INDIAN INSTITUTE OF MANAGEMENT RANCHI

Post-graduate Programme in Management (MBA)

MID-TERM EXAMINATION

PROJECT MANAGEMENT

MAX. MARKS: 30 TERM:-IV

Time:90 mins.

INSTRUCTIONS

1. This is a closed-book examination. You are allowed to use only Calculator and Pen.
2. All questions are compulsory.
3. If a student is found guilty of being involved in any kind of academic dishonesty or malpractice
during the time of examination, his/her examination will be cancelled and the concerned faculty
will take the final decision regarding the matter.

Questions
1. (a) ABX Ltd is considering undertaking a project, which will involve an initial outlay of £300,000.
The project has the following cash flows associated with it:
Year 1 Cash Inflows £100,000
Year 2 Cash Inflows £150,000
Year 3 Cash Inflows £200,000
If a discount rate of 10% is used to calculate the NPV of the project, which of the following statements
is correct? (Assume the cash flows arise at the end of each year). [2.5 marks]
(i) The project will yield a positive NPV of £65.5k and have a payback period of 2 years and 3 months.
(ii) The project will yield a positive NPV of £65.5k and have a payback period of 2 years and 9 months.
(iii) The project will yield a positive NPV of £365.5k and have a payback period of 2 years and 3 months.
(iv) The project will yield a positive NPV of £365.5k and have a payback period of 2 years and 9 months.
(b) A five-year project has a projected net cash flow of $15,000, $25,000, $30,000, $20,000, and
$15,000 in the next five years. It will cost $50,000 to implement the project. If the required rate of
return is 20 percent, conduct a discounted cash flow calculation to determine the NPV. [2.5 marks]
(c) The project information for the custom order project is given below. Draw a project network for this
project. Compute the early and late activity time and slack time. Identify the critical path. [5 marks]

Activity ID Predecessor Time

A None 2
B A 15
C A 10
D A 13
E A 18
F C, D 15
G B, F 10
H E, G 5
2. The global tea and organic juice companies have merged. The following information has been
collected for the “consolidation project.” [10 Marks]
Activity Description Predecessor a m b
1 Codify accounts - 16 19 28
2 File articles of unification - 30 30 30
3 Unify price and credit policy - 60 72 90
4 Unify personnel policies - 18 27 30
5 Unify data processing 1 17 29 47
6 Train accounting staff 1 4 7 10
7 Pilot run data processing 5 12 15 18
8 Calculate P& L and balance sheet 6,7 6 12 24
9 Transfer real property 2 18 27 30
10 Train sales force 3 20 35 50
11 Negotiate with unions 4 40 55 100
12 Determine capital needs 8 11 20 29
13 Explain personnel policies 11 14 23 26
14 Secure line of credit 9,12 13 16 19
15 End 10,13,14 0 0 0

(i) Compute the expected time for each activity.

(ii) Compute the variance for each activity.
(iii) Draw the network diagram and compute the expected project duration.
(iv) What is the probability of completing the project by 113 days? Within 115 days?
(v) What is the probability of completing “negotiate with unions “by 92 days?
3. Draw the project network diagram from the following information. Compute the early, late and
slack times for each activity. Identify the critical path. [10 Marks]

ID Duration Finish to Start Finish to Start Additional Lag Lag

Predecessor Lag Relationship
A 8 None 0 None 0
B 12 A 0 None 0
C 13 A 0 Start-finish C-D 22
D 7 B 7 Start-start D-E 7
E 22 B 0 Finish-finish E-F 5
F 15 D 0 None 0
G 10 C 11 Finish-finish G-F 11
H 21 F 0 None 0

*****************ALL THE BEST*****************