Project Management Paper May 2018

Q.1(a)

Solution: -

Operator Per Hour rate

Blenders 250
Packers 50
Fillers 200

Working is Eight Hours Per days

(A) Blenders = Per hour rate * hours per day*NT* no. of Blenders
Similar for all Activities

cost
Crash per
Number Number Number Total
Preced. Limit Blenders Packers Fillers day
Activity NT CT of of of Cost
Activity (NT- (B) (P) (F) activity
Blenders Packers Fillers Ʃ=B+P+F
CT) wise
=Ʃ/NT
A 4 3 1 3 24000 0 0 24000 6000
B 3 3 0 1 1 6000 0 4800 10800 3600
C A,B 3 2 1 2 1 0 2400 4800 7200 2400
D A 6 4 2 1 2 12000 4800 0 16800 2800
E C,D 5 4 1 1 2 0 2000 16000 18000 3600
F A,B 10 6 4 2 1 1 40000 4000 16000 60000 6000
G E,F 3 2 1 2 0 0 9600 9600 3200
Total 146400

Diagram

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 Project Management Paper May 2018

Critical Path: - A – D – E – G

Total Duration: - 4 + 6+ 5+3 = 18 days

Total Cost: - 146400

Crashing the Activity:

The Lowest cost per day on critical Activity is D which is Rs. 2800

Thus

Critical Path: - A – D – E – G

Total Duration: - 4 + 5+ 5+3 = 17 days

As per the situation the cost for reduction increases the cost by twice the cost per day

Total Cost: - 146400 + 2800 (crashing cost) = Rs.149200

Now we cannot crash the Activity D because, even if we have the limit of one more day but crashing doesn’t have effect
on the total duration, so now, crashing the activity which has the lowest cost per day other than D is Activity G

Thus, crashing Activity D

Critical Path: - A – D – E – G

Total Duration: - 4 + 5+ 5+2 = 16 days

As per the situation the cost for reduction increases the cost by twice the cost per day

Total Cost: - Rs. 149200 + 3200 (crashing Cost) = Rs. 152400

By SaceL
 Project Management Paper May 2018

Q1 (b)

Given: -

Frist year Sale: - 1700 units, Increase Sale by 85 units per year

Frist year Price: - RS.600, Increase Price by 15 per year

Capital: - RS.600000

Land: - Rs. 100000

Loan: - Rs.1200000

Repayment period = 5 years

Depreciation On fixed asset (WDVM)

Year Cost Depreciation @10% Nt. Book Value

1 1700000 170000 1530000
2 1530000 153000 1377000
3 1377000 137700 1239300
4 1239300 123930 1115370
5 1115370 111537 1003833

Interest Calculation on loan

Year Loan Interest @ 12 % Repayment amount

1 1200000 144000 240000
2 960000 115200 240000
3 720000 86400 240000
4 480000 57600 240000
5 240000 28800 240000
(EBITA – Depreciation)
(pervious price + 15)
(pervious sale + 85)

(Revenue – Op ex)
(Op exp + 20000)

(EBIT – Interest )
Operating exp

Depreciation
Units * Price

(EBT – TAX )
Tax @35 %
Revenue =

Principal

Interest

EBITDA
Units

Price
Year

EBIT

EAT
EBT

1 1700 600 1020000 178000 240000 144000 170000 842000 672000 528000 184800 343200
2 1785 615 1097775 198000 240000 115200 153000 899775 746775 631575 221051 678724
3 1870 630 1178100 218000 240000 86400 137700 960100 822400 736000 257600 702500
4 1955 645 1260975 238000 240000 57600 123930 1022975 899045 841445 294506 728469
5 2040 660 1346400 258000 240000 28800 111537 1088400 976863 948063 331822 756578

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 Project Management Paper May 2018

EAT+Depreciation+Interest
DSCR first year = 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡+𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝐴𝑚𝑜𝑢𝑛𝑡

343200 + 170000 + 144000

= 144000+240000

= 1.71

EAT+Depreciation+Interest
DSCR Second year =
𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡+𝑃𝑟𝑖𝑛𝑐𝑖𝑝𝑎𝑙 𝐴𝑚𝑜𝑢𝑛𝑡

678724 + 153000 + 115200

=
115200+240000

= 2.67

EBIT
ICR first year = 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
672000
= 144000

= 4.67

EBIT
ICR Second year = 𝐼𝑛𝑡𝑒𝑟𝑒𝑠𝑡
746775
= 115200

= 6.48

By SaceL
 Project Management Paper May 2018

Q.2

after 5 months

completion to

COMPLETION
month) *100
% Scheduled

ACWS (time)
BCWS (time)

ACWP (cost)
BCWP (cost)
(NT/ after 5
PRECEDING

completion

% ACTUAL

NC * % AC
NT * % SC

NT* % SC
ACTIVITY

ACTIVITY

actual
NC
NT

AC

AC
be

A 4 6 6 4 100% 100% 4.0 6.0 4.0 6.0

B 12 15 6 5 42% 40% 5.0 6.3 4.8 6.0
C 4 3 3 4 100% 95% 4.0 3.0 3.8 3.0
D A 10 15 2 1 10% 7% 1.0 1.5 0.7 2.0
E C 6 10 0 1 17% 0% 1.0 1.7 0.0 0.0
F A 14 11 8 1 7% 7% 1.0 0.8 1.0 8.0
G B,D,E 8 10 0 0 0% 0% 0.0 0.0 0.0 0.0
Total 58.0 70.0 16.0 19.2 14.3 25.0

CPI = BCWP/ACWP

= 19.2 / 25

= 0.77

SPI = 19.2/16

= 1.200

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 Project Management Paper May 2018

Revised Project cost = Total NC + ((1- CPI) * total NC)

=70 + ( (1-0.77) * 70)

= 70 + 16.10

= 86.10

Revised Duration = Total NT + ((SPI- 1) * total NT)

= 58 + 11.60

= 69.60

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 Project Management Paper May 2018

Q.3 (a)

Month Demand 3 month moving average Error Error2

1 32
2 29
3 27
4 36 29.33 6.67 44.444
5 34 30.67 3.33 11.111
6 32 32.33 -0.33 0.111

MSE (Mean Squared Error) = Ʃ Error2 / Number of error month

= 55.6 /3

= 18.55

Forecast for 7 month = Average of previous 3 months

= (36 + 34 + 32)/3

= 34

Q.3 (b)

Month Demand Forecast t = α *Demand t-1 + (1-α )*Forecastt-1 Error l Error l

1 32
2 29 32.00 -3.00 3.000
3 27 31.70 -4.70 4.700
4 36 31.23 4.77 4.770
5 34 31.71 2.29 2.293
6 32 31.94 0.06 0.064

MAD (Mean Absolute Deviation) = Ʃ | Error | / Number of error month

= 14.82 /5

= 2.96

Forecast for 7 months = α *Demand t-1 + (1-α )*Forecastt-1

= 0.1* 32 +( 0.9 * 31.94)

= 31.94

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 Project Management Paper May 2018

Q.4

(a)

IRR = ra +( NPVa /( NPVa – NPVb)) *(rb-ra)

ra = lower discount rate

rb = Higher discount rate

NPVa = NPV at ra

NPVb = NPV at rb

Discounting rate (10%) Discounted

Year Inflow
= (1-(rate of discounting)^yr. Inflow
1 120 0.90 108.0
2 144 0.81 116.6
Total NPV 224.6

ra = 10 %

NPVa = Total discounted cash flow - Initial Investment

= 224.6 – 200

= 24.6

Discounting rate (20%) Discounted

Year Inflow
= (1-(rate of discounting)^yr. Inflow
1 120 0.80 96.0
2 144 0.64 92.2
Total NPV 188.2

Rb = 10 %

NPVb = Total discounted cash flow - Initial Investment

= 188.2 – 200

= - 11.8

IRR = ra +( NPVa /( NPVa – NPVb)) *(rb-ra)

= 10 % + ((24.6/(24.6 - (-11.8)))* (20%- 10%)

= 10% + (0.676) * (10%)

= 16.76 %

By SaceL
 Project Management Paper May 2018

(b)

Cumulative
Discounting rate (10%) Discounted
Year Inflow Discounted
= (1-(rate of discounting)^yr. Inflow
Inflow
1 25 0.90 22.5 22.5
2 55 0.81 44.6 67.1
3 155 0.73 113.0 180.0
4 200 0.66 131.2 311.3
Total NPV 311.3

(investment – dis.cash flow of year)

Payback period = year of complete pay + (dis.cash flow of next year – dis.cash flow of year)

Payback period = 3 + (210 – 180.0) /(311.3 – 180.0)

= 3 +0.2

= 3.2 years

(c)

Discounted rate is = 10 %

= (1- 10%) ^ year

= (1- 0.10) ^ year

Discounting rate (10%)

Year Inflow Discounted Inflow
= (1-(rate of discounting)^yr.
1 50 0.90 45.0
2 75 0.81 60.8
3 125 0.73 91.1
4 225 0.66 147.6
5 300 0.59 177.1
Total discounted cash flow 521.6

NPV = Total discounted cash flow - Initial Investment

= 521.6 – 500

= 21.6

By SaceL
 Project Management Paper May 2018

Q. 5

Activity Description Optimistic Pessimistic Most Preced Time Variance Free

likely Activity float
A Lay Foundation 6 30 12 14 16 26
B Dig hole 4 28 10 12 16 0
C Insert scale bases 12 60 24 B 28 64 0

D Erect frame 4 16 10 A,C 10 4 0

E complete building 10 34 22 D 22 16 0

F Insert scales 66 66 66 E 66 0 0

G Insert display cases 6 54 18 E 22 64 0

H Put in office Equipment 2 14 8 G 8 4 0

I Finishing touches 8 56 38 E,H 36 64 0

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 Project Management Paper May 2018

1. Critical Path: - B – C – D – E – F

Total Duration: - 12 + 28+ 10+22+66 = 138 days

Deviation: - σ² = 16+64+4+16= 100

σ = 10

2. Critical Path: - B – C – D – E – G – H – I

Total Duration: - 12 + 28+ 10+22+22+8+36 = 138 days

Deviation: - σ² = 16+64+4+16+64+4+64 =232

σ = 15.23

As the Deviation which is lower must be considered for the probability 85%

Consider the area under Normal Curve: -

Probability: - 85%

The second Half area under the cover is 35% = 0.35

Thus area is 0.35

So the value of Z = 1.04

By SaceL
 Project Management Paper May 2018

Z = (x - Ϻ) /σ

Where; Ϻ = total days = 138

σ = deviation (lowest) = 10

therefore;

1.04 = (x – 138) / 10

= 148.4

~ 149 days

149 days we can say that there are 85 % chances of completing the project

By SaceL
 Project Management Paper May 2018

Q.7

Critical Path: - B–E–G–H

Total Duration: - 7 + 2 + 2 + 3 = 14 days

Gantt Chart: -

No of Days for project

No. of
Activity
Activity men per Duration 1 2 3 4 5 6 7 8 9 10 11 12 13 14
flow
day
A 1-2 4 5 4 4 4 4 4
B 1-3 2 7 2 2 2 2 2 2 2
C 2-4 2 3 2 2 2
D 2-5 4 3 4 4 4
E 3-5 6 2 6 6
F 3-6 3 2 3 3
G 5-6 3 2 3 3
H 6-7 4 3 4 4 4
Total number of men per day 6 6 6 6 6 8 8 15 9 3 3 4 4 4

By SaceL
 Project Management Paper May 2018

Suggestion so that the number of men can be kept equal and minimum is as follows;

No of Days for project

No.
of
Activity Total
Activity men Duration 1 2 3 4 5 6 7 8 9 10 11 12 13 14
flow Float
per
day
A 1-2 4 5 1 4 4 4 4 4
B 1-3 2 7 0 2 2 2 2 2 2 2
C 2-4 2 3 6 2 2 2
D 2-5 4 3 1 4 4 4
E 3-5 6 2 0 6 6
F 3-6 3 2 4 3 3
G 5-6 3 2 0 3 3
H 6-7 4 3 0 4 4 4
Total number of men per day 6 6 6 6 6 6 6 10 6 6 6 6 6 6

BEST OF LUCK
GUYS !!!
CRACK IT THIS TIME
Do call if any Query

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