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Aqeel Wahab Siddiqui

Project Business AQEEL WAHAB
SIDDIQUI

Case
 According to PMI Business Case Is: 2
The approved business case, or similar, is the business document most commonly used to create

Aqeel Wahab Siddiqui

the project charter. The business case describes the necessary information from a business
standpoint to determine whether the expected outcomes of the project justify the required
investment. It is commonly used for decision making by managers or executives above the project
level. Typically, the business need and the cost benefit analysis are contained in the business case
to justify .and establish boundaries for the project.
1. Market demand
2. Organizational need
3. Customer request
4. Technological advance
5. Legal requirement
6. Ecological impacts
7. Social need
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Business Case

 There is defined business case for

every project.
 Which of the possible projects or
programs will provide the greatest
benefit.
 You might even have a project
selection committee in place to put
all the data together on the various
project ideas.

Aqeel Wahab Siddiqui


Business Case
It is a document which is also
called a justification. Why
your company cannot survive
without this project or can’t
achieve strategic objectives.
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You have an idea for how you
can improve your business.
When you take your idea
forward, they say, you need to
submit a business case.
Problem Statement 5
In

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Business case
You need to solve a problem in order to get people’s attention.
It contains key problems or opportunities that this project will
address. It contains summary of the problem including pin
point the Issue.
A well-written problem statement gets your reader to say,
wow, that's a big problem and we need to solve that.
It's what motivates action and will lead to approval of your
idea. Write in plain language. Remember, people from all
different functions across the organization will be involved in
the approval process. You need to make it easy for them to
understand what the problem is.
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Explaining your idea

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The idea section of your business case is the heart
of it. This describes how you'll solve the problem
and explain how your solution solves it, what it
takes to implement your solution, and evidence
for why your solution will work. You may also
include other possible solutions and an
assessment as to why you're recommending the
one you've chosen. You'll need to strike a balance
between being easy to understand, but having
enough detail to support your idea. Choose a few
key facts and analyses to support your case.
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Economic Models

 Pay Back
 NPV
 IRR
 Payback Period
 Benefit-Cost Ratio
Present Value 8

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  
Present Value means the value today of future cash flows and can be found using
the following formula:
 PV =
 FV = Future Value
 r = Interest Rate
 n = number of time periods
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What is the present value of 300,000 received three

Present Value

years from now if we expect the interest rate to be 10
percent?

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What is the present value of 300,000 received

three years from now if we expect the interest
rate to be 10 percent?

Present Value
Answer = $225,394

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Net Present Value

 C & CO has following investment

proposals. 01-01- 2009 2010 2011 2012
2009
Choice X (20,500) 10,500 6,500 8,000 Nil
Choice Y (50,500) 35,500 5,500 9,500 7500

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What is NPV?
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Confused?
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NPV Solution

Year Discount at 10% Amount NPV

01-01-2016 1 (20,500)
Dec-2016 0.9091 10,500 9545.55
Dec-2017 0.8264 6,500 5371.6
Dec-2018 0.7513 8,000 6010.4
2012 0.6830 - 20,927.55
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Net Present Value

 An organization has two projects to choose from. Project A will take three years to
complete and has an NPV of $45,000. Project B will take six years to complete
and has an NPV of $85,000. Which one is a better investment.

Aqeel Wahab Siddiqui

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Net Present Value

An organization has two projects to choose from. Project A will take three years to
complete and has an NPV of $45,000. Project B will take six years to complete and has an
NPV of $85,000. Which one is a better investment.

Answer: Project B. The number of years is not relevant, as it would have been taken into
account in the calculation of NPV.

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Pay Back 17

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 Mr. A has following investment proposals involving same COF of US$210,000 in
each case as on 01-01-2010

2010 2011 2012 2013 2014 2015

Choice 1 $50,000 $40,000 $40,000 $50,000 $30,000 $35,000
Choice 2 US $49,000 each year for next 5 years.
Pay Back 18

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 Mr. A has following investment proposals involving same COF of US$210,000 in
each case as on 01-01-2010

2010 2011 2012 2013 2014 2015

Choice 1 $50,000 $40,000 $40,000 $50,000 $30,000 $25,000
Choice 2 US $45,000 each year for next 5 years.

 Answer Choice 2
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Internal Rate of Return

To Explain this concept, think of a bank account. You put money in a bank account and expect to get a return
of 2 percent. You can think of a project in the same way. If a company has more than one project in which to
invest, the company may look at the different projects returns and then select the highest one.

Question: you have two projects to choose from; Project A with an IRR of 21 percent or Project B with an
IRR of 15 percent. Which one would you prefer?

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This term refers to the opportunity given up by

selecting one project over another.

Opportunity Cost
Question: An organization has two projects to
choose from: Project A with an NPV of
$45,000 or Project B with an NPV of $85,000.
What is the Opportunity cost of selecting
project B

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Straight Line Depreciation

Large assets (e.g. equipments) There are two forms of 1. Straight Line Depreciation 2. Accelerated Depreciation
purchased by a company lose depreciation:
value over time. Accounting
standards call this depreciation.

The Same amount of depreciation is taken This goes from higher value to lower
each year value i.e $180 first year, $150 second year
and so on.

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Specify Resources
To support your Idea and to achieve business goals availability of resources
are extremely important.
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A risk with

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negative
impacts is a
threat, whereas
a risk with a
positive impact
is an
opportunity.
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 Milestones are significant events
within the project schedule. They
are not work activities. For
example, a completed design,
certain deliverable due dates from
the customer, or a company-
required checkpoint could be
milestones.
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Measuring Result
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