Hofstede Insights

BAHR 323 – PROJECT

MANAGEMENT
VIRNEX R. GIAMALON,MM,CHRA
THE LIFE CYCLES OF PROJECTS
1

S-SHAPED
THE LIFE CYCLES OF PROJECTS
2

J-SHAPED
SELECTING PROJECTS TO MEET
ORGANIZATIONAL OBJECTIVES
1 Nonnumeric Selection Methods

• The Sacred Cow

• The Operating/Competitive Necessity
• Comparative Benefits
SELECTING PROJECTS TO MEET
ORGANIZATIONAL OBJECTIVES
2 Numeric Selection Methods
• Financial Assessment Methods
 Payback – initial fixed investment in the project
divided by the estimated annual net cash inflows
 Discounted cash flow – considers the time value
of money as well as any returns beyond the
payback period
SELECTING PROJECTS TO MEET
ORGANIZATIONAL OBJECTIVES
2 Numeric Selection Methods
• Financial Assessment Methods
 Payback – initial fixed investment in the project
divided by the estimated annual net cash inflows
 Discounted cash flow – considers the time value
of money as well as any returns beyond the
payback period
Present Value and Discounting
The time value of money (TVM) is the concept that a sum of money is
worth more now than the same sum will be at a future date due to its
earnings potential in the interim. This is a core principle of finance. A
sum of money in the hand has greater value than the same sum to be
paid in the future.

Discounting is the process of determining the present value of a

payment or a stream of payments that is to be received in the future.
Given the time value of money, a dollar is worth more today than it
would be worth tomorrow. Discounting is the primary factor used in
pricing a stream of tomorrow's cash flows.
Present Value

PV = 500 X (1/1+.10)
= 500 x (1/1.10)
= 455
Example
DISCOUNTING
YEAR CASH FLOW PRESENT VALUE
FACTOR

(INITIAL
0 INVESTMENT)

Rule if NPV > 0 ACCEPT

Rule if NPV < 0 REJECT
Example
3 Calculate NPV of two projects and suggest which of
the two project should be accepted assuming the
discount rate of 10%
PROJECT X PROJECT Y
INITIAL INVESTMENT
40,000 60,000

Estimated life 5 years 5 years

10,000 40,000
20,000 20,000
Cash inflow 20,000 10,000
6,000 6,000
4,000 4,000
Example PROJECT X
INITIAL INVESTMENT
40,000
3 Project Y
Estimated life 5 years

PROJECT X
Year Discounting Factor -
Cash flow Present Value
10%
0 (20,000) 1 (20,000)
1 10,000 0.909 9,090
2 20,000 0.826 16,520
3 20,000 0.751 15,020
4 6,000 0.683 4,098
5 4,000 0.621 2,484
NPV 27,212
Example PROJECT Y
INITIAL INVESTMENT
60,000
3 Project Y
Estimated life 5 years

PROJECT X
Year Discounting Factor -
Cash flow Present Value
10%
0 (60,000) 1 (60,000)
1 40,000
2 20,000
3 10,000
4 6,000
5 4,000
NPV
Identify Project Categories and Criteria

3 Wheelright and Clark (1992) has developed a matrix

called the aggregate project plan and identified four
separate categories of projects:
i. Derivative projects - it range from cost-reduced
versions of existing products to add-ons or
enhancements for an existing production
process.
ii. Platform projects - are in the middle of the
development spectrum and are thus harder to
define.
 Identify Project Categories and Criteria

3 Wheelright and Clark (1992) has developed a matrix called

the aggregate project plan and identified four separate
categories of projects:
i. Breakthrough projects - are at the other end of the
development spectrum because they involve
significant changes to existing products and
processes.
ii. R&D projects - is the creation of the know-how
and know-why of new materials and technologies
that eventually translate into commercial
development.
The PM Responsibility to the Project

4 1. Acquiring Resources
2. Fighting Fires and Obstacles
3. Leadership and Making Trade offs
4. Negotiation, Conflict resolution and Persuasion
Selection of a Project Manager

5 1. Credibility
2. Sensitivity
3. Leadership, Style and Ethics