Question 1:

Amiantit Oman is the largest manufacturing companies in the sultanate of Oman. According
to the project plan of Amiantit Company the project and project management is defined in
following ways:

i. Meaning of project and project management

Project is defined as

A set of planned interconnected chores that are to be accomplished in a fixed period of time
in a definite cost and many other limitations.

A project has a certain starting and beginning time that has to be accomplished in a defined
resources and scope which means a project is a temporary operation but it is unique as it is not
a routine task, it has defines set of tasks that needs to be performed in a time period given.
People from different geographic and organizations work together to achieve a single goal
defined in the project.

Project management, is described as the use of the skills, knowledge techniques and tools in
the accomplishment of task in order to fulfil the requirements of projects. The knowledge of
the project management is drawn on following areas:

ii. Definition of business project management

Project management is the activity and the process that involves the planning, organizing and
controlling the employed resources, all the processes and the procedures to gain the defined
goal in daily routine. A project is a temporarily designed to generate a product or any service
that is unique. The project is completed in definite time period which has a definite starting and
ending time.it is designed to achieve defined goals and objectives. The project is temporary in
nature but it is repeatedly performed to generate product and service. The Amaniatit Company
manages the project in six steps during the project life cycle:

Defining the Project in this step the objectives of the project are defined and the
factors are considered in order to make the project able to be accomplished.

Initiation of the Project the second step involves the planning for the project and
identifying the resources for the project.

Planning of Project the outline for the project is prepared that how the project will
be accomplished. At this stage the tringle of the project with time cost and quality is
developed.

Execution of Project it involves delivering the outcome of the project.

Monitoring and controlling of Project at this step measures that are necessary for
the operation of the project.

Closure of project the resources that were used to complete the project are
discontinued.

iii. Project life cycle 4 ps

The management of the effective project includes 4 Ps:

The People
The Product
The Process
The Project

The People

The people categories that are included in the process are: senior managers, practitioners,
customers, project managers and the end users. The role of each of the person is different as
the project manager motivates, make planning, organize and control the activities of the project.
The senior manager is responsible to define the issue of the business. The practitioners provide
their technical expertise and skills.

The Product

The objectives of the project and the scope are identified. It involves defining cost and the
risk that s involved in the project.

The Process

The proper process and the model is developed.

The Project

It is the series of phases to make exact decisions for the successful completion of the project.

iv. Concepts of business project management (time, cost and quality)

Time cost and quality is the triangle of the project management that is used by the managers in
order to examine and comprehend the difficulties that arise during the execution and
implementation of the project. The projects includes many constraints regardless of their size.

The three constraints included in the cycle of project management are cost, time and scope.

1 Time
The activities of the project might take longer or shorter period of time to accomplish. The
accomplishment of the tasks is influenced by many factors like skills, expertise of the people
and the number of people that are working in the project. Time is very critical factor which
cannot be controlled. The deadlines of the project if not completed on time can cause contrary
effects. The lack of resources can be the reason of failure in completion of the project in time.

2 - Cost
It is important for the project manager to make the estimates of the costs when establishing a
project. Budget should be prepared. Resources allocation will determine the additional costs
if required.

3 Scope
Scope is the outcome of the project. It involves the deliverables and the manager of the project
is responsible for the scope and any type of change in the project which has any potential impact
on the cost and time of the project.

4 - Quality
Quality is not as such the part of the project management triangle it is the eventual aim of
every deliverable. The higher the quality the higher is the cost. The use of the resources that
are low in quality cannot help in the successful completion of the project. Likewise scope
quality is also one of the important factor of the project.

Question no 2:

A. Calculate NPV and IRR and Payback period

NPV of project A

900 900 900 900 900 900 900 900

= 5000 + (1.10) + (1.10)2 + (1.10)3 + (1.10)4 + (1.10)5 + (1.10)6 + (1.10)7 + (1.10)8 +
900 900
+ (1.10)10
(1.10)9

= 530.115

NPV of project B

700 800 900 1000 1100 1200 1300 1400

= 5000 + (1.10) + (1.10)2 + (1.10)3 + (1.10)4 + (1.10)5 + (1.10)6 + (1.10)7 + (1.10)8 +
1500 1600
+ (1.10)10
(1.10)9

= 1590.396
NPV of project C

2000 2000 2000 1000

= 5000 + (1.10) + (1.10)2 + (1.10)3 + (1.10)4

= 656.72

IRR of projects A= 12%

IRR of projects B= 16%

IRR of projects C= 16%

Payback period of project A

= 5000

900

= 5.556 years

Payback period of project B

Period Project B Cumulative

0 (5000)
1 700 700
2 800 1500
3 900 2400
4 1000 3400
5 1100 4500
6 1200 5700
7 1300 7000
8 1400 8400
9 1500 9900
10 1600 11500
= A + B/C

= 3 + 2400/1000

= 5.4 years

Payback period of project C

= 5000/2000

= 2.5 years

B. Ranking of the projects

The ranking of the projects with respect to net present value is:

1. Project C
2. Project B
3. Project A

The ranking of the projects according to IRR are:

1. Project B
2. Project C
3. Project A

The rankings of projects according to payback period are:

1. Project C
2. Project B
3. Project A

Payback period is the time period in which the investor expects to recover the initial outflow
of the made investment through all the inflows of the cash produced by the investment. The
project C is more suitable according to the results of payback period because it will pay back
the original investment in 2.5 years. While considering the results of NPV the project C is the
best one as its net present value is greater than any other projects. Internal rate of return (IRR)
is the rate of discount at which the NPV of any investment is zero.

C. Why payback commonly used as way of dealing with risk in investment

projects?

Payback period is the old method that is used commonly to analyse the risk that is linked with
the project investment. This method is more basically used for an attempt in decisions of capital
budgeting in order to allow for the risk instead of being used for the profitability as measure.
Payback focuses on near future term for the allowance of risk. Payback period emphasize on
the firms liquidity as it recovers the capital because of its favour of projects that are short term
over the longer term projects. Payback period is a method of analysis of risk which allows only
some types of risks. The payback period once calculated is compared by the projects assessed
by the investor. If the result of the payback period is less than the assessed one the project
would be accepted.

Question no 3.

Advantages and disadvantages of NPV, Pay Back period and IRR

The Advantages of payback period are:

1. Calculation of payback period is very easy.
2. It is the indication of the certainty of the cash inflows of the project.
3. Payback period is a source of providing ranking to the projects that gives the early return
in form of money especially for the firms that have problems of liquidity.

Disadvantages of payback period are:

1. It does not considers the concept of time value of money which can be a source of making
wrong decisions. It is one of the critical disadvantage of the payback period.
2. The cash flows that occurs after the payback period are not considered in the calculation.

Advantages of Net Present Value (NPV)

1. It provides great importance to time value of money.

2- In NPV both the cash flows after and before the life time of the project are considered
during the calculation of net present value.
3. It aids in the maximization of the value of the firms value.

Disadvantages of Net Present Value (NPV)

1.It difficult to use.

2. It does not gives accurate results in the perspective of mutually exclusive projects in which
the investment is not equal.

3. Appropriate discount rate is not calculated in the method of net present value.
4. The projects who have not equal life in these NPV does not provides accurate decisions.

Advantages of Internal Rate of Return

Internal Rate of Return (IRR) is the rate of discount at which the net present value of the
projects become zero.

1) IRR provides all cash flows equal importance. Only the point where the Present value of
the cash inflow becomes equal to the present value of the outflow of the cash.
2) It is very popular

3) It is a worthy method in capital budgeting.

4) It is straighter forward then net present value.

5) It is more realistic technique then accounting rate of return.
6) It takes into account the concept of time value of money.

Disadvantages of Internal Rate of Return:

1) This technique is difficult to understand.

2) It does not considers the concept of cost of capital.

3) It cannot be used for the comparison of the projects.

4) The trial and error method if used then calculation of internal rate of return would be
difficult.
5) IRR does not identify the different sizes of the projects.

Question no 4:

Explain work break down structure with WBS chart

The guide to project management body of knowledge book 3rd edition defines the work break
down structure as:

The work break down structure helps to organize the scope of the project. It defines the scope
of project in specified and accurate way. The work break down structure is used in a tree
structural hierarchal form. This hierarchy helps the project in the division of objectives and
deliverables in a specific and parts that are measureable. It helps to assign the responsibilities,
in the allocation of resources, project monitoring and controlling. The works is divided in a
precise and accurate form that makes easy for the team members to understand that what is
intended to be accomplished. Work break down structure divide the entire project into
smaller chunks which estimates the time, risk and cost of the project. Nothing remains
missing due to the division of project into smaller tasks.
Process
The formation of the work break down structure improves and enhances the efficiency and
effectiveness of the project. Creation of work break down structure requires certain inputs:
The Project Scope Statement

The management plan for the Project Scope

Organisational Process Assets

Approved requests for the changes

With the above mentioned inputs certain tools are also required that provides necessary
information to the team members.

Work Breakdown Structure Templates and the Decomposition are the required tools.

The creation of the work break down structure first step involves getting all the team with
necessary expertise, experience and thinking that is creative in one room. Team is the
important part of creation of the work break down structure. In the first level title is decided
for the project, in the second level there are project deliverables. It is done under hundred
percent rule. The rule basically constitutes that the work break down structure includes all the
work that is defined in the statement of project scope and plan of the management. When the
two levels are reached the decomposition is decided then. In the decomposition the
deliverables are broken down into smaller parts so that the work can be completed in accurate
manner. The smaller parts made helps the managers to achieve the objective in a given time
frame. At this level all the work related to project is monitored by the managers.

Question no 5.

Change management plan and risk management plan

Risk management plan involves various steps which are:

risk identification,
risk analysis, and
Risk prioritization.
The control of risk includes planning of the risk, mitigation of risk and monitoring of the
risk. The risk management should be done in a protective way throughout the
accomplishment of the project.
The risk that is face by Industrial projects are of different types. Some of these might include
losing the members in the team and changes in the requirements. Ten risk items in the
projects associated with industries are:
Change Management plan

Change Management defined as the process of planning, coordination, implementation and

Monitoring of all the changes that affect the platform of the production.

Summary Table of change level:

References:

Rachel Thompson. (2014), Kotters 8-Step Change Model. assessed on June 8, 2015 retrieved from
http://www.mindtools.com/pages/article/newPPM_82.htm

Payback Period, assessed on June 8, 2015 retrieved from

http://accountingexplained.com/managerial/capital-budgeting/payback-period

Internal Rate of Return (IRR) assessed on June 8, 2015 retrieved from

http://accountingexplained.com/managerial/capital-budgeting/irr

Conventional Techniques of Risk Analysis in capital budgeting. Assessed on June 8, 2015 retrieved
from: http://professional-edu.blogspot.com/2010/07/212-conventional-techniques-of-risk.html