Problems

1. Two projects are proposed to a company. Project A will cost 5250,000 to implement and will have annual cash flows of $75,000. Project B will cost $150,000 to implement and will have annual cash flows of $52,000. The company is very concerned about their cash flow. Using the payback period, which project is better, from a cash flow standpoint?

2. What is the average rate of return for a project that costs $200,000 to implement and has an average annual profit of $30,000?

3. A three-year project has net cash flows of $20,000; $25,000; and $30,000 in the next three years. It will cost $75,000 to implement the project. If the required rate of return is 0.2, what is the NPV?

4. What would happen to the NPV of the above project if the inflation rate was expected to be 7 percent in each of the next three years?

5. Given: An information systems program to develop a set of financial accounts systems consists of two projects, three packages, and three required deliverables, as shown (a contribution of 2 is twice that of 1).

(b) Calculate C and interpret it.

(c) Calculate E and interpret it.

(d) Calculate E* and interpret it.

6. Given the following military weapons program:

Project Management Made Easy

Project Management Made Easy

What you need to know about… Project Management Made Easy! Project management consists of more than just a large building project and can encompass small projects as well. No matter what the size of your project, you need to have some sort of project management. How you manage your project has everything to do with its outcome.

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