Solutions To Selected Problems: Appendix

B-1
APPENDIX
B
Solutions to Selected Problems
CHAPTER 2: STRATEGIC MANAGEMENT AND PROJECT

SELECTION
Problem 2:
Average Rate of Return = $30,000/$200,000 = 0.15 = 15%
Problem 4:
i = 24%
Investment Yr 1 Yr 2 Yr 3 Yr 4
Cashflow $ (75,000) $ 20,000 $ 25,000 $ 30,000 $ 50,000
PVIF 1.0000 1.2400 1.5376 1.9066 2.3642
PV $ $ (75,000) $ 16,129 $ 16,259 $ 15,735 $ 21,149
NPV $ (5,729)
The addition of 4% inflation makes the investment unfavorable at a hurdle rate of 20%.
Problem 6:
Year Pessimistic Most Likely Optimistic Used PVIF PV$
0 $ (65,000) $ (65,000) $ (65,000) $(65,000) 1 $(65,000)
1 $ 14,000 $ 20,000 $ 22,000 $ 20,000 1.200 $ 16,667
2 $ 19,000 $ 25,000 $ 30,000 $ 25,000 1.44 $ 17,361
3 $ 27,000 $ 30,000 $ 36,000 $ 30,000 1.728 $ 17,361
4 $ 32,000 $ 35,000 $ 39,000 $ 35,000 2.0736 $ 16,879
Rate 20% NPV $ 3,268
The column labeled “Used” indicates the cash flow value used to calculate the net present value.
The profitability index is the sum of the discounted cash flows divided by the initial
investment. For this problem it is the sum of the PV’s for years 1-4 divided by $65,000 or:
68,268/65,000 = 1.05
Since the value it greater than one, the project should be accepted.
Copyright ©2015 John Wiley & Sons, Inc.

B-
2
Problem 8:
Most
Year Pessimistic Likely Optimistic Inflation Used PVIF PV$
0 $ (65,000) $ (65,000) $ (65,000) - $(65,000) 1 $(65,000)
1 $ 14,000 $ 20,000 $ 22,000 2% $ 20,000 1.220 $ 16,393
2 $ 19,000 $ 25,000 $ 30,000 2% $ 25,000 1.4884 $ 16,797
3 $ 27,000 $ 30,000 $ 36,000 2% $ 30,000 1.8158 $ 16,521
4 $ 32,000 $ 35,000 $ 39,000 2% $ 35,000 2.2153 $ 15,799
Rate 20% NPV $ 510
Now the column labeled “Inflation” has been added. Each of these cells is individually
calculated by Crystal Ball® with a normal distribution using a standard deviation of 0.33% to
allow different inflation values for each year. The result is added to the “PVIF” calculation
used to determine the individual PV results.
Now the forecast values for NPV look like this:
The probability that the NPV exceeds $0 is about 50%. The mean value for this distribution
is -$85. This analysis indicates that there is only a 50-50 chance that the project will qualify
(meet the hurdle rate).

B-3
Method Options
Grad
e Score
Category Weight A B C A B C
Consulting costs 20 1 2 3 20 40 60
Acquisition time 20 2 3 1 40 60 20
Disruption 10 2 1 3 20 10 30
Cultural differences 25 3 3 2 75 75 50
Skill redundencies 10 2 1 1 20 10 10
Implementation risks 10 1 2 3 10 20 30
Infrastructure 10 2 2 2 20 20 20
Total
Score 205 235 220
Problem 10:
a) Implementation risks = 10 and cultural differences = 25

Due to the changes in weights for implementation risks and cultural differences, Method B is
now the best option.
b) Using the initial values from problem 6, make the changes so that Method A
implementation risks = 3 and Method C cultural differences = 2.
Method Options
Grad
e Score
Disruption 10 2 1 3 20 10 30
Total
Score 225 220 235
The change for A’s implementation risks grade was not sufficient to replace Method C as the
best option. The grade for cultural differences at Method C had already been set to 2 in the
initial evaluation of the problem.
B-4
Method Options
Grad
e Score
Disruption 10 2 1 3 20 10 30
Tax considerations 15 3 2 1 45 30 15
Total
Score 220 250 250
c) Using the initial values from problem 6, insert Tax considerations = 15 and A = 3, B = 2, and
C = 1.
Due to the insertion of tax considerations, Methods B and C are now the best options.
Problem 12:
Change the grade for Location 3’s rent to 3.
Mall Options
Grade Score
Category Weight 1 2 3 4 1 2 3 4
Class of clientele 1.000 2 3 1 3 2.000 3.000 1.000 3.000
Rent 0.900 3 2 3 3 2.700 1.800 2.700 2.700
Indoor mall 0.855 3 1 3 1 2.565 0.855 2.565 0.855
Traffic volume 0.720 3 2 3 1 2.160 1.440 2.160 0.720
Total Score 9.425 7.095 8.425 7.275
Due to the rent change, Location 3 moves up from last place to second place based upon
the grades assigned to the evaluated categories.
B-5
CHAPTER 6: PROJECT ACTIVITY AND RISK PLANNING
Problem 2:
Threat Severity Likelihood Inability to detect RPN

#1 3 5 4 60
#2 5 6 1 30
#3 4 3 3 36
#4 7 4 6 168
The main thing that changes when using this approach is that threat #2 drops significantly
from “critical” to possibly “ignore.” This is mostly due to the lack of inability to detect. Threat
#2 is somewhat severe and the likelihood is great, but since the threat is relatively easy to
detect, it can be mitigated early and possibly even removed. Thus, this is a much more
realistic evaluation of the threats than just creating a risk matrix.
Problem 4:

B-
6
p = .20 $1,200
p = .30 $3,600
p = .40
$7,200
p = .10
$2,400
$14,400
Existing tools
$800
p = .20
$2,100
p = .30
Cheap equipment
p = .40 $4,000
p = .10
$1,300
$8,200
High-quality equipment
$900
p = .20
p = .30 $1,950
p = .40 $3,400
p = .10
$1,050
$7,300
Based on the analysis, the manufacturer should approve the purchase of the high-quality,
special equipment for $10,000. As a result, significant savings should occur.

B-7
Problem 6:
P 5
r
o 4
3
b
a 3
1
b
i 2
2
l
i 1
t
y
1 2 3 4 5
Impact
Legend:
Critical
Monitor
Ignore
Opportunity 1:
You could “accept” this risk and enjoy the benefits derived from it. To increase the potential
for more impact, you could enhance the risk by providing more training.
Opportunity 2:
for more impact, you could further exploit the database.
Opportunity 3:
for more impact, you could share the data by increasing sales.

B-
8
CHAPTER 7: BUDGETING: ESTIMATING COSTS AND RISKS
Problem 2:
Tracking
Period Estimate Actual A(t)-F(t)-1|(A(t) - F(t))-1| MAR Signal
1 179 163 -0.08939 0.089385475
2 217 240 0.105991 0.105990783 0.10 0.17
3 91 67 -0.26374 0.263736264 0.15 -1.61
4 51 78 0.529412 0.529411765 0.25 1.14
5 76 71 -0.06579 0.065789474 0.21 1.03
6 438 423 -0.03425 0.034246575 0.18 1.00
7 64 49 -0.23438 0.234375 0.19 -0.28
8 170 157 -0.07647 0.076470588 0.17 -0.74
Total -0.129
Again, the bias has reduced considerably and changed sign but the MAR is somewhat
greater. Hence, the Tracking Signal is substantially smaller and shows an acceptable level
of bias on the part of this estimator.
Problem 4:
The learning rate can only be determined in reality by trial and error.
For this problem a simple spreadsheet will be used. The learning curve factor reduces the
time spent producing the lots, from the base time of 7 hours. We also know that the total
production hours for 25 units are 103.6 hours. A spreadsheet calculating the cycle time for
each lot based on a learning curve would look like this:
Base Adjusted Trial

Unit Time Multiplier Time Rate
1 7 1.00 7.00 0.90
2 7 0.90 6.30
3 7 0.85 5.92
4 7 0.81 5.67
5 7 0.78 5.48
6 7 0.76 5.33
7 7 0.74 5.21
8 7 0.73 5.10
9 7 0.72 5.01
10 7 0.70 4.93
11 7 0.69 4.86
12 7 0.69 4.80

B-9
13 7 0.68 4.74
14 7 0.67 4.69
15 7 0.66 4.64
16 7 0.66 4.59
17 7 0.65 4.55
18 7 0.64 4.51
19 7 0.64 4.47
20 7 0.63 4.44
21 7 0.63 4.41
22 7 0.63 4.38
23 7 0.62 4.35
24 7 0.62 4.32
25 7 0.61 4.29
Total 124.0
Note that for this example, the multiplier for year two is calculated as:
2 (log(0.90)/log(2)) or 2 (-0.045/0.301) or 2 (-0.149) = 0.9
Each multiplier is calculated in turn based on the unit number it represents. In each case the
multiplier is used to modify the base cycle time of 7 hours and then totaled at the bottom.
The total in this example does not equal 103.6 hours because the learning rate is incorrect.
One could insert different values and find the correct value by trial and error, or use the Solver
feature of Microsoft® Excel. To use Solver, the total hours are set as the “Target Cell” and the
“Trial Rate” is designated as the cell to be changed subject to the limitation that it may not
exceed 1.0 using this technique, the spreadsheet with the correct learning rate would be:
Base Adjusted Trial

Unit Time Multiplier Time Rate
1 7 1.00 7.00 0.85
2 7 0.85 5.95
3 7 0.77 5.41
4 7 0.72 5.06
5 7 0.69 4.80
6 7 0.66 4.60
7 7 0.63 4.44
8 7 0.61 4.30
9 7 0.60 4.18
10 7 0.58 4.08
11 7 0.57 3.99
12 7 0.56 3.91
13 7 0.55 3.84

B - 10
14 7 0.54 3.77
15 7 0.53 3.71
16 7 0.52 3.65
17 7 0.51 3.60
18 7 0.51 3.55
19 7 0.50 3.51
20 7 0.50 3.47
21 7 0.49 3.43
22 7 0.48 3.39
23 7 0.48 3.36
24 7 0.47 3.32
25 7 0.47 3.29
Total 103.6
Problem 6:
Problem 8:
Year Pessimistic Most Likely Optimistic Used PVIF PV$

0 $ (65,000) $ (65,000) $ (65,000) $(65,000) 1 $(65,000)
1 $ 14,000 $ 20,000 $ 22,000 $ 20,000 1.200 $ 16,667
2 $ 19,000 $ 25,000 $ 30,000 $ 25,000 1.44 $ 17,361
3 $ 27,000 $ 30,000 $ 36,000 $ 30,000 1.728 $ 17,361
4 $ 32,000 $ 35,000 $ 39,000 $ 35,000 2.0736 $ 16,879
Rate 20% NPV $ 3,268
Now the green (or shaded) cells in the column labeled “Used” (with the exception of the initial
investment of $65,000) are calculated by Crystal Ball® using a triangular distribution with the
end

B - 11
points selected based on the pessimistic and optimistic values given. The setup for year one
looks like this:
The net present value is then calculated for each of 1000 trials and results are displayed by
designating the NPV cell as a forecast. Typical results look like this:
By adjusting the triangular sliders it can be seen that the chance of the NPV exceeding $0
(and the hurdle rate) is about 87%. The mean value for this distribution is $2770.

B - 12
Problem 10:
Windows
Unix

B - 13
CHAPTER 8: SCHEDULING
NOTE: Many of the AON graphics in this solutions set depict the start day of the successor activity to
be the same day as the completion of the predecessor. This is consistent with the presentation in the
text. It is not consistent with the result that would be obtained using Microsoft® Project, where the
start day of the successor is always the next working day after the completion of the predecessor.
Problem 2:
Problem 4:
a) The critical path is B-E-G.
b) 23 work periods.
c and d)
Task Duration ES EF LS LF Slack

A 10 0 10 5 15 5
B 7 0 7 0 7 0
C 5 10 15 15 20 5
D 7 10 17 11 18 1
E 11 7 18 7 18 0
F 3 15 18 20 23 5
G 5 18 23 18 23 0

B - 14
Problem 6:
PDM Diagram 6a
PDM Diagram 6b
Problem 8:

B - 15
Please see note about network depiction preceding Problem 2
a) The critical path activities are A, C, E, and G.
b) The project’s duration is 22 days.
c) Yes, activity B can be delayed one day without delaying the completion of the
project.
Problem 10:
a. The path with the longest expected duration is AC CB BE EF.
b. The only event with slack is “D” at 3 days.
c. If “D” were the final event in the network, then the critical path would be AC CB BD.
d. The following spreadsheet excerpt illustrates the calculation of the probability of

completion in 14 days:
Task a m b Expected Variance Std Dev.
AB 3 6 9 6.0 1.00 1.00
AC 1 4 7 4.0 1.00 1.00
CB 0 3 6 3.0 1.00 1.00
CD 3 3 3 3.0 0.00 0.00
CE 2 2 8 3.0 1.00 1.00
BD 0 0 6 1.0 1.00 1.00
BE 2 5 8 5.0 1.00 1.00
DF 4 4 10 5.0 1.00 1.00
DE 1 1 1 1.0 0.00 0.00
EF 1 4 7 4.0 1.00 1.00

B - 16
Sum of
Expected Variances
Desired Project Critical
Duration Duration Path Z Probability
14 16.0 4.00 -1 15.9%
e. If CD slips to six days the critical path is unchanged but slack on D is reduced. If CD
slips to seven days then there are two critical paths: AC CB BE EF and AC CD DF. If
CD slips to eight days then the critical path shifts to AC CD DF and the project
duration extends to 17 days.
Problem 12:
Figure 8.12a shows the PDM network for the data from Table A of Problem 8-12 assuming that
the data were applied as shown in Figure 8.12b.
1) The path with the longest expected duration is 2,3,4,5,7,8,9.
2) The slack for activity 1 is 11.7 days. The slack for activity 6 is 4 days.
The following table shows the calculation of the expected completion time:
Activity a m b Expected
1 8 10 13 10.2
2 5 6 8 6.2
3 13 15 21 15.7
4 10 12 14 12.0
5 11 20 30 20.2
6 4 5 8 5.3
7 2 3 4 3.0
8 4 6 10 6.3
9 2 3 4 3.0

B - 17
Expected
Project
Duration
66.4
Problem 14:
Figure 8.14a shows the original network diagram for problem 14.

B - 18
1) The critical path activities are A, D, G, and J. Activities B and E should be closely
monitored as a near critical path.
Figure 8.14b shows the impact of the project’s performance to date.
2) The project will be completed in 12.5 days instead of the 13 days originally expected. The near
critical path (B, E, G, J) is now critical. Activities A, D, F, and H are now near critical activities.
Problem 16:
Using critical path analysis with the data provided gives the following table:
Activity Expected Std Dev. Variance

a 2.0 2.00 4.00
b 3.0 1.00 1.00
c 4.0 0.00 0.00
d 2.0 3.00 9.00
e 1.0 1.00 1.00
f 6.0 2.00 4.00
g 4.0 2.00 4.00
h 2.0 0.00 0.00

B - 19
Sum of
Expected Variances
12 13.0 9.00 -0.33 37.1%
13 13.0 9.00 0.00 50.0%
16 13.0 9.00 1.00 84.1%
17.3 13.0 9.00 1.44 92.5%
For this problem the variance has to be calculated from the standard deviation, and the
durations provided are assumed to be the expected durations. As can be seen there is about an
84% chance of completing the project within the drop dead time. If a little more than a week is
added to the duration, the chance of completing the project on time rises to 92.5%.
Problem 18:

B - 20
Problem 20:
Figure 8.20 shows the network diagram for problem 20.
a) The critical path is A, D, E, G, I, J.
b) The slack on process confirmation (F) is 20 days.
c) The slack on test pension plan (C) is 61 days.
d) The slack on verify debt restriction compliance (H) is 20 days.

B - 21
Problem 22:
a)
Figure 8.22 shows the network diagram for problem 22.
b) The critical path is B, F, H.
c) Week 9.
d) If activity E requires one extra week, the time will be absorbed in free float and will not affect any
other activity. If activity E requires two extra weeks, then a second critical path will be created for
activities B, E, G. If activity E requires three weeks, negative float will be created and the project
cannot complete in nine weeks. The new completion time will rise to 10 weeks.

B - 22
Problem 24:
a)
Figure 8.24a shows the network diagram for problem 24a.
b) The critical path is B, E, G, H.
Figure 8.24c shows the network diagram solution to problem 24c.

B - 23
c & d) Given a float value of 6 weeks, activity F seems to be the best candidate to supply resources
needed to crash the project. Since the float is almost 50% of the activity’s duration, using its
resources to work other activities is unlikely to convert activity F into a near-critical activity. Since
activity D is both critical and concurrent to activity F, the resources should be transferred there.
Problem 26:
Figure 8.26a shows the network, critical path and slack times.
Tabulating the calculations for expected durations and probability looks like this:
1-2 6 8 10 8 0.44 0.67
1-3 5 6 7 6 0.11 0.33
1-4 6 6 6 6 0.00 0.00
2-6 0 0 0 0 0.00 0.00
2-7 10 11 12 11 0.11 0.33
3-6 12 14 16 14 0.44 0.67
4-5 5 8 11 8 1.00 1.00
4-9 7 9 11 9 0.44 0.67
5-6 8 10 12 10 0.44 0.67
5-9 0 0 0 0 0.00 0.00
6-7 14 15 16 15 0.11 0.33
6-8 10 12 14 12 0.44 0.67
7-10 9 12 15 12 1.00 1.00
8-10 0 4 14 5 5.44 2.33
9-11 5 5 5 5 0.00 0.00
10-11 7 8 9 8 0.11 0.33

B - 24

Desired Expected Project Sum of Variances
Duration Duration Critical Path Z Probability
61.69 59.0 2.67 1.65 95.0%
The next longest path is 1-3, 3-6, 6-7, 7-10, 10-11 at 55 days. It will only be a concern if
under some circumstances; its duration exceeds the path with the longest expected duration
of 59 days. Using the same technique for calculating the probability of exceeding a particular
duration gives the following table for this path:
Probability for path 1-3-6-7-10-11

Expected
Desired Path Sum of Path
Duration Duration Variances Z Probability
59 55.0 1.78 3.00 99.9%
Clearly the chance of exceeding 59 days is quite small. The same technique can be applied to the
next longest path 1-4, 4-5, 5-6, 6-8, 8-10, 10-11 which while relatively short has high variance:
Probability for path 1-4-5-6-8-10-11

Expected
Desired Path Sum of Path
Duration Duration Variances Z Probability
59 49.0 7.44 3.67 100.0%
Again it is clear that it is unlikely that this path will cause problems with the overall project duration.
Problem 28:
Figure 28a shows the PDM network diagram for problem 28.

B - 25
The following table tabulates the variances and probability for this project:
1 6 10 14 10 1.78 1.33
2 0 1 2 1 0.11 0.33
3 16 20 30 21 5.44 2.33
4 3 5 7 5 0.44 0.67
5 2 3 4 3 0.11 0.33
6 7 10 13 10 1.00 1.00
7 1 2 3 2 0.11 0.33
8 0 2 4 2 0.44 0.67
9 2 2 2 2 0.00 0.00
10 2 3 4 3 0.11 0.33
11 0 1 2 1 0.11 0.33
12 1 2 3 2 0.11 0.33
Sum of
Expected Variances
44 41.0 8.22 1.05 85.2%
Problem 30:
The setup for problem 30 is similar to that for problem 29. First the spreadsheet in Excel is
prepared with the calculations for the paths:
Activities
1 2 3 4 5 6 7 8 9 10 11 12
10 1 22 5 3 10 2 2 2 3 1 2
Paths Project
1-2-4-5 1-2-4-7-8-11-12 1-2-4-7-9-10-12 1-3-9-10-12 1-3-6 Completion
19 23 25 39 42 42
Then, similar to problem 29, triangle distributions are established to calculate the durations
for all activities except 9 (no variation in the estimate).

B - 26
The resulting forecast for the duration of the project and corresponding statistics are:
Note that the probability of completing the project in 44 days has dropped to about 70%.

B - 27
To determine the probability that a path is the critical path, the simulation model can be
enhanced as follows. First, a formula can be added used Excel’s IF function as follows:
=IF(duration of path in question = duration of longest path,1,0)
Next the cell containing this formula can be assigned to be a Forecast cell in Crystal Ball.
Problem 32:
The “Pert Entry Form” in Microsoft® Project is used to enter the three durations. After they are in
the “Calculate Pert” button is clicked to populate the Duration field with the expected durations.
Note that MSP uses the non-standard terminology “Expected” in lieu of “Most Likely.”
Using the calculated durations, the Gantt chart looks like this:
ec '05 Jan '06 Feb '06

ID Task Name Duration Start Finish Predecessors 4 11 18 25 1 8 15 22 29 5 12 19
1 Start 0 days Sun 12/11/05 Sun 12/11/05 12/11

2 a 7.5 days Mon 12/12/05 Wed 12/21/05 1
3 b 8 days Mon 12/12/05 Wed 12/21/05 1
4 c 6 days Wed 12/21/05 Thu 12/29/05 2
5 d 14.5 days Thu 12/22/05 Wed 1/11/06 2,3
6 e 7 days Wed 1/11/06 Fri 1/20/06 4,5

7 f 11.5 days Fri 1/20/06 Mon 2/6/06 3,6
8 g 8 days Tue 2/7/06 Thu 2/16/06 7
9 End 0 days Thu 2/16/06 Thu 2/16/06 8 2/1
The figure shows the default Gantt chart view of the problem, with a project start day of
Sunday December 11, 2005. Note that MSP moves the beginning of the first task to the first
workday of Monday the 12th. This display shows the default calendar of 5 day 40 hr. weeks
with no holidays. A “Start” and “End” milestone have been inserted to insure that all activities
have at least one predecessor and successor.

B - 28
The tracking Gantt view can be used to display the critical path:
ec '05 Jan '06 Feb '06

I 4 11 18 25 1 8 15 22 29 5 12 19
D Task Name Duration 12/11
1 Start 0 days
0%
2 a 7.5 days
0%
3 b 8 days
0%
4 c 6 days
5 d 14.5 days 0%
6 e 7 days 0%
7 f 11.5 days 0%
8 g 8 days 0%
2/1
9 End 0 days
The network diagram can be displayed directly from MSP using the “Network Diagram”
view. A portion of it with the default format settings looks like this:
Start a
Start: 12/12/05 ID: 2
Milestone Date: Sun 12/11/05 Finish: 12/21/05 Dur: 7.5 days
ID: 1 Res:
b
Start: 12/12/05 ID: 3
Finish: 12/21/05 Dur: 8 days
Res:
The slack values are automatically calculated by MSP. They can be revealed in a number of
different views:
Dec
'05 Jan '06 Feb '06 Mar '06 Apr '06
ID Task Name Start Finish Late Start Late Finish Free Slack Total Slack 27 4 11 18 25 1 8 15 22 29 5 12 19 26 5 12 19 26 2 9 16
1 Start Sun 12/11/05 Sun 12/11/05 Mon 12/12/05 Mon 12/12/05 0 days 0 days
2 a Mon 12/12/05 Wed 12/21/05 Mon 12/12/05 Wed 12/21/05 0 days 0.5 days
3 b Mon 12/12/05 Wed 12/21/05 Mon 12/12/05 Wed 12/21/05 0 days 0 days
4 c Wed 12/21/05 Thu 12/29/05 Tue 1/3/06 Wed 1/11/06 9 days 9 days 9 days
5 d Thu 12/22/05 Wed 1/11/06 Thu 12/22/05 Wed 1/11/06 0 days 0 days
6 e Wed 1/11/06 Fri 1/20/06 Wed 1/11/06 Fri 1/20/06 0 days 0 days
7 f Fri 1/20/06 Mon 2/6/06 Fri 1/20/06 Mon 2/6/06 0 days 0 days
8 g Tue 2/7/06 Thu 2/16/06 Tue 2/7/06 Thu 2/16/06 0 days 0 days
9 End Thu 2/16/06 Thu 2/16/06 Thu 2/16/06 Thu 2/16/06 0 days 0 days
This view shows the View “Detail Gantt” combined with the “Schedule” Table. Note that the
Gantt chart also displays the slack as a green line.

B - 29
CHAPTER 9: RESOURCE ALLOCATION
Problem 2:
Activity Crash Days Crash $ Crash $/Day

A 1 $200.00 $ 200.00
B 2 $ 75.00 $ 37.50
C 3 $150.00 $ 50.00
D 2 $100.00 $ 50.00
Figure 9.2 uses the data from problems 1 and 2 to answer problem 2.
b) Task B is on the critical path and it has the lowest cost per day $37.50 to crash (additional
cost of $75.00). It enables a 13-day completion without making any other new tasks critical.
Problem 4:
Figure 9.4 shows the AON network data for problem 4.

B - 30
d) On the surface the answer is no, since the duration as calculated is one month less than
the project deadline requires. It would be prudent, however, to perform analysis as
described in Chapter 8 to determine the probability of actually achieving this schedule.
Based on that analysis it may in fact be prudent to crash some activities.
Problem 6:
Figure 9.6a shows the normal and crashed networks for problems 8.18 and 9.6.
Activity Crash Wk Crash $/Wk

C 1 $ 40.00
F 4 $ 20.00
H 3 $ 10.00
I 3 $ 30.00
Options Σ Crash $
Option 1 H3,F4,I2 $ 170.00
Option 2 H3,F3,I1,C1 $ 160.00
Option 3 H2,F4,I1,C1 $ 170.00
Figure 9.6b shows the crashing options.

B - 31
Option 2 is the most favorable option because it satisfies the time constraint and has the lowest cost.
However, it also increases the number of critical activities (Figure 9.6a). Because two critical paths
converge at event 7, completion probabilities should consider the effects of path convergence.
Problem 8:
In all cases, crashing is applied only to critical path activities (1-2, 2-4, 4-6, and 6-7).
a) 1-2 and/or 6-7
b) 4-6, assuming that duration is equivalent to resource consumption.
c) All activities on the critical path have zero slack at present.
d) 1-2 has the most critical followers in problem 7.
e) 1-2 has the most successors in problem 7
Problem 10:
The critical path is defined by the events 1,2,3,4. The normal duration is 17 days and a
normal cost of $100 per day; a total cost of $1,700.
Activity Completion Crash Total Cost

Date Costs
Normal 17d $ - $ 1,700
3-4 16d $ 25 $ 1,625
1-2 15d $ 30 $ 1,555
1-2 14d $ 50 $ 1,505
3-4 13d $ 60 $ 1,465
2-3 12d $ 80 $ 1,445
Figure 9.10 shows the cost-duration history for problem 10.
Since activity 2-4 is not on the critical path, it is not crashed. The table indicates that the
lowest-cost crashing option was always the first crash option taken.

B - 32
Problem 12:
Figure 9.12a shows the network history of crashing the TV commercial project.
Completion Crash
Activity Total Cost
Date Costs
Normal 19d $ - $ 1,710
1-2 18d $ 30 $ 1,650
2-3 17d $ 40 $ 1,600
1-2 16d $ 50 $ 1,560
1-2 15d $ 70 $ 1,540
1-3,2-3,2-4 14d $ 140 $ 1,590
Figure 9.12b shows the tabular history for Figure 9.12a.
Crashing attacks duration to compress the schedule. As slack approaches zero, the benefits of
crashing can be expected to fall below the costs required to remove time by crashing the critical path.

B - 33
Problem 14:
a. g has a slack of 1
b. e, g, and h all have 1 successor
c. e has 1 critical follower
d. g has shortest time of 4
e. f has latest start time of 29
Problem 16:
The problem with using the Normal distribution to model activity times is that with the Normal
distribution tasks are equally likely to take longer than the expected time and less than the
expected time. With many activities this is not true and it is more likely that activities will take
longer than expected time. Therefore, using distributions that can model skew in the data such
as the Triangular and Beta distributions are more appropriate for modeling project activity times.
The table below summarizes the results after modifying the model so that the activity times
follow a BetaPERT distribution with parameters 7, 10, and 15.
In comparing these results we observe that the variation (as measured by both the range
and standard deviation) went down in the BetaPERT models. Also, observe how the Min
values increased in the BetaPERT models but the Max values decreased.

B - 34

Solutions To Selected Problems: Appendix

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Solutions To Selected Problems: Appendix

Uploaded by

Copyright:

Available Formats

B-1

CHAPTER 2: STRATEGIC MANAGEMENT AND PROJECT

Copyright ©2015 John Wiley & Sons, Inc.

Now the forecast values for NPV look like this:

Copyright ©2015 John Wiley & Sons, Inc.

a) Implementation risks = 10 and cultural differences = 25

CHAPTER 6: PROJECT ACTIVITY AND RISK PLANNING

Threat Severity Likelihood Inability to detect RPN

Copyright ©2015 John Wiley & Sons, Inc.

Copyright ©2015 John Wiley & Sons, Inc.

Copyright ©2015 John Wiley & Sons, Inc.

CHAPTER 7: BUDGETING: ESTIMATING COSTS AND RISKS

Base Adjusted Trial

Copyright ©2015 John Wiley & Sons, Inc.

2 (log(0.90)/log(2)) or 2 (-0.045/0.301) or 2 (-0.149) = 0.9

Base Adjusted Trial

Copyright ©2015 John Wiley & Sons, Inc.

Year Pessimistic Most Likely Optimistic Used PVIF PV$

Copyright ©2015 John Wiley & Sons, Inc.

Copyright ©2015 John Wiley & Sons, Inc.

Copyright ©2015 John Wiley & Sons, Inc.

Task Duration ES EF LS LF Slack

Copyright ©2015 John Wiley & Sons, Inc.

Copyright ©2015 John Wiley & Sons, Inc.

Please see note about network depiction preceding Problem 2

a) The critical path activities are A, C, E, and G.

b) The project’s duration is 22 days.

a. The path with the longest expected duration is AC CB BE EF.

b. The only event with slack is “D” at 3 days.

d. The following spreadsheet excerpt illustrates the calculation of the probability of

Copyright ©2015 John Wiley & Sons, Inc.

Please see note about network depiction preceding Problem 2

1) The path with the longest expected duration is 2,3,4,5,7,8,9.

Copyright ©2015 John Wiley & Sons, Inc.

Please see note about network depiction preceding Problem 2

Copyright ©2015 John Wiley & Sons, Inc.

Figure 8.14b shows the impact of the project’s performance to date.

Activity Expected Std Dev. Variance

Copyright ©2015 John Wiley & Sons, Inc.

Copyright ©2015 John Wiley & Sons, Inc.

Figure 8.20 shows the network diagram for problem 20.

Please see note about network depiction preceding Problem 1

a) The critical path is A, D, E, G, I, J.

b) The slack on process confirmation (F) is 20 days.

c) The slack on test pension plan (C) is 61 days.

d) The slack on verify debt restriction compliance (H) is 20 days.

Copyright ©2015 John Wiley & Sons, Inc.

Figure 8.22 shows the network diagram for problem 22.

Please see note about network depiction preceding Problem 2

b) The critical path is B, F, H.

Copyright ©2015 John Wiley & Sons, Inc.

Figure 8.24a shows the network diagram for problem 24a.

b) The critical path is B, E, G, H.

Figure 8.24c shows the network diagram solution to problem 24c.

Please see note about network depiction preceding Problem 1

Copyright ©2015 John Wiley & Sons, Inc.

Copyright ©2015 John Wiley & Sons, Inc.

Task a m b Expected Variance Std Dev.

Probability for path 1-3-6-7-10-11

Probability for path 1-4-5-6-8-10-11

Copyright ©2015 John Wiley & Sons, Inc.

Copyright ©2015 John Wiley & Sons, Inc.

Copyright ©2015 John Wiley & Sons, Inc.