Name S.

AMEER ABBAS

Roll No. 520955311

Course MBA-Semester-3
Introduction to Project
Subject
Management
Subject
Code
PM 0001-Set-1
1.What are the various types of models followed in project
management:

Project management is the discipline of planning, organizing, and

managing resources to bring about the successful completion of specific
project goals and objectives. It is sometimes conflated with program
management, however technically a program is actually a higher level
construct: a group of related and somehow interdependent projects.

A project is a temporary endeavor, having a defined beginning and end

(usually constrained by date, but can be by funding or deliverables),
undertaken to meet unique goals and objectives, usually to bring about
beneficial change or added value. The temporary nature of projects stands in
contrast to business as usual (or operations) which are repetitive, permanent
or semi-permanent functional work to produce products or services. In
practice, the management of these two systems is often found to be quite
different, and as such requires the development of distinct technical skills
and the adoption of separate management.

Project management model :

The six phases are:

Define: The project is discussed fully with all the stakeholders and the key
objectives are identified. The costs and timescales are also established at this
stage and there is often a feasibility study as well. This stage is complete
when the project brief has been written and agreed.

Plan: An initial plan is developed. Planning is an ongoing activity because the

plan is the basis for reviews and revision when necessary, depending on how
the project progresses.

Team: The team members are usually involved in developing the plan and
are often able to contribute specialist knowledge and expertise. The building
of this team and its motivation and leadership also continue until the project
is finished.

Communications: should take place continuously, both within the project

team and between the project team and stakeholders in the project,
including anyone who contributes to achievement of the outcomes. Some
communications will be through formal reporting procedures but many will be
informal.

Control: Implementation takes place during the control stage (stage 4 in the
model). During this stage, the tasks and activities of the team will be
monitored against the plan to assess the actual progress of the project
against the planned progress. Control is essential to ensure that the
objectives are met within the scheduled timescales, budgeted costs and
quality. Regular reviews are usually held to enable the plan to be revised and
for any difficulties that emerge to be resolved.

Review and exit: The review is held to evaluate whether all the intended
outcomes of the project have been met. It is also important because it
enables information to be gathered about the processes used in carrying out
the project from which lessons can be learned for the future. The exit from
the project has to be managed to ensure that:

• any outstanding tasks are completed;

• all activities that were associated with the project are
discontinued;
• all resources are accounted for, including any that remain at
the end and have to be transferred or sold to someone else.
Many projects evolve through a series of loops of planning, acting, reviewing
and re planning. It is important to think of planning as a continuous activity
rather than something that can be completed once and used without change
for the duration of the project. Expect change and allow scope to change or
modify the plan.
2.How can we do a risk mitigation process planning for a software
project?

Project risk management is the systematic process of identifying,

analyzing, and responding to project risk. It includes maximizing the
probability and consequences of positive events and minimizing the
probability and consequences of events adverse to project objectives. It
includes the processes of risk management planning, risk identification,
qualitative risk analysis, quantitative risk analysis, risk response planning,
and risk monitoring and control.

Business challenge

Risk mitigation is a major challenge that many organizations fail to fully

understand or implement. Focusing on risk mitigation at the right stage of a
project will increase the likelihood of successful delivery by more than 50%.
Many solutions have to be re-worked because technical risks were not
mitigated in the early stages of a development. Building a system on a soft
foundation, typically, will mean a collapse later in the lifecycle.

Solution

To maintain an approach that focuses on regular risk mitigation throughout

the project lifecycle. During planning or assessment of an iteration or sprint,
help identify risks and implement plans that minimize those risks as early as
possible. One way to reduce technical risk, for example, is to implement
architecturally significant requirements in the beginning stages of a project’s
lifecycle and prove that they work.

This approach involves a full risk assessment every few weeks, and the
development of plans that focus on producing executable code to minimize
risk. Involving key stakeholders in these reviews helps address project-wide
risks effectively.

Provide training, coaching and support throughout the implementation of our

iterative risk-mitigation approach:

• Utilizing precise practices to conduct project health checks that

determine the state of the project and identify risk
• Defining an integrated risk assessment plan to compute and prioritize
risks by order of magnitude
• Separating risk identification from identifying risk mitigation and risk
response strategies, and demonstrate how to build them directly into
the project plan

Collaboration overview

• Risk identification workshops

• Iteration planning sessions
• Iteration assessment sessions
• Active mentoring of teams to guarantee a focus on risk mitigation

Sample implementation

To realized a more agile software project lifecycle would improve delivery

capability and reduce risk. We should modernize the approach to software
development by implementing Essential Unified Process (EssUP) practices.

These are the factors we can use for risk mitigation of software
projects

Benefits

By fully incorporating risk mitigation into project life cycle, we can:

 • Mitigate risks early to give the project a solid foundation
• Ensure shared ownership of risk by the whole project team
• Enable continuous risk tracking, providing better visibility of project
and team dependencies
• Be able to record risks and plot trends over time to identify issues that
need to be addressed
• Integrate risk management into project plan

3.Explain the importance of work breakdown structure and scope

statement in project management:

Work breakdown struture:

A complex project is made manageable by first breaking it down into

individual components in hierarchical structure, known as the work
breakdown structure, or the WBS. Such a structure defines tasks that can be
completed independently of other tasks, facilitating resource allocation,
assignment of responsibilities, and measurement and control of the project.
The word breakdown structure can be illustrated in a block diagram:
Because the WBS is a hierarchical structure, it may be conveyed in outline
form:

LEVEL-1 LEVEL-2 LEVEL-3

TASK 1
SUBTASK 1.1 Work package 1.1.1
Work package 1.1.2
Work package 1.1.3
SUBTASK 1.2
Work package 1.2.1
Work package 1.2.2
Work package 1.2.3
TASK 2
SUBTASK 2.1 Work package 2.1.1
Work package 2.1.2
Work package 2.1.3

Work Breakdown Structure Outline:

Terminology for Different Levels

Each organization uses its own terminology for classifying WBS components
according to their level in the hierarchy. For example, some organization
refer to different levels as takes, sub –tasks , and work packages, as shown
in the above outline. Others use the terms phases, entries, and activities.

Organization by Deliverables or Phases

The WBS may be organized around deliverables or phases of the project life
cycle. Higher levels in the structure generally are performed by individual,
though a WBS that emphasizes deliverables does not necessarily specify
activities.

Level of Detail

The breaking down of a project into its component parts facilitates resource
allocation and the assignment of individual responsibilities. Care should be
taken to use a proper level of detail when creating the WBS. On the one
extreme, a very high level of detail is likely to result in micro –management.
On the other extreme, the tasks may become to large to manage effectively.
Defining tasks so that their duration is between several days and a few
months works well for most projects.

WBS’s Role in Project Planning

The work breakdown structure is the foundation of project planning. It is

developed before dependencies are indentified and activity durations are
estimated. The WBS can be used to indentify the tasks in the CPM and PERT
project planning models.

Scope statement in project management

The Scope Statement provides a common understanding of the project

among stakeholders. Some organizations create a separate Scope Statement
Document while others make it a part of the Project Charter or Project Plan.

The preliminary Project Scope Statement specifies what should be the goals
and objectives of the project and what needs to be accomplished for the
project.

A project scope statement includes the following:

* Project and Product Objectives

* Product Acceptance Criteria
* Project Boundaries
 * Assumptions and Constraints
* Project Requirements and Deliverables
* Initial Defined Risk
* Schedule
* Work breakdown structure
* Summary of Budget
* Configuration Management

The preliminary project scope statement can be created on the basis of the
information from the client side. The inputs used here are:

* The project charter,

* The project statement of work (SOW)
* The enterprise environmental factor
* The organizational process assets
Project Management Methodology (PMM) helps the project managers in
developing and controlling changes to the preliminary project scope
statement.

Project Scope management

A clear and well defined scope is very important for the completion of any
minor or major project on time.

Project Scope Management comprises five processes:

* Scope Planning
* Scope Definition
* Create work break down structure
* Scope Verification
* Scope Control
* Scope interface

The Scope Management Plan should be part of the Project Plan.

 Name S.AMEER ABBAS

Roll No. 520955311

Course MBA-Semester-3
Introduction to Project
Subject
Management
Subject
Code
PM 0001-Set-2
1.What are the various methods of demand forecasting? Explain in
detail with some practical tools:

Demand forecasting is the activity of estimating the quantity of a

product or service that consumers will purchase. Demand forecasting
involves techniques including both informal methods, such as educated
guesses, and quantitative methods, such as the use of historical sales data or
current data from test markets. Demand forecasting may be used in making
pricing decisions, in assessing future capacity requirements, or in making
decisions on whether to enter a new market.

Necessity for forecasting demand

Often forecasting demand is confused with forecasting sales. But,

failing to forecast demand ignores two important phenomena. There is a lot
of debate in demand-planning literature about how to measure and represent
historical demand, since the historical demand forms the basis of forecasting.
The main question is whether we should use the history of outbound
shipments or customer orders or a combination of the two as proxy for the
demand.

Methods

No demand forecasting method is 100% accurate. Combined forecasts

improve accuracy and reduce the likelihood of large errors.

Methods that rely on qualitative assessment

Forecasting demand based on expert opinion. Some of the types in this

method are,

• Unaided judgment
• Prediction market
 • Delphi technique
• Game theory
• Judgmental bootstrapping
• Simulated interaction
• Intentions and expectations surveys
• Conjoint analysis

Methods that rely on quantitative data

• Discrete Event Simulation

• Extrapolation
• Quantitative analogies
• Rule-based forecasting
• Neural networks
• Data mining
• Causal models
• Segmentation

Delphi method:

The Delphi method is a systematic, interactive forecasting method

which relies on a panel of experts. The experts answer questionnaires in two
or more rounds. After each round, a facilitator provides an anonymous
summary of the experts’ forecasts from the previous round as well as the
reasons they provided for their judgments.

First applications of the Delphi method were in the field of science and
technology forecasting. The objective of the method was to combine expert
opinions on likelihood and expected development time, of the particular
technology, in a single indicator. One of the first such reports, prepared in
1964 by Gordon and Helmer, assessed the direction of long-term trends in
science and technology development, covering such topics as scientific
breakthroughs, population control, automation, space progress, war
prevention and weapon systems. Other forecasts of technology were dealing
with vehicle-highway systems, industrial robots, intelligent internet,
broadband connections, and technology in education.

Later the Delphi method was applied in other areas, especially those related
to public policy issues, such as economic trends, health and education. It was
also applied successfully and with high accuracy in business forecasting.

Prediction markets

Prediction markets (also known as predictive markets, information

markets, decision markets, idea futures, event derivatives, or virtual
markets) are speculative markets created for the purpose of making
predictions. Assets are created whose final cash value is tied to a particular
event (e.g., will the next US president be a Republican) or parameter (e.g.,
total sales next quarter). The current market prices can then be interpreted
as predictions of the probability of the event or the expected value of the
parameter. Prediction markets are thus structured as betting exchanges,
without any risk for the bookmaker.

People who buy low and sell high are rewarded for improving the
market prediction, while those who buy high and sell low are punished for
degrading the market prediction. Evidence so far suggests that prediction
markets are at least as accurate as other institutions predicting the same
events with a similar pool of participants.

Game theory:

Game theory is a branch of applied mathematics that is used in the

social sciences, most notably in economics, as well as in biology (most
notably evolutionary biology and ecology), engineering, political science,
international relations, computer science, and philosophy. Game theory
attempts to mathematically capture behavior in strategic situations, in which
an individual's success in making choices depends on the choices of others.
While initially developed to analyze competitions in which one individual does
better at another's expense (zero sum games), it has been expanded to treat
a wide class of interactions, which are classified according to several criteria.
Today, "game theory is a sort of umbrella or 'unified field' theory for the
rational side of social science, where 'social' is interpreted broadly, to include
human as well as non-human players (computers, animals, plants)"

Extrapolation:

In mathematics, extrapolation is the process of constructing new

data points outside a discrete set of known data points. It is similar to the
process of interpolation, which constructs new points between known points,
but the results of extrapolations are often less meaningful, and are subject to
greater uncertainty. It may also mean extension of a method, assuming
similar methods will be applicable. Extrapolation may also apply to human
experience to project, extend, or expand known experience into an area not
known or previously experienced so as to arrive at a (usually conjectural)
knowledge of the unknown (e.g. a driver extrapolates road conditions
beyond his sight while driving).

2.What are the methods of financial appraisal?

From the financial viability viewpoint, the selection of projects to be

implemented will be based on the stream of cash flows (both inflows and
outflows), for which estimates are worked out as noted in the preceding
section. The method to be used will depend on the selection criteria to be
decided by the management.
It is important to keep in mind the points that need to be considered
while estimating the costs incurred and the income realized from the project
in the consecutive years of the project’ operation. These points are as under:
1. All costs and incomes (benefits) need to be measured in
terms of cash flows. This means that that all non –cash
 charges or expenses like depreciation should be added back
to the PAT to arrive at net cash flows.

2. The net cash flow accrues to the firm only after paying tax.
Hence, net cash flow must be computed in post- tax terms.

3. For an additional project being considered by an company

which is already in operation, only the incremental cash flows
arising out of the additional project should be considered.

With the above –mentioned points I the background, we can broadly

divide the financial viability criteria in two categories as under:
• Discounting criteria – These criteria consider the time value
of money. The discounting rate to be used for this
computation is popularly accepted as the ‘cost of capital’ in
percentage (k). Cost of capital can be defined as the
minimum discount rate that must be earned on a project
keeping the market value of the firm constant. Another
understanding of the cost of capital is that it is the expected
rate of return offered to the investors by the equivalent risk
investments traded in the capital markets. A brief description
of cost of capital is given in the succeeding section.

• Non –discounting criteria- These criteria do not consider the

time value of money i.e. the future year’s cash flows are
considered on the same footing as the investment / cash
flows in the initial year / years.

A. Discounting criteria:

The different discounting techniques are:

Net Present Value (NVP)

NVP is the present algebraic value of all future cash flow discounted at
‘k’.

The formula for NPV is

Note: If summation is made from

t= 1 to t = N, Initial investment

t will be subtracted from RHS of the equation

where CFt = Cash flow in year t, t varying from 0 to N i.e. the no. of
years of project life.

Cash inflow taken as (+) and Cash outflow taken as (-)

CF0 will be the investment made in year 0 and will be (-), the
investments may continue to be made in year 1, year 2 etc. in which
case CF1, CF2 etc.

Will be entered accordingly in the equation

k= Cost of capital (computation of k is discussed in subsequent

section.

k reflects the risk of the project.

The project is Accepted if NPV is (+)

Rejected if NPV is (-)

Point of indifference if NPV = 0

If there are 2 or more mutually exclusive projects, the one with the
higher NPV is selected. It can be noted that the NPV decreases as the
cost of capital increases, can increases as the cost of capital
decreases.

Modified NPV (NPVn)

The assumption in the NPV method above is that the cash flows are
reinvested at a rate of return equal to k i.e. cost of capital. In case the
reinvestment rate is ‘r’, then the Terminal Value (TV) of the cash
inflows of the project has to be computed, then the TV has to be
reduced to its present value and the NPV will be equal to the present
value of TV minus the present investment (assuming the entire
investment is made in year 0). The formula for modified NPV (denoted
as NPVn) is

I = investment outlay

It can be noted that if the reinvestment rate is higher than the cost of
capital, the NPVn will be higher than NPV and vice versa.
Internal Rate of Return (IRR)

The IRR is the discount rate (k) at which NPV=0

By way of a formula, the IRR is the value of ‘k’ derived from the
equation hereunder:

The IRR is also known as ‘yield on investment’, marginal efficiency of

capital, marginal productivity of capital etc.

Although the IRR can be considered as the case for NPV=0, we must
understand the differences between the implication of NPV and IRR.

In the NPV method, k is taken as the cost of capital which is

determined based on the factors external to the project proposal. In
the IRR method, the discount rate is the rate of return based on the
factors that are internal to the project proposal.

The company sets a cut –off rate for comparing with the IRR
computed. The project is accepted if IRR is greater than the cut –off
rate. For more than one project being evaluate, the project with the
highest IRR is selected.

Modified IRR (IRRn)

The IRR method shown above is based on the assumption that the
cash inflows of the project are reinvested at the same IRR rate. If the
reinvestment rate (r) is different, then the modified IRR i.e. IRRn is to
be computed after calculating TV as explained in the NPVn method
above. The formula for IRRn is

Here, TV is the terminal value of cash inflows expected from the

project i.e.

And PVC is the present value of the costs associated with the project
i.e.

Benefit –cost ratio (BCR, also known as Profitability index PI)

This is the ratio of the present value of future cash benefits to the
initial investment. The present value of future cash benefits is
computed using the same Time-value of money technique used in the
NPV method. The NPV method computes the differences between the
present value (PV) of the future cash benefits and the initial
investment, whereas the BCR method calculated the ratio of future
cash benefits to the initial cash flow. The formula for BCR is thus:

The project is Accepted if BCR > 1

Rejected if BCR < 1

Point of indifference if BCR = 1

If there are two or more projects being evaluated, the one with the
highest BCR will be selected.

Net benefit cost ratio (NBCR)

The formula for NBCR id

NBCR = BCR – 1

It measures the ratio of the net benefit of the project rather than the
gross benefit. It is advantageous when capital rationing is used.

The project is Accepted if NBCR is +ve

Rejected if NBCR is – ve

Point of indifference if NBCR = 0

In case of more than one project, the project with the highest +ve
NBCR is selected.

Discounted Payback Period

In this method, the present value of future cash flows are calculated
and added. The number of years for which this total becomes equal to
the initial investment I is considered as the payback period. This can
include a fraction of the year. This payback period is compared to the
payback period set as the standard for accepting the project.
If the discounted payback period is less than the standard, the project
is Accepted. If it is more than the standard, the project is Rejected.

B. Non - discounting Criteria;

The different non –discounting techniques are

Payback Period

Here, the future annual cash flows are algebraically added without
considering the time–value of money. If the annual cash inflows are
equal,

Then

The criteria foe project selection is the same as the mentioned under

Discounted payback period.

Average Rate of Return (ARR, also called Accounting Rate of Return)

The formula is

A project with a higher rate of ARR is preferred.

3.What do you mean by social cost benefit analysis? Explain with a
example.

Cost-benefit analysis is a term that refers both to:

• helping to appraise, or assess, the case for a project or proposal,

which itself is a process known as project appraisal; and
• an informal approach to making economic decisions of any kind.

Under both definitions the process involves, whether explicitly or implicitly,

weighing the total expected costs against the total expected benefits of one
or more actions in order to choose the best or most profitable option. The
formal process is often referred to as either CBA (Cost-Benefit Analysis) or
BCA (Benefit-Cost Analysis).

Benefits and costs are often expressed in money terms, and are
adjusted for the time value of money, so that all flows of benefits and flows
of project costs over time (which tend to occur at different points in time) are
expressed on a common basis in terms of their “present value.” Closely
related, but slightly different, formal techniques include cost-effectiveness
analysis, economic impact analysis, fiscal impact analysis and Social Return
on Investment (SROI) analysis. The latter builds upon the logic of cost-
benefit analysis, but differs in that it is explicitly designed to inform the
practical decision-making of enterprise managers and investors focused on
optimising their social and environmental impacts.

An example of social cost benefit analysis of Delhi metro are

summarised as example:

The Delhi Metro planned in four phases is part of an Integrated Multi

Mode Mass Rapid Transport System (MRTS) planned for dealing with the fast
growing passenger traffic demand in Delhi. It provides an alternative safe
and comfortable mode of transport by rail to a large fraction of passengers
using the road transport in Delhi. It reduces the travel time of people using
the road and Metro, number of accidents on roads and the atmospheric
pollution.
The financial cost-benefit ratio of the Metro is estimated as 2.30 and
1.92 at 8 percent and 10 percent discount rates respectively while its
financial internal rate of return is estimated as 17 percent. The financial
evaluation of the Metro is done considering the financial flows of the project
comprising the annual revenue earned and flows of investments and
operation and maintenance costs. The shares of debt, equity and internal
resource mobilization in investments made on Metro are 60, 30 and 10
percent, respectively.

The social cost-benefit analysis of the Metro requires the identification

of benefits and the economic agents affected by it. The incremental changes
in the incomes of various economic agents: passengers, transporters, public
and government and unskilled labour due to the Metro could be estimated by
considering the Delhi economy with and without the Metro. It is found that
there are income gains to the government, public, passengers and unskilled
labour while there are substantial income losses to the transporters because
of the Metro.
The estimated NPSB of the Metro at 2004-05 prices and the 8 percent
social time preference rate for the Indian economy is Rs. 419979.6 million.
The social rate of return on investment in the Metro is as high as 22.7
percent.

Social cost-benefits of Delhi Metro

Savings in travel time

Due to reduction in travel time for Metro passengers
Reduction in accidents
Reduction in the number of vehicles on road
Savings in fuel consumption
Reduction in air pollution
Savings in passenger time
Savings due to fewer accidents
Savings in vehicular operating costs due to the decongestion effect
Savings in Capital and Operating Cost of Diverted vehicles