Learning outcomes assessed
The total cost for the project has been estimated to be $123,800.00 for executing the various activities related to the Solar Backup system installation for McDonalds. The costing of the project has been prepared with the help of activity based estimates as presented below:
|
WBS |
Task Name |
Duration |
Start |
Finish |
Cost |
|
0 |
Solar Backup System Installation |
59 days |
Mon 03-12-18 |
Thu 21-02-19 |
$123,080.00 |
|
1 |
Project Management |
9 days |
Mon 03-12-18 |
Thu 13-12-18 |
$5,800.00 |
|
1.1 |
Contract |
5 days |
Mon 03-12-18 |
Fri 07-12-18 |
$4,200.00 |
|
1.2 |
Project plan |
4 days |
Mon 10-12-18 |
Thu 13-12-18 |
$1,600.00 |
|
2 |
Pre-Construction |
29 days |
Fri 14-12-18 |
Wed 23-01-19 |
$92,780.00 |
|
2.1 |
Site Survey |
3 days |
Fri 14-12-18 |
Tue 18-12-18 |
$2,400.00 |
|
2.2 |
Requirements analysis |
2 days |
Wed 19-12-18 |
Thu 20-12-18 |
$1,680.00 |
|
2.3 |
Proposal |
1 day |
Fri 21-12-18 |
Fri 21-12-18 |
$840.00 |
|
2.4 |
Approval |
1 day |
Mon 24-12-18 |
Mon 24-12-18 |
$440.00 |
|
2.5 |
Permits |
3 days |
Tue 25-12-18 |
Thu 27-12-18 |
$2,520.00 |
|
2.6 |
Design |
7 days |
Fri 28-12-18 |
Mon 07-01-19 |
$2,520.00 |
|
2.7 |
Final Approval |
2 days |
Tue 08-01-19 |
Wed 09-01-19 |
$880.00 |
|
2.8 |
Procurement |
10 days |
Thu 10-01-19 |
Wed 23-01-19 |
$81,500.00 |
|
3 |
Construction |
16 days |
Thu 24-01-19 |
Thu 14-02-19 |
$22,340.00 |
|
3.1 |
Mounting system |
3 days |
Thu 24-01-19 |
Mon 28-01-19 |
$14,300.00 |
|
3.2 |
Electrical wiring |
2 days |
Tue 29-01-19 |
Wed 30-01-19 |
$560.00 |
|
3.3 |
Mounting panels |
2 days |
Thu 31-01-19 |
Fri 01-02-19 |
$1,120.00 |
|
3.4 |
Mounting inverters & Batteries |
3 days |
Mon 04-02-19 |
Wed 06-02-19 |
$1,800.00 |
|
3.5 |
Testing |
4 days |
Thu 07-02-19 |
Tue 12-02-19 |
$2,880.00 |
|
3.6 |
Commissioning |
2 days |
Wed 13-02-19 |
Thu 14-02-19 |
$1,680.00 |
|
4 |
Post-Construction |
3 days |
Fri 15-02-19 |
Tue 19-02-19 |
$1,760.00 |
|
4.1 |
Final testing |
2 days |
Fri 15-02-19 |
Mon 18-02-19 |
$1,360.00 |
|
4.2 |
Close project |
1 day |
Tue 19-02-19 |
Tue 19-02-19 |
$400.00 |
|
5 |
Maintenance |
2 days |
Wed 20-02-19 |
Thu 21-02-19 |
$400.00 |
Different budget estimating methods are there and among those for this specific project the budgeting approach that has been chosen is Bottom up budget estimation approach. This is one of the most effective as well as time consuming budget estimation methods. With the help of this method the cost for each item and activity of labor, schedule and labour can be identified.
In order to manage the overall project budget the approaches followed in this project include management of cash flow, contingency reserve, management reserve and proper budget evaluation during the project progress phase. Through proper budget evaluation the project progress will be accordingly measured and reported.
It has been analyzed that each process associated to any project are interwoven into the budget of any project. Based on the outline of project the budget of a project should be structured by the finance heads. It is obligatory for the project heads to design the budget considering all needful resources (Nicholas and Steyn 2017). In order to prepare the “solar backup system installation” project the factors that are to be analyzed respectively include time, quality and budget. This is crucial to come up with detail project cost estimation. In order to estimate project budget the different tools and techniques that are to be utilized are as follows:
Resource cost rates determination: All the project associates need to work on specific project activities. All the materials used in this project will be charged. This calculation will measure the labors and materials rate.
Vendor bid analysis: If the project owner needs to work with external contractors then vendor bid analysis is required (Kerzner and Kerzner 2017). This specific tool or technique will evaluate the bids and choose the one that will be accepted.
Reserve analysis: Certain amount of money for cost overruns needs to set aside. If it is found that, any risk may generate that expense the project better budgeting structure needs to be designed.
Cost of quality: Based on the project quality the budget should have to be prepared by the associates to ensure that the complete budget is not overrunning (Pheng 2018). Cost of quality is a way that tracks the cost of all the project activities.
|
Hardware |
$ 50,000.00 |
|
Software |
$ 15,000.00 |
|
Installation team salaries |
$ 12,500.00 |
|
Training |
$ 5,750.00 |
|
Total Development Cost |
$ 83,250.00 |
|
Hardware |
$ 12,000.00 |
|
Software |
$ 1,500.00 |
|
Operational Labor |
$ 15,000.00 |
|
Total Operational Cost |
$ 28,500.00 |
|
Approximate salary savings |
$ 85,000.00 |
|
Reduced operating cost |
$ 35,000.00 |
|
Total Benefit |
$ 120,000.00 |
|
Discount Rate Used |
5.00% |
The above table presents the investment costs, operational costs and savings that will be achieved approximately from the project. It has been identified that the total one-time development cost for the project will be $ 83,250.00 and the operational cost which is required every year is $ 28,500.00. The savings that will be achieved from the project is $ 120,000.00.
|
Discount Rate Used |
5.00% |
|
Annual Benefits |
$ 120,000.00 |
|
Annual Operational Costs |
$ 28,500.00 |
|
One-Time Development Cost |
$ 83,250.00 |
|
Year of Project |
|||||||
|
0 |
1 |
2 |
3 |
4 |
5 |
TOTAL |
|
|
Economic Benefit |
$0.00 |
$ 120,000.00 |
$ 120,000.00 |
$ 120,000.00 |
$ 120,000.00 |
$ 120,000.00 |
|
|
Discount Rate |
1.0000 |
0.9524 |
0.9070 |
0.8638 |
0.8227 |
0.7835 |
|
|
PV of Benefits |
$0.00 |
$114,285.71 |
$108,843.54 |
$103,660.51 |
$98,724.30 |
$94,023.14 |
|
|
NPV of all BENEFITS |
$0.00 |
$ 114,285.71 |
$ 223,129.25 |
$ 326,789.76 |
$ 425,514.06 |
$ 519,537.20 |
$ 519,537.20 |
|
One-Time COSTS |
$(83,250.00) |
||||||
|
Recurring Costs |
$0.00 |
$ (28,500.00) |
$ (28,500.00) |
$ (28,500.00) |
$ (28,500.00) |
$ (28,500.00) |
|
|
Discount Rate |
1.0000 |
0.9524 |
0.9070 |
0.8638 |
0.8227 |
0.7835 |
|
|
PV of Recurring Costs |
$0.00 |
$ (27,142.86) |
$ (25,850.34) |
$ (24,619.37) |
$ (23,447.02) |
$ (22,330.50) |
|
|
NPV of all COSTS |
$(83,250.00) |
$(110,392.86) |
$(136,243.20) |
$ (160,862.57) |
$ (184,309.59) |
$ (206,640.09) |
$ (206,640.09) |
|
Overall NPV |
$ 312,897.12 |
||||||
|
Overall ROI |
|||||||
|
1.5142 |
|||||||
|
Break-even Analysis |
|||||||
|
Yearly NPV Cash FLOW |
$(83,250.00) |
$ 87,142.86 |
$ 82,993.20 |
$ 79,041.14 |
$ 75,277.28 |
$ 71,692.64 |
|
|
Overall NPV Cash FLOW |
$(83,250.00) |
$ 3,892.86 |
$ 86,886.05 |
$ 165,927.19 |
$ 241,204.47 |
$ 312,897.12 |
From the above analysis, it can be said that the project is financially feasible and the overall net present value of the project is estimated to be $ 312,897.12. The overall ROI (Return on Investment) is calculated to be 1.5142 which means that the investment could be recovered in that time period.
|
B-E Analysis Over 5 Years: |
0 |
1 |
2 |
3 |
4 |
5 |
|
NPV of all BENEFITS |
$0.00 |
$ 114,285.71 |
$ 223,129.25 |
$ 326,789.76 |
$ 425,514.06 |
$ 519,537.20 |
|
NPV of all COSTS |
$ 83,250.00 |
$ 110,392.86 |
$ 136,243.20 |
$ 160,862.57 |
$ 184,309.59 |
$ 206,640.09 |
Figure 1: Break Even Analysis for the Solar Backup System
(Source: Created by Author)
The above chart reflects the comparison of NPV (Net Present Value) of all benefits against all costs. The NPV of all benefits after 5 years is estimated to be $ 519,537.20 whereas the costs associated with this project will be $ 206,640.09.
|
Benefits of option |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|
Approximate salary savings |
$ 85,000 |
$ 85,000 |
$ 85,000 |
$ 85,000 |
$ 85,000 |
|
|
Reduced operating cost |
$ 35,000 |
$ 35,000 |
$ 35,000 |
$ 35,000 |
$ 35,000 |
|
|
Total Benefits |
$ 1,20,000 |
$ 1,20,000 |
$ 1,20,000 |
$ 1,20,000 |
$ 1,20,000 |
$6,00,000 |
|
Costs of option |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|
Development costs |
$ 83,250 |
$ – |
$ – |
$ – |
$ – |
|
|
Additional hardware |
$ 12,000 |
$ – |
$ – |
$ – |
$ – |
|
|
Operation costs |
$ 28,500 |
$ 28,500 |
$ 28,500 |
$ 28,500 |
$ 28,500 |
|
|
Total Costs |
$ 1,23,750 |
$ 28,500 |
$ 28,500 |
$ 28,500 |
$ 28,500 |
$2,37,750 |
|
Net benefits/costs |
$ (3,750) |
$ 91,500 |
$ 91,500 |
$ 91,500 |
$ 91,500 |
|
|
Cumulative benefits/costs |
$ (3,750) |
$ 87,750 |
$ 1,79,250 |
$ 2,70,750 |
$ 3,62,250 |
|
|
Payback Period |
3.04 |
Figure 2: Payback Analysis for the Solar Backup System
(Source: Created by Author)
From the above figure, it can be said that the payback period for investment in the Solar Backup System installation project for McDonalds is 3.04 years. The investment required for the project could be retrieved by the company within next 3.04 years.
References
Abednego, G., Githae, W. and Masu, S.M., 2014. The Contingencies Allowances In Project Budgeting. International Journal of Soft Computing and Engineering, 3(6), pp.17-23.
De Marco, A., 2018. Planning and Scheduling. In Project Management for Facility Constructions (pp. 93-122). Springer, Cham.
Fleming, Q.W. and Koppelman, J.M., 2016, December. Earned value project management. Project Management Institute.
Harrison, F. and Lock, D., 2017. Advanced project management: a structured approach. Routledge.
Kerzner, H. and Kerzner, H.R., 2017. Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons.
Nicholas, J.M. and Steyn, H., 2017. Project management for engineering, business and technology. Routledge.
Pheng, L.S., 2018. Project cost management. In Project Management for the Built Environment (pp. 97-112). Springer, Singapore.
Tate, K., 2017. Project Scheduling and Management. Managing Supply Chain Operations, p.191.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
