Unit 2: Project Life Cycle Models

Upon completion, you will be able to …

◼ List the purpose and types of project life cycle models

◼ Distinguish between project and product life cycle
◼ Define the role of phase reviews in PM
◼ Apply a model to a hypothetical and a real project

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 Key Concepts

◼ Project phase: “A collection of logically related project activities usually

culminating (reach to a final stage) in the completion of a major
deliverable.”
◼ Project life cycle: “Collectively the project phases are known as the
project life cycle.”
◼ Product life cycle: The natural grouping of ideas, decisions, and actions
into product phases, from product conception to operations to product
phase-out.

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 Generic Cost and Staffing Life Cycle

Cost and Intermediate Phases

Staffing (one or more)
Level
Initial Final
Phase Phase

Start Finish
Time

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Project management life cycle
 Project Life Cycle

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 Project Life Cycle
Example Phases

Concept and
Proposal

Development

Implementation

Verification

Termination

Initial Phase Intermediate Phases Final Phase

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 Software Development Life Cycle

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 The Agile-Scrum Framework

Scrum is the Framework in which a sprint takes place. A Sprint is a defined time
period for developing features for a product. ... Scrum , the most popular agile
framework in software development, is an iterative approach that has at its core
the sprint — the scrum term for iteration.
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 Appraisal and Selection of the Projects

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 Feasibility Study

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 Aspects of conducting feasibility study

1. Feasibility Study Initiation

◼ >>>Feasibility study should be formalized with
requirements, boundaries and expected outcomes:
◼ >>>>Some Points to Consider
◼ who is responsible
◼ project brief and proposal to be analyzed
◼ who should be involved
◼ level of detail
◼ report back date
◼ budget for the feasibility study.

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 Aspects of conducting feasibility study…

◼ 2. Appoint the Feasibility Study Team

◼ Senior management decides a suitable Project manager (PM)or Team
leader (TL ). Then PM initiates feasibility study.
◼ >>>>Project manager is responsible to select the expert team to work
on feasibility study.

The feasibility study team Line management

will be comprised of Customer
stakeholders like Users or end clients
Affected organizations even from outside the
Project manager
project/industries
Project sponsor
Government/ Environment agencies
Project leader Maintenance people involved in the day to day
Project team run of the projects etc
Upper management

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 Aspects of conducting feasibility study…

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 Aspects of conducting feasibility study…

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 Aspects of conducting feasibility study…

◼ 5. Define the Client's Needs and Project Viability Checks

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 Aspects of conducting feasibility study…

◼ 6. Evaluate Constraints
>>>>> Internal or external restrictions
under three sub-headings such as Internal project constraints,
Internal corporate constraints, External constraints. Example:
Technology changes during the implementation of the project.

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 Aspects of conducting feasibility study…

7. Evaluate Alternatives and Options

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 Aspects of conducting feasibility study…

◼ 8. Gather Information

a prerequisite for effective decision-making.

Information may be found in: Sales and marketing brochures (product
Periodicals information)
Books Market research (market trends and fashions)
Technical reports Internet (data base search)
Bureau specifications Stakeholders (interviews and questionnaires)
Closeout reports

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 Aspects of conducting feasibility study…

◼ 9. Value Management

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 Aspects of conducting feasibility study…

◼ 10. Cost-Benefit Analysis

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 Project Selection

The relationship between a project's expected results

and the company's strategic goals, needs to be
established. As per Meredith the selection of projects
can be based on the considerations available in the
areas like

Production Personnel

Marketing Administration

Financial

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 selection of projects
Financial appraisal models

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 Payback period (PP)

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 Payback Period (PP)

The payback period of a given investment or project is an important

determinant of whether to undertake the position or project as longer
payback periods are typically not desirable for investment positions. It
ignores any benefits that occur after the payback period and therefore
does not measure profitability. It ignores the time value of money.
◼ Even Cash flow:

◼ Payback Period = Cost of Project / Annual Cash Inflows

◼ Uneven Cash flow:

◼ Payback Period = A + B/C

◼ Where

◼ A: Last period with a negative cumulative cash flow;

◼ B: Absolute value of cumulative cash flow at the end of the period A;

◼ C: Actual Cash Flow during the period after A

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 Payback Period (PP)

◼ Example 1: Even Cash Flows

◼ Company C is planning to undertake a project requiring initial

investment of $100 million. The project is expected to generate
$25 million per year for 10 years. Calculate the payback period
of the project.
 Payback Period (PP)

◼ Group Discussion: Uneven Cash Flows

◼ Company C is planning to undertake another project requiring

initial investment of $50 million and is expected to generate $10
million in Year 1, $13 million in Year 2, $16 million in year 3,
$19 million in Year 4 and $22 million in Year 5. Calculate the
payback value of the project.
Payback Period (PP)
Payback Period (PP) decision rule
 Net Present Value (NPV)

◼ Takes into consideration all the relevant cash flows

associated with a project during its life and also when the
cash flows will occur.
◼ PV - Receiving a £1000 now, would be worth more than
receiving a £1000 in 5 years as this could be reinvested
with an additional rate of return being received over the
five years.

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 Net Present Value (NPV)

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Net Present Value (NPV)
Net Present Value (NPV)
 Net Present Value (NPV)

◼ Thus, if Projects A and B are independent projects

then both projects should be accepted. On the other
hand, if they are mutually exclusive projects then
Project A should be chosen since it has the larger
NPV.
NPV decision rule
◼
 Internal rate of return (IRR)

◼ The Internal Rate of Return (IRR) of a Capital Budgeting project is the

discount rate at which the Net Present Value (NPV) of a project equals zero.

◼ In more specific terms, the IRR of an investment is the discount rate at which
the net present value of costs (negative cash flows) of the investment equals
the net present value of the benefits (positive cash flows) of the investment.

◼ The IRR decision rule specifies that all independent (can occur at same time)
projects with an IRR greater than the cost of capital should be accepted.
When choosing among mutually exclusive (cannot occur at same time)
projects, the project with the highest IRR should be selected (as long as the
IRR is greater than the cost of capital).
Internal rate of return (IRR)
Internal Rate of Return(IRR)
Internal Rate of Return(IRR)
IRR decision rule
The relationship between the NPV and IRR methods
The cumulative cash flows of each project in Activity 10.6
 ROI

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 Calculate ROI?

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 Calculate ROI?.....

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 COST BREAKEVEN ANALYSIS

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 Break Even Analysis

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 Overview of Knowledge Areas

Scope
Cost Integration Time
Human Resources
Communications
Risk
Procurement

Quality

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 Project Integration Management

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 Project Scope Management

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 Project Time Management

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 Project Cost Management

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 Project Quality Management

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 Project HR Management

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 Project Communication Management

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 Project Risk Management

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 Project Procurement Management

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