Project Management: Process, Selection, Cost Management, Funding, And Winding Up

Projection Selection

Answer:

Introduction

Project management is the process of analyzing the project and supervising and controlling the activities in its implementation. It involves risk assessment and formulation of risk mitigation strategies (Carstens, Richardson, and Smith, 2013). This report explains the process of project selection and other aspects 1in the context of project management.

Projection Selection

The project selection is the process involving chronological set of activities such as analysis of financial feasibility, technical, legal, and environmental feasibility. Further, it also involves analyzing the risks involved in the project and identifying the risk mitigation strategies. There are various tools available to analyze the project and finalize its selection. From the financial feasibility perspective, the capital budgeting, budgetary analysis, and profitability analysis prepared. Tools and techniques such as NPV, IRR, budgets and variance analysis are employed to assess the financial feasibility (Kerzner, 2009.). Further, technical feasibility is assessed by analyzing the technical advancement needed and availability of the required technology.         

Cost Management

The cost management plays a crucial role in implementation of the project in the cost effective manner. It is highly important to analyze, supervise, and control the costs related to the project. If it is not done, there are chances that the project would incur costs higher than what was projected and it may result in financial loss. Further, cost management also plays crucial role in preparing data for strategic purposes (Shim, Siegel, and Shim, 2011). There are various strategies and approaches which could be adopted for effectively managing the cost of the project. For instance, budgetary and variance analysis is one which is used to control the costs. Further, the analysts apply cost volume profit analysis which involves analysis of contribution margin, breakeven point, and margin of safety.  The analysis of breakeven points is essential to know the point where the firm would start making profits. The contribution margin and margin of safety are employed to analyze the profitability of the project (Shim, Siegel, and Shim, 2011).

Funding

With the advent of time, there have arrived different innovative models and sources of finance for a start up business. One among them the most popular is venture capital funding. The venture capital funding is provided by the venture capitalist in exchange in equity ownership being given the project. Thus, venture capital is a source of equity finance. Further, there are various debt options available to the business. The lender offers different types of debts and lines of credit to the businesses (Caselli and Negri, 2018). The firm can take term loan which is sanctioned against the security of the assets being financed. Thus, if the firm wants to buy a machine, it can take term loan from the bank on the security of machine being sought to be bought. Apart from it, the banks also offer overdraft facility which the firms can use to finance the working capital needs.   

Cost Management

Implementation and Winding up

Apart from analyzing the financial feasibility of the project, it is also crucial to assess the issues arising from the implementation of the project from the social and environmental view point. The project could affect the society in a negative or positive way. The analyst should carefully analyze the negative impacts of the project so that proper safeguard could be taken. Further, there may be some manufacturing venture which could affect the environment badly by the hazardous waste generated. The government agencies are formed to take care of such projects(Carstens, Richardson, and Smith, 2013).

When the life of the project comes to an end, the project is over and all its assets are disposed off and liabilities paid out. The project is wound up after liabilities being paid and the claim of equity owners is discharged. There may be in some situations the infrastructure of the project is not sold rather than its being utilized on some another project. There are some projects which require disposal of the waste garneted when the project is ended up. The disposal of waste is the issue associated with the environment. The waste generated on the project might be hazardous to the environment and hence requiring careful examination while disposing it off (Carstens, Richardson, and Smith, 2013)..    

Conclusion and Recommendations

From the discussion carried out in this report, it could be articulated that the project management and project planning is a crucial process. The analysts should follow sequence of steps to analyze the project and make final choice. After selection of the project, it is recommended to employ cost management and control mechanism. The project manager should employ budgetary and variance analysis technique to manage and control the cost incurred on the project. Further, the project should take decision as regards sources to be used for funding the project and finally, the winding up and disposal of waste should be decided.   

Part-B

Question-a

Mayer holdings limited has shares outstanding to the tune of 821.28 million which amount to total market capitalization of $353.149 million (Yahoo Finance, 2018). Thus, it could be said that Mayer has equity capital on issue.

The companies issue equity capital to raise funds from the public at large. The equity share capital provides source of long term funding. The biggest advantage of issuing equity is that the company could raise money in huge sums which otherwise through debt or other sources might not be possible (Phillips, 2018).

In the year 2018, the value of equity of Mayer has gone severely down. Currently, the stock is trading at record low of AUD 0.43. The primary reason for fall in the value of equity seems to be the declining revenues and profits of the company. As per the reports, the revenues of the first half of 2018 are down by 3.60% and profits are down by 42% which is quite significant (Hatch, 2018). Due to downfall in the revenues and profits, the shareholders are losing faith in the company and consequently selling pressure is increasing causing decline in the share prices.   

Question-b (i)

Question-b (ii)

Question-b (iii)

Question-b (iv)

The net present value of the project as shown in (ii) above is AUD 5.9195 which indicates that the project is financial beneficial for the company and hence the board of directors should consider going ahead with the project. However, there is always a risk of foreign exchange loss as the project is to be undertaken in the foreign country. The results of part (iii) shows that if the exchange rate fall down to 0.95 AUD per Can $, the NPV of project would decline to AUD 5.6236. It is to be noted that this decline is still sustainable and the company is still earning positive NPV.

 References

Carstens, D.S., Richardson, G.L., and Smith, R.B. 2013. Project Management Tools and Techniques: A Practical Guide. CRC Press.

Caselli, S. and Negri, G. 2018. Private Equity and Venture Capital in Europe: Markets, Techniques, and Deals. Academic Press.

Hatch, P. 2018. Myer profits slump as stocktake sale flops; shares hit all-time low. [Online]. Available at: https://www.smh.com.au/business/companies/myer-profits-slump-as-stocktake-`sale-flops-shares-hit-all-time-low-20180209-p4yzsi.html [Accessed on: May 31, 2018].

Kerzner, H. 2009. Project Management: A Systems Approach to Planning, Scheduling, and Controlling. John Wiley & Sons.

Phillips, S. 2018. Shrink or die: the grim choice facing Myer. [Online]. Available at:  https://www.smh.com.au/money/investing/shrink-or-die-the-grim-choice-facing-myer-20180227-p4z1xr.html [Accessed on: May 31, 2018].

Shim, J.K., Siegel, J.G., and Shim, A.I, 2011. Budgeting Basics and Beyond. John Wiley & Sons.

Yahoo Finance. 2018. Myer Holdings Limited (MYR.AX): Summary. [Online]. Available at: https://au.finance.yahoo.com/quote/MYR.AX?p=MYR.AX [Accessed on: May 31, 2018].

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