Example After Tax Cash Flows under Inflation

A construction firm is offered a fixed-price contract for a 5-year period. The firm will be paid 23,500 (actual dollars) per year for the contract period. In order to accept the contract, the firm must purchase equipment costing 15,000 and requiring 13,000 (constant dollars) per year to operate. The equipment qualifies for 5-year MACRS depreciation and is expected to have a salvage value of 1000 at the end of 5 years. Use a tax rate of 40 and an inflation-free interest rate of 20 . If the...

Staffing and Organizing

In staffing and organizing a project, management must bring together a diverse group of people, equipment, information, and other resources that, when properly integrated, is capable of achieving the project objectives. Each element of the resulting system is critical to overall project success. Selecting the Project Manager The project manager is the most critical selection. A person should be selected who Serves full time on the project. With few exceptions, appointing a part-time project...

Example Sensitivity Analysis

Boston Metal Company (BMC), a small manufacturer of fabricated metal parts, must decide whether to enter the competition to be the supplier of transmission housings for Gulf Electric. Gulf Electric has its own in-house manufacturing facility to produce transmission housings, but it has almost reached its maximum production capacity. Therefore, Gulf is looking for an outside supplier. To compete, the firm must design a new fixture for the production process and purchase a new forge. The new...

Project Control

Planning puts the team in a position to launch a project. However, rarely does everything go according to plan. As soon as the project begins, deviations start to occur. Thus, once the project is launched, conforming to the plan becomes a principal function of project management. It is up to the project control system to keep the project manager apprised of how all components of the project are progressing, and highlight significant problems and deviations from plan, so that corrective action...

Team Building

Today's projects characteristically require the efforts of many people from multiple disciplines whose efforts must be effectively integrated to meet project objectives. Further, project managers must cope with dynamic environments, high degrees of organizational complexity, and ever-increasing competitive pressures. Experienced project managers know that the only way to effectively deal with these challenges is to mold their project personnel into true project teams or groups of people with...

Cash Flow Series with a Special Pattern

Geometric Series Annual Percent Rate

Whenever one can identify patterns in cash flow transactions, one may use them in developing concise expressions for computing either the present or future worth of the series. For this purpose, we will classify cash flow transactions into three categories 1 equal cash flow series, 2 linear gradient series, and 3 geometric gradient series. To simplify the description of various interest formulas, we will use the following notation 1. Uniform Series Probably the most familiar category includes...