Project Investment Management Vs Project Management: Meaning of Project Investment Management means the purpose of any income-yielding

asset, such as securities or real estate. The assets themselves are also referred to as investments. Investment management is the professional management of various securities & assets, to meet specified investment goals for the benefit of the investors. Investors may be institutions (insurance companies, pension funds, corporations, etc.) or private investors (both directly via investment contracts & more commonly via collective investment schemes, e.g., mutual funds). Investment management is a large & important global industry in its own right responsible for caretaking of trillions of dollars, euro, pounds, & yen. Project Investment Management is more than just about financial value & returns; it also involves the management of strategic contribution & non-financial benefits. The over use of financial parameters has led to this process being done poorly in most organizations. If the investment management process is not measurably increasing the returns on projects year on year, it needs fixing. Project Investment management determines which projects get prioritized & approved &, therefore, resourced. At the basic, level investment management involves answering just 3 questions, which are as follows: 1) Why: Do we want to do this project? 2) How: Can we be sure we can deliver it (& its value) successfully? 3) When: Can we do it, & do we want to o it now? These 3 questions are cumulative – failure at any one should cull the project. To answer these three questions requires: 1) A value proposition based business can appropriate to the stage of the project/proposal. 2) Comprised of comparable information based on agreed standards & validated as correct. 3) Within the portfolio context – both planned & existing. We created 3 investments categories: a) Small Projects b) Medium – Size Projets c) Major Strategic Projects Investment Management Process: A six – step procedure for making these decisions is the basis of the investment process:

1) 2) 3) 4) 5) 6)

Setting Investment Objectives Set Investment Policy Perform Security Analysis Construct a Portfolio Portfolio Revision Evaluate the Performance of Portfolio

Errors in Investment Management: a) b) c) d) e) f) g) h) i) j) Inadequate Comprehension of Return & Risk Vaguely Formulated Investment Policy Naïve Extrapolation of the Past Cursory Decision Making Simultaneous Switching Cheap Stocks Over – Diversification & Under – Diversification Buying Shares of Familiar Companies Wong Attitude towards Losses & Profits Tendency to Speculate

Project Management Meaning & Definition of Project Management A Project is a carefully defined set of activities that use resources (money, people, materials, energy, space, communication, motivation, etc.) to achieve the project goals & objectives. Project Management is the discipline of planning, organizing & managing resources to bring about the successful completion of specific project goals & objectives. Process of Project Management Project Management processes can be split into 5 groups each consisting of one or more processes. They are: 1) Initiation Processes

Initiating Processes

Planning Processes

Controlling Processes

Implementation Processs

Closing Processes

2) Planning Processes 3) Implementation Proceses a) Core Process Project Plan Implementation b) Facilitating Processes 4) Controlling Processes 5) Closing Processes

Selection of Profitable Project: Project selection is the process of evaluating individual projects or groups of projects, & then choosing to implement some set of them so that the objectives of the parent organization will be achieved. This same systematic process can be applied to any area of the organization’s business in which choices must be made between competing alternatives. The selection of projects is serious business. It should not be carried out in an offhand manner. Too, often, insufficient attention is given to whether a particular project idea has real merit. Thus, project may be selected to satisfy the hunches of powerful players. Or they may be selected simply to keep staff busy or to spend end – of – the year money. The key to success lies in getting into the right business at the right time. Identification of such opportunities requires imagination, sensitivity to environmental changes & realistic assessment of what the firm can do. The task is partly structure, partly unstructured, partly dependent on convergent thinking, partly dependent on divergent thinking; partly requiring objective analysis of quantifiable factors. The project takes shape to meet the customer’s needs for goods & services.

The whole concept of project can be to fit I the terms of finding a gap between customers needs for goods & services & filling the gap. A promising investment idea enables a firm to exploit opportunities in the environment by drawing on its competitive strengths. A big problem with offhand project selection is that it leads to the ineffective use of resources. Steps in Selection of Profitable Project: 1) Project Identification a) Tapping of Project Ideas b) Identify Potential Problems 2) Project Screening & Selection Criteria a) Preliminary Screening b) Selection Criteria 3) Investment Alternative Evaluation 4) Establishing Project Scope 5) Project Feasibility Report a) Need of Project b) Executive Summary c) Major inputs of Project d) Demand & Market Study e) Technical Study f) Location Study g) Financial Study Outlay & Cost of Project h) Economic Study i) Ecological Study j) Cost Benefit Analysis k) Project Implementation 6) Cost-Benefit Analysis 7) Selection & Initiation of Projects 8) Review of Projects Evaluation of Investment Opportunities: 1) Traditional Methods of Appraisal Techniques: There is two such techniques available i.e., i) Payback period method, ii) Accounting rate of return 2) Discounted Cash Flow Techniques: i) NPV method, ii) IRR method, iii) Terminal value method, iv) Profitability Index, v) Excess present value Index.

Traditional Methods of Appraisal Techniques: i) PBP Method: This method is popularly known as pay-off, pay out or replacement periods method also. It represents the number of years required to recover the original cash outlay invested in a project. It is based on the principle that every capital expenditure pays itself back over a number of years. Cash Outlay of the Project or Original cost of the Asset PBP= Annual Cash Inflows

Advantages of PBP Method:  Simple to operate  Calculation Costs Low  Risk of Obsolescence High Disadvantages of PBP Method:  Cash flows not considered  Equal weightage to all cash flows  Difficulty in fixing standard period  Not consistent with shareholders wealth maximization ii) Average Rate of Return Method: It establishes the relationship between average annual profits to total investment. Total profits (after dep & taxes) ARR= Net investment in the project * No. of years of profits Advantages of ARR method:    Easy to operate Considers profitability Based on financial data * 100

Disadvantages of ARR method:     Ignores the time value of maoney Not consider cash flows Ignores the project period Not suitable for investment in parts

Discounted Cash Flow Techniques: Traditional methods do not take into consideration the time value of money, the fact that a rupee earned today has more value than a rupee earned after 5 years. i) NPV:

The net present values of all inflows & outflows of each occurring during the entire life of the project is determined separately for each year by discounting these flows by the firm’s cost of capital. 1 PV= (1+r)n

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