader we usually think the
project manager however the people at each management level have are
possible to ensure that the project is successful management should not
micro management but provide support to ensure that the project manager
can follow through with the expectations placed upon them
Inaccurate cost estimations:- they may be times when you cost
estimates are completely off as you know when resource when out the
project stops prevent this by identifying the lack of resources early on
Culture or ethical misalignment :- company culture must be comprised
of competence pro-activeness, and professionalism if it isn’t team members
will not be motivated to do their best basically everyone involved must be
invested in their part of the project to successfully complete it
5. Questions related to project initiation
Answer
A. What is project initiation
Project initiation is the creation of project management that
entails the definition of the project purpose primary and
secondary goals time frame and time line of when goals are
expected to be met the project management may add additional
items to the project during the project initiation phase the project
initiation can also be used to determine the project’s viability
prior to committing the required staff materials and finances to
the project
B. Describe briefly how and why the project originates initiated ?
How did projects originates initiated?

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 Essentially any project begins with an idea the idea is often one
about how to do something that seems to be need transforming
ideas in to projects begins with recognizing the nature this
driving force projects arise in order to meet human needs
Why are projects initiated?
There are recommend reasons to initiated a projects by an
organization.
i. Market demand:- is described as the aggregate of the demand of all
potential customers ( market participants) for a specific product over a
specific period in a specific market this demand generally imitates new
projects to meet the specific need of a particular customer group.
ii. Strategic opportunity (Business need) :- organizations might
initiate projects in order to get a strategic opportunity or due to a
business need
iii. Social need:- social needs of people or groups might be reason to
initiate new projects as well.
For instance if UNICEF starts to build 10 regional schools in middle
east region this will be an example of project initiation due to a social
need.
iv. Environmental consideration:- become an important aspect for must
of the companies because consumers become more responsive and
selective in recent years for “green” products as a result companies had
to give importance in environmental issues in their products and stated
to produce more environmental friendly product or revised their
production processes to produce more environmental friendly.
v. Customer request :- this is actually the must common way to initiate
projects especially for vendors

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 vi. Technological advance:- companies might initiate new project to
have a technological advance against their rivals
vii. Legal requirement:- depending on the industry you are working new
regulations might be obligated by the government or agencies in order
to work in line with the proposed regulations you might need to initiate
new project
C. What are the major steps in project initiation?
Project initiation process 6 key steps to follow:-
1. Creating a business case
2. Conducting a feasibility study
3. Establishing a project charter
4. Identifying stakeholders and making a stake holder register
5. Assembling the team & establishing a project office
6. Final review

6. Questions related to project identification

Answer

A. What is project identification?

Project identification is the first steps of any project cycle it is to
develop a preliminary proposal for the most appropriate set of
interventions and course of action with in specific time and
budget frames to address a specific development goal in a

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 particular region or setting investment ideas can a rise from
many sources and contexts they can original from a country is
sector plan, programme or strategy as follow up of an existing
project or form priorities identified in multi stake holder sector
or local development dialogue.
B. Take and organization and describe wry and how they conduct
project identification with example?
Problem solving is important both to individuals and
organization b/c it enables us to extern control over our env’t
problem solving gives us a mechanism for identifying these
things figuring out why they are broken and determining a
course of action to fix then
How they conduct project identification with example?

The purpose of project identification is to develop preliminary

proposal for the most appropriate set of interventions and course
of action, with is specific time and budget frames to address a
specific development goal in a particular region or setting

1. Let’s say you own business selling bread. It costs 1.50 Birr to make one bread. That’s
your Variable cost. You sell each bread for 3.50 Birr. Your cost for rent, utilities,
overhead, etc... is 100,000 Birr per month, that's your fixed cost. What is your business
breakeven point if you want to generate a profit of 60,000 Birr?

Given:-

Variable cost VC = 1.5 Birr

Fixed Cost (FC) = 100,000

Price (P) = 3.5 Birr

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Breakeven point is a point where Total revenue and total cost become equal or where profit
equals zero

BEP=TR-TC=0

TR=P * Q

TC= TFC+TVC

BEP=TR-TC=0

BEP=3.5*Q-100000-1.5Q=0

2Q=100,000

Q=50,000 Units Break even quantity

So therefore producing 50,000 will help the company to cover all its all expense and generate no
revenue.

But if a firm want to generate 60,000 profits what should be the quantity.

60,000=TR-TC

60,000 = P * Q (100,000 +VC*Q)

60000 = 3.5 * Q -100000 – 1.5 *Q

2Q= 160,000

Q = 80,000 Units
So therefore at 80000 units the firm can make 60,000 profits.

2. You are a financial analyst for Beverage Company. The director of the capital budgeting
division of the company has asked you to analyze the payback period of the project. The
project has the cost of 10,000 Birr and the cost of capital for project is 10 percent. The
expected net cash flows of the project is as follows:
Expected Cash Flows
Year Project X
0 10,000
1 6,500
2 3,000
3 3,000
4 1,000

Required: Calculate both the traditional and discount payback period

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 Given

Initial investment: 10,000

Cost of capital = 10 %

Project life interval = Four years

I. Traditional Payback period

PBP = year before return + uncovered cost

Cash flow during the next year

Year Project X Cumulative cash flow

0 (10,000)
1 6,500 6500
2 3,000 9500
3 3,000 12500
4 1,000 13500

PBP = 2 + 500
3000

Payback period = 2.16 Years

II. Discount payback period method

Dscounting cash flow = CF

(1+R)n

Year Project Discount Discounted cash flow Cumulative cash flow

X
0 (10,000)
1 6,500 (6500)/(1+0.1) 5909 5909
2 3,000 (3000)/(1+0.1)2 2479 8388
3 3,000 (3000)/(1+0.1)3 2253 10641
4 1,000 (1000)/(1+0.1)4 683 11,224

PBP = year before return + uncovered cost

Cash flow during the next year

PBP = 2 + 1612
2253
DPBP = 2.7 Years

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 3. A project costs Birr 200, 000 and has a scrap value of Birr 50, 000. The streams of
income after depreciation are Birr 40, 000, Birr 50, 000, Birr 60, 000 for three years. The
tax rate is 50% and depreciation is on straight line basis.
Q. Calculate the Accounting Rate of Return for the project.

Given

Project investments = 200,000

Scrap value = Salvage value = 50000

Income After deprecation

Year 1 = 40000

Year 2 = 50,000

Year 3 = 60,000

Tax Rate = 50%

Average profit = Total profit

Number of years
Average investments = Total investments
2

Income Tax Net Profit Average Profit

40,000 20000 20000
50,000 25000 25000 25,000
60,000 60000 60000

Average Investments = 200000

2
Average investment = 100,000
Accounting rate of return = 25000
100000
ARR= 25%
4. A construction company must choose between a gas-powered and an electric-powered
forklift for moving materials at the construction sites. Since both forklifts perform the
same function, the company will choose only one (i.e. they are mutually exclusive
investments). The electric-powered truck will cost more, but is will be less expensive to
operate; it will cost 22,000 birr, whereas the gas-powered truck will cost 17,500 birr. The
cost of capital that applies to both investments is 12 %. The life of truck is estimated to

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 be 6 years, during which time the net cash flows for the electric powered truck will be
6,290 birr per year and those for gas powered truck will be 5,000 birr year. Annual cash
flows include depreciation expenses.
Q. Calculate the NPV and IRR of for each type of truck, and decide which to
Recommend.

Given

Electric power truck = 22,000

Gas Power Truck = 17500

Cost of Capital = 12 %

Annual cash follow – Electric Power truck =6290

Annual cash follow – Gas Power truck =5000

NPV = PV-Io

Cash flow Discounting Discounted cash flow

Electric Gas (1+R)n 6290/(1+R)n 5000/(1+R)n
power Power
truck truck
6290 5000 1.12 5616.071 4464.286
6290 5000 1.2544 5014.349 3985.969
6290 5000 1.404928 4477.098 3558.901
6290 5000 1.573519 3997.409 3177.59
6290 5000 1.762342 3569.115 2837.134
6290 5000 1.973823 3186.71 2533.156
SUM 25860.75 20557.04
Io 22000 17500
NPV 3860.752 3057.037

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 The NPV of electric car trucks is greater than the gas Truck so Electric power truck should
be accepted

Electric Power Truck = Accept

Gas Power Truck = Reject

Internal Rate of Return

It is a rate that makes NPV zero

If IRR > cost of capital the project should be accepted

Let us try 12 %

Cash flow Discounting Discounted cash flow

Electric Gas (1+R)n 6290/(1+R)n 5000/(1+R)n
power Power
truck truck
6290 5000 1.12 5616.071 4464.286
6290 5000 1.2544 5014.349 3985.969
6290 5000 1.404928 4477.098 3558.901
6290 5000 1.573519 3997.409 3177.59
6290 5000 1.762342 3569.115 2837.134
6290 5000 1.973823 3186.71 2533.156
SUM 25860.75 20557.04
Io 22000 17500
NPV 3860.752 3057.037

At 12 % both NPV is Greater than zero it cannot be IRR

So let us try 19 %

Cash flow Discounting Discounted cash flow

Electric Gas (1+R)n 6290/(1+R)n 5000/(1+R)n
power Power
truck truck
6290 5000 1.19 5285.714 4201.681
6290 5000 1.4161 4441.777 3530.824
6290 5000 1.685159 3732.585 2967.079
6290 5000 2.005339 3136.626 2493.344
6290 5000 2.386354 2635.821 2095.247

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6290 5000 2.839761 2214.975 1760.712
SUM 21447.5 17048.89
Io 22,000 17,500
NPV -552.501 -451.114

Since the NPV of both is less than zero is cannot be IRR

Let us try 18 % for Electric Power and 17.978 % for Gas power car

For Electric Power Car = 18%

For Gas power Car = 17.978%

Cash flow Discounting Discounted cash flow

Electric Gas (1+R)n 6290/(1+R)n 5000/(1+R)n
power Power 18% 17.978%
truck truck
6290 5000 1.19 5330.5085 4238.078
6290 5000 1.4161 4517.3801 3592.262
6290 5000 1.685159 3828.2882 3044.857
6290 5000 2.005339 3244.312 2580.869
6290 5000 2.386354 2749.417 2187.585
6290 5000 2.839761 2330.0144 1854.231
SUM 22000 17500
Io 22,000 17,500
NPV 0 0
18 % is IRR for Electric power truck

IRR > Cost of capital so it should be accepted

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