Task 1: Business case financial analysis
|
Year of Project |
|||||||
|
0 |
1 |
2 |
3 |
4 |
5 |
TOTALS |
|
|
Economic Benefit |
$0.00 |
$11,200,000.00 |
$11,200,000.00 |
$11,200,000.00 |
$11,200,000.00 |
$11,200,000.00 |
|
|
Discount Rate |
1.0000 |
0.9434 |
0.8900 |
0.8396 |
0.7921 |
0.7473 |
|
|
PV of Benefits |
$0.00 |
$10,566,037.74 |
$9,967,960.13 |
$9,403,735.97 |
$8,871,449.03 |
$8,369,291.54 |
|
|
NPV of all BENEFITS |
$0.00 |
$10,566,037.74 |
$20,533,997.86 |
$29,937,733.83 |
$38,809,182.86 |
$47,178,474.40 |
$47,178,474.40 |
|
One-Time COSTS |
$(1,700,000.00) |
||||||
|
Recurring Costs |
$0.00 |
$ (510,000.00) |
$ (510,000.00) |
$ (510,000.00) |
$ (510,000.00) |
$ (510,000.00) |
|
|
Discount Rate |
1.0000 |
0.9434 |
0.8900 |
0.8396 |
0.7921 |
0.7473 |
|
|
PV of Recurring Costs |
$0.00 |
$ (481,132.08) |
$ (453,898.18) |
$ (428,205.83) |
$ (403,967.77) |
$ (381,101.67) |
|
|
NPV of all COSTS |
$(1,700,000.00) |
$ (2,181,132.08) |
$ (2,635,030.26) |
$ (3,063,236.09) |
$ (3,467,203.86) |
$ (3,848,305.53) |
$ (3,848,305.53) |
|
Overall NPV |
$43,330,168.87 |
The overall ROI of the project is calculated as 11.2595.
The payback period for the project is calculated to be 2.31.
|
Payback Analysis (Manage Your Health, Inc.) |
||||||
|
Benefits of option |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|
Savings on full time employees |
$10,000,000.00 |
$10,000,000.00 |
$10,000,000.00 |
$10,000,000.00 |
$10,000,000.00 |
|
|
Savings on part-time employees |
$ 500,000.00 |
$ 500,000.00 |
$ 500,000.00 |
$ 500,000.00 |
$ 500,000.00 |
|
|
Total Benefits |
$ 10,500,000 |
$ 10,500,000 |
$ 10,500,000 |
$ 10,500,000 |
$ 10,500,000 |
$52,500,000 |
|
Costs of option |
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|
Cost for Web application development |
$ 1,200,000.00 |
$ – |
$ – |
$ – |
$ – |
|
|
Cost for Web and database servers |
$ 500,000.00 |
$ – |
$ – |
$ – |
$ – |
|
|
System Maintenance costs |
$ 400,000.00 |
$ 400,000.00 |
$ 400,000.00 |
$ 400,000.00 |
$ 400,000.00 |
|
|
Cost for Application Operations Manager |
$ 110,000 |
$ 115,500 |
$ 121,275 |
$ 127,339 |
$ 133,706 |
|
|
Total Costs |
$ 2,210,000 |
$ 515,500 |
$ 521,275 |
$ 527,339 |
$ 533,706 |
$ 4,307,820 |
|
Net benefits/costs |
$ 8,290,000 |
$ 9,984,500 |
$ 9,978,725 |
$ 9,972,661 |
$ 9,966,294 |
|
|
Cumulative benefits/costs |
$ 8,290,000 |
$ 18,274,500 |
$ 28,253,225 |
$ 38,225,886 |
$ 48,192,180 |
The proposed project is worthwhile undertaking as the return of investments will be received within the period of 2.31 years as determined from the payback analysis. This means the revenue generated from the project will be visible from that period and it will be profitable.
The Total budget at completion (BAC) for the project has been estimated to be $2,307,820.00 comprising of the costs for web application development, web and database servers and Application Operations Manager.
The likely reason for difference between PV and AC for the first month of this project is crashing of activities which has caused delay in the project this resulting into increase in actual cost.
The formula for calculating Cost Variance (CV) is:
CV = EV (Earned Value) – AC (Actual Cost)
= $140,000 – $200,000 = (-) $60,000
Hence, the CV for the first month in this project is (-) $60,000.
The formula for calculating Cost Performance Index (CPI) is:
CPI = EV (Earned Value) / AC (Actual Cost)
= $140,000/$200,000 = 0.70
Hence, the CPI for the first month in this project is 0.70.
Since, the CPI is less than 1 and the CV is (-) $60,000, it can be said that the project is over budget.
The formula for calculating Schedule Variance (SV) is:
SV = EV (Earned Value) – PV (Plan Value)
= $140,000 – $180,000 = (-) $40,000
Hence, the SV for the first month in this project is (-) $40,000.
The formula for calculating Schedule Performance Index (SPI) is:
SPI = EV (Earned Value) / PV (Plan Value)
= $140,000/$180,000 = 0.80
Hence, the CPI for the first month in this project is 0.80.
Since, the SPI is less than 1 and the SV is (-) $40,000, it can be said that the project is behind schedule.
The formula for calculating Estimate at completion (EAC) for this project is:
EAC = (BAC – EV) + AC
= $ [(2,307,820 – 140,000) + 200,000] = $2,367,820
Hence, the new estimate at completion (EAC) for this project after the completion of first month’s work is $2,367,820.00.
The formula to calculate duration of the project is:
Estimated Time to Complete = (Planned Completion in Months) / (Schedule Efficiency Factor)
Now, Schedule Efficiency Factor is calculated as BCWP/BCWS.
BCWP is also called as Earned Value (EV) and BCWS is called as Plan Value (PV)
Task 2: Project cost control
So, the Schedule Efficiency Factor is calculated as:
= EV/PV = $140,000/$180,000 = 0.80
Hence, the Estimated Time to Complete is:
= (Planned Completion in Months) / (Schedule Efficiency Factor)
= 8 / 0.8 months = 10 months
Therefore, it can be said that it will now take 10 months to finish this project after working on the project for a month.
|
Task |
Predecessor |
Optimistic duration |
Most Likely duration |
Pessimistic duration |
Task effort = [Optimistic + 4*(Most Likely) + Pessimistic]/6 |
|
A |
– |
20 |
22 |
35 |
24 |
|
B |
– |
20 |
18 |
30 |
20 |
|
C |
A |
25 |
27 |
40 |
29 |
|
D |
A |
15 |
20 |
30 |
21 |
|
E |
C |
15 |
12 |
20 |
14 |
|
F |
D |
10 |
15 |
25 |
16 |
|
G |
B |
10 |
8 |
15 |
10 |
|
H |
B |
5 |
8 |
15 |
9 |
|
I |
E,F, G |
5 |
8 |
15 |
9 |
|
J |
H |
3 |
5 |
12 |
6 |
|
K |
J |
5 |
7 |
17 |
8 |
|
L |
I, K |
5 |
8 |
15 |
9 |
|
Possible Paths |
Total Duration |
|
1à2à4à6à10à13 |
85 |
|
1à2à5à7à10à13 |
79 |
|
1à3à8à10à13 |
48 |
|
1à3à9à11à12à13 |
52 |
The critical path that has been identified for this project is 1à2à4à6à10à13 which means AàCàEàIàL with a duration of 85. It is the critical path for this project as it has the longest duration from all the possible paths. Critical path is considered as the sequence of activities that sums up to longest duration for the project and it means that it is the shortest possible time to complete the project.
The opening date for the project is feasible as the critical path duration has been calculated to be 85 days which means that the project could be accomplished within 5 months. It is feasible considering that there are no holidays during the project and it will be executed for 5 days a week.
|
Requirement Score |
|||||
|
Criteria |
Weight |
Project 1 |
Project 2 |
Project 3 |
Project 4 |
|
a |
35% |
60 |
55 |
50 |
65 |
|
b |
35% |
65 |
70 |
65 |
55 |
|
c |
15% |
70 |
60 |
70 |
75 |
|
d |
5% |
70 |
65 |
50 |
70 |
|
e |
10% |
60 |
60 |
70 |
65 |
|
Weighted Scores |
100% |
64 |
62 |
60 |
63 |
|
Priority |
1 |
3 |
4 |
2 |
The order in which the 4 projects should be undertaken has been presented above which shows that Project 1 should be given first priority as it has the highest weighted score and other projects are prioritized accordingly.
|
Project |
Risks |
Chance of Outcome |
Estimated Impact |
Expected monetary value (EMV) |
Contingency reserve |
|
Project 1 |
Risk 1 |
40% |
$120,000 |
$48,000 |
$8,400 |
|
Risk 2 |
60% |
-$30,000 |
-$18,000 |
||
|
Project 2 |
Risk 1 |
35% |
$110,000 |
$38,500 |
$11,000 |
|
Risk 2 |
25% |
$90,000 |
$22,500 |
||
|
Risk 3 |
45% |
-$40,000 |
-$18,000 |
||
|
Project 3 |
Risk 1 |
20% |
$60,000 |
$12,000 |
$1,000 |
|
Risk 2 |
30% |
$40,000 |
$12,000 |
||
|
Risk 3 |
50% |
-$20,000 |
-$10,000 |
||
|
Project 4 |
Risk 1 |
30% |
$60,000 |
$18,000 |
$15,100 |
|
Risk 2 |
50% |
$50,000 |
$25,000 |
||
|
Risk 3 |
20% |
-$70,000 |
-$14,000 |
|
Project |
Contingency reserve |
Explanation |
|
Project 1 |
$8,400 |
The contingency reserve for Project 1 has been estimated to be $8400 assuming that there is 40% probability of risk 1 and 60% probability of risk 2. Hence, the contingency reserve has been calculated as the sum of probability*EMV for both the risks. |
|
Project 2 |
$11,000 |
The contingency reserve for Project 2 has been estimated to be $11,000 assuming that there is 35% probability of risk 1, 25% probability of risk 2 and 45% probability of risk 3. Hence, the contingency reserve has been calculated as the sum of probability*EMV for both the risks. |
|
Project 3 |
$1,000 |
The contingency reserve for Project 3 has been estimated to be $1,000 assuming that there is 20% probability of risk 1, 30% probability of risk 2 and 50% probability of risk 3. Hence, the contingency reserve has been calculated as the sum of probability*EMV for both the risks. |
|
Project 4 |
$15,100 |
The contingency reserve for Project 4 has been estimated to be $15,100 assuming that there is 30% probability of risk 1, 50% probability of risk 2 and 20% probability of risk 3. Hence, the contingency reserve has been calculated as the sum of probability*EMV for both the risks. |
The role of a product manager is incorporated into agile approach for software development. The product manager has the responsibility of creating and maintaining backlog along with providing requirements for release of the product (Conforto et al. 2014). The product manager is associated throughout the process of development to answer the questions as they may arise. The product manager also have to attend team meetings for addressing the business related questions or difficulties. The product manager is also involved with securing feedback from customers with the progress in development. The product manager is also associated with product planning to ensure the requirements of the client is fulfilled by the end product. The product manager also have to prepare the vision plan to demonstrate the features and functionalities that will be achieved as outcome from the software development (Kerzner 2018). Roadmap planning is also an important role of the product manager which is essential to illustrate the timeframe for completion of the project to the development team.
References
Conforto, E.C., Salum, F., Amaral, D.C., da Silva, S.L. and de Almeida, L.F.M., 2014. Can agile project management be adopted by industries other than software development?. Project Management Journal, 45(3), pp.21-34.
Costantino, F., Di Gravio, G. and Nonino, F., 2015. Project selection in project portfolio management: An artificial neural network model based on critical success factors. International Journal of Project Management, 33(8), pp.1744-1754.
Crawford, J.K., 2014. Project management maturity model. CRC Press.
Fleming, Q.W. and Koppelman, J.M., 2016, December. Earned value project management. Project Management Institute.
Heagney, J., 2016. Fundamentals of project management. AMACOM Div American Mgmt Assn.
Kerzner, H. and Kerzner, H.R., 2017. Project management: a systems approach to planning, scheduling, and controlling. John Wiley & Sons.
Kerzner, H., 2018. Project management best practices: Achieving global excellence. John Wiley & Sons.
Martinelli, R.J. and Milosevic, D.Z., 2016. Project management toolbox: tools and techniques for the practicing project manager. John Wiley & Sons.
Portny, S.E., 2017. Project management for dummies. John Wiley & Sons.
Riol, H. and Thuillier, D., 2015. Project management for academic research projects: balancing structure and flexibility. International Journal of Project Organisation and Management, 7(3), pp.251-269.
Todorovi?, M.L., Petrovi?, D.?., Mihi?, M.M., Obradovi?, V.L. and Bushuyev, S.D., 2015. Project success analysis framework: A knowledge-based approach in project management. International Journal of Project Management, 33(4), pp.772-783.
Turner, R., 2016. Gower handbook of project management. Routledge.
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