University of Sharjah

College of Business Administration

Project Management (0307530)

Assignment 1

Dr. Mohamed Abdalla Nour

Student Name IDs:

Aisha Saif Khamis Almazrouei U202000607

Due Date: Wednesday 22/09/2021

A. 1. Given the following table with financial data on three projects, create MS Excel models to
compute each of the following selection criteria for each project:

1) NPV (discounting rate 10%)

2) Discounted ROI (RRR 20%)

3) Discounted Payback Period (maximum 3 years)

Answer 1:

As we show in the table below the calculations for 3 projects by finding for each one the
NPV, ROI, and Payback period by MS Excel

Present value factor (PVF) 0.91 0.83 0.75 0.68 0.62

Projects: Cost/Benefits Year 1 Year 2 Year 3 Year 4 Year 5 Total

Costs 200 300 500 600 1200 2,800
Discounted costs 182 249 375 408 744 1,958
Project 1 Benefits 0 400 800 1,800 400 3,400
Discounted Benefits 0 332 600 1224 248 2,404
Disc Benefits -Disc Costs -182 83 225 816 -496 446
Cumulative Disc Benefits -Disc Cost -182 -99 126 942 446

Costs 500 700 500 200 600 2,500

Discounted costs 455 581 375 136 372 1,919
Benefits 300 800 600 800 600 3,100
Project 2 Discounted Benefits 273 664 450 544 372 2,303
Disc Benefits -Disc Costs -182 83 75 408 0 384
Cumulative Disc Benefits -Disc Cost -182 -99 -24 384 384

Costs 700 600 600 600 600 3,100

Discounted costs 637 498 450 408 372 2,365
Benefits 500 500 1200 1,000 600 3,800
Project 3 Discounted Benefits 455 415 900 680 372 2,822
Disc Benefits -Disc Costs -182 -83 450 272 0 457
Cumulative Disc Benefits -Disc Cost -182 -265 185 457 457

And also, as is evident by the second table the accepted projects or rejected projects by three
elements NPV, ROI, and Payback period:

Acceptance / Rejection Project 1

Accepted NPV 446
Accepted ROI 23%
Accepted Payback year 3
Project 2
Accepted NPV 384
Accepted ROI 20%
Rejected Payback year4
Project 3
Accepted NPV 457
Rejected ROI 19%
Accepted Payback year 3
B. Based on your Excel computation results in (A) above, determine whether each
project independently is feasible/acceptable or not, according to each of the 3 criteria
above. Each project must be accepted/rejected on the basis of each criterion considered
separately. I.e. each project will have THREE accept/reject decisions.

Answer :2

As shown above, in table two we can extract, that project 1 is accepted by three methods.
however, project 2 was accepted in two methods NPV and ROI but rejected in the payback
period which is more than 3 years. Project 3 accepted in two condition’s NPV and payback
period but doesn’t achieve ROI conditions, it's less than Discounted ROI (RRR 20%).

C. If only ONE of the three projects should be selected, which project would you
recommend, and why?

Answer:3

I stand to chooses a project with three conditions. Firstly, it must have highest NPV.
Secondly, it's a must-have the highest ROI. Finally, it’s payback period is less than or equal 3
years. Depends on that’s, I will select project 1. it achieves the three standards with high
NPV, high ROI and also payback period will be in 3 years, compare it with projects number 2
and 3. project 2 had 4 years payback period, and the project 3 had less than ROI they want
it.

D. Explain why there are differences and discrepancies in the recommendations of the
three selection criteria

Answer:4

1. Net present value, or NPV, is used to calculate the current total value of a future stream
of payments.

If the NPV of a project or investment is positive, it means that the discounted present value
of all future cash flows is related to that projector. Project 1 has a higher NPV. compare with
others project

2: Return on investment (ROI) is a performance measure used to evaluate the efficiency or

profitability of an investment or compare the efficiency of a number of different
investments. ROI tries to directly measure the amount of return on a particular investment,
relative to the investment's cost. So, the project 1 has the highest ROI, even project 2 is
equal to the required ROI we will take the higher one between them. And we will ignore
project 3 because it's less than the required ROI.

3: The payback period refers to the amount of time it takes to recover the cost of an
investment or the length of time an investor needs to reach a break-even point. ... The
payback period is calculated by dividing the amount of the investment by the annual cash
flow. We can see it is having 3 years for project 1 and project 3 .whereas 4 years for project 2
and its more than the required payback periods for it.