Q.1.Define Project Management.

Describe the objectives

and types of project.

Introduction to Project Management

‘Projects’ are tasks that could be part of our routine lives or any

business. Projects could be anything from preparing a meal at home

or organizing a vacation tour. And, if it’s business or work-related,

developing a website or software, product or a tool, construction of a

building can be termed as ‘Projects’.

Thus, the project is an endeavor, with a set of temporary tasks

implemented to attain targeted objectives within defined time, scope,

resources, and cost. The distinguishing factor between ‘project

management and ‘management’ is that the latter is an ongoing

process while the former has a definite span of time and deliverable.

In simpler terms, ‘Project Management is a process which requires the

application of knowledge, skills, and expertise, tools and techniques as

well as deliverables to make the project a success so as to attain the

desired objectives/goals.
Types of Project
1. Manufacturing Projects: Manufacturing projects are the one
that are carried on with the motive of manufacturing products
such as car, train, airplane, machinery and many more.
2. Construction Projects: Construction projects are related to
erection of buildings, tunnels, roads, bridges etc. and also
comprise of petro-chemical and mining projects.
3. Research Projects: Research projects are carried on by
scientists and researcher for developing a new concept or an
idea. Objectives of such projects are difficult to establish and
also results are unpredictable.
4. Management Projects: These projects involve management
and monitoring of activities. It may be organization or re-
origination of activities that do not necessarily yield a tangible
result.

Objectives of Project

1. Function or performance: Primary objective of every project is

to fulfill the needs for which it was carried out. Project should
perform as per the expectation satisfying the wants of end
user. It should function properly without any errors and
defects. For example, a project taken by company to develop a
racing bike, then the bike must deliver better performance
while driving, should have safety features, standard quality and
reliability.
2. Expenditure should remain within budget: Another main
objective is that project expenses should remain within the pre-
allotted budget. All activities should be performed efficiently
and time-to-time monitoring should be done. For example, if
expenses of racing bike developed by company exceeds the
budget allotted by it, then company will raise its selling price to
recover cost that would increase its price in relation to rival
products.
3. Time Scale: Projects must be completed within right period of
time decided at the time of developing its plan. All phases of
project should complete periodically that will ensure its timely
delivery to customer thereby providing better satisfaction.
Q.2.What do you mean by Project Life Cycle. Explain components of
project feasibility studies

Project Life Cycle

Every project proceeds phase by phase and each phase have an efficient
role in completion of project. These phases are collectively termed as
project life cycle. These phases are explained below: –

1. Project Initiation: It is the initial phase of project life cycle

which is concerned with measurement of value and feasibility
of project. In this phase, a business case is developed and
project is defined at broad level. Project is given due diligence
by important stakeholders for giving it final approval. Once, it is
approved then a project charter is created defining the
objective and requirements of project. Needs of business,
stakeholders and a business case should be included in this
charter.
2. Project Planning: After receiving the green light for carrying out
a plan, a solid plan is formulated for guiding team in
performing activities. It is concerned with developing a clear
roadmap to be followed for achieving the desired outcomes. A
proper plan instructs how to acquire required resources, raise
funds and obtain needed materials. It provides direction to
team regarding quality production, risk handling, managing
suppliers and sharing benefits with stakeholders. It also guides
team members on how to face or handle any obstacles that
may come in way of project. Project plan clearly defines the
expense, timeframe and scope of project.
3. Project Execution: Project execution is related with actual
implementation of project well-framed plans. It is a phase
where team start performing their work. All resources are
efficiently allocated and managers ensures that all team
members remained focused on their roles. Execution phase is
dependent on planning phase as all works and efforts are
derived from plan of project.
4. Project Monitoring and Control: After successfully executing
all plans, continuous monitoring and controlling of project
related activities become essential to derive expected
outcomes. Managers monitor the progress of project and
ensure that all activities are going on track or not. They try to
detect any variations in terms of allotted cost and time, quality
 of deliverables and various other aspects. All necessary
corrective measures are taken to overcome these variations for
guarantee delivery of results as per the promise.
5. Project Closure: It is the last phase where project gets
completed and is handed over to customers. Stakeholders are
informed about its completion and all resources are released
for other projects. Here, team members evaluate the project
and learn about the mistakes or hardships they came across
while performing their task. It will enhance their understanding
that will lead to building up of strong team for carrying out
more projects.

The contents of a project feasibility study are:

▪ Design Summary
▪ Economics
▪ Geopolitical
▪ Environmental
▪ Historical
▪ Social
Design Summary

The feasibility study must perform the project

design to a minimum level that allows the executives or board to make a final decision to proceed
with the project.

The project cost must be estimated to a level that:

▪ Is sufficient to obtain project financing

▪ Is sufficient to make a final project go/no-go decision
On the impact side, the design must be sufficiently complete to ensure that all of the project’s
impacts are well known:

▪ Environmental
▪ Social
▪ Geopolitical
In most industries, many studies are produced prior to the final feasibility study. In major
industrial projects, for example, a scoping study or pre-feasibility study will assess the economics
of one or two major factors that are driving the project’s viability. However, they generally serve
only as a guideline used to proceed to the next phase, rather than a definitive investigation of the
viability of the project.

Typically, if there is a processing plant the size and throughput of the plant is finalized. If there is
a production item like a solar farm the number and size of units are finalized. For a mine, the
mining and processing rates are finalized.

The manpower and project schedule are analyzed, and the transportation and logistics are
planned out. In short, every item that has a possibility of derailing the project is investigated to
ensure it does not pose a risk to project success. Or if it does, the stakeholders are proceeding
with full knowledge of that risk.

Although the project design is often completed as part of the feasibility study, the design details
are usually not included in their entirety because they are not the main focus of the
report. Rather, the project design is summarized within the feasibility study to give the readers
context. Approval of the final design details comes after the feasibility decision phase.

Economics

The most important part of a feasibility study is

the economics. Economics is the reason most projects are undertaken (with some exceptions
for government and non-profit projects in which a cost benefit analysis is the primary tool).
Simply put, none of the other feasibility criteria matter if the project does not generate a return on
investment.

The economic feasibility of a project is determined by:

▪ Estimating the project costs

Because the design is mostly complete, each item is estimated using comparisons
to previous projects (analogous estimating) or unit rate averages from various
sources (parametric estimating). These project costs are agglomerated into an
overall project estimate (bottom up estimating) to determine the overall capital cost
of the project.
▪ Estimating revenue
The revenue generated from the project is usually alot less certain than the capital
cost of the plant. For that reason, feasibility studies usually evaluate several
different scenarios, for example high-medium-low or optimistic/pessimistic
scenarios. If there is an underlying commodity price, like the price of crude oil, a
discount from the current price is usually applied to account for potential price
volatility. Risk analysis is an important component of this step, since there are
usually many risk events that could impact the project’s revenue stream.
▪ Estimating operations and maintenance costs
The ongoing yearly costs of the facility once constructed are estimated and enter the
analysis together with the capital (one-time) cost. Usually, but not always, this is
known with a fairly strong degree of certainty and contingency factors are not
necessary.
▪ Capital budgeting techniques
The feasibility study considers all of the capital inflows and outflows accounting for
the time value of money. Metrics such as the Net Present Value (NPV), Internal
Rate of Return (IRR), and payback period are calculated to give the decision makers
the necessary information to approve or cancel the project.
The first thing the decision makers usually look at are the three main capital budgeting figures:

1. Net Present Value

The current value, in today’s currency, of the full stream of cash flows (positive and
negative) assuming a discount rate that takes into account the time value of money
and the organization’s opportunity cost.
2. Internal Rate of Return
The percentage return generated by the project, which is comparable to a stock
market return.
 3. Payback Period
The length of time it takes to recover the initial investment.
Geopolitical

Political considerations are a factor in the

feasibility of many projects. Although it is rare that government regulation causes a project to be
rejected outright, it is not uncommon that they cause project changes which increase the project
budget or affect the completion date.

In addition, the geopolitical landscape can change very quickly, and should be assumed to
change for projects that require more than a year of planning.

Project managers need to continually ask themselves what is the appetite for the project among
the political class. Sensitive sectors include:

▪ Oil and gas

▪ Mining
▪ Renewable energy
▪ Electric vehicles
In these industries, change is a constant. But do not assume that change occurs only in one
direction. A new government can, and has, wiped out many projects that are in a trendy niche.

Hence, a feasibility study should investigate the odds of obtaining regulatory approval for the
project, and what the future changes to those regulations are anticipated to be.

Environmental
 In this day and age, environmental regulations
are integral to project feasibility. There are many environmental regulations that could derail a
project if a project manager is not familiar with their project’s environmental footprint. Major
projects must plan for stakeholder engagement since any one stakeholder can revolt and stop
the project.

In most jurisdictions, environmental reviews must be completed for any construction work that
involves disturbing a site. These reviews require monitoring and establishing a baseline for a
variety of ecosystem components, which include:

▪ Soils and erosion

▪ Vegetation (grasses, bushes, and trees)
▪ Wetlands
▪ Wildlife
▪ Fish
▪ Hydrology and stormwater
▪ Water quality
▪ Air quality
▪ Groundwater
▪ Noise
▪ Navigation
▪ Cultural resources
Historical

You might be surprised how many projects are

commissioned without a proper idea of who tried the same thing, how long ago, and whether or
not they were successful. Success is often relative – maybe they succeeded partially and there
are good lessons learned for the current project manager.

Even if it doesn’t swing the project feasibility, the previous lessons learned could significantly
reduce the cost or schedule of the project.

This is one of the most underrated areas of project feasibility because there is almost always
someone who has done (or is doing) something nearby, or at an earlier time period, which
provides tremendous insight into the project.

Most mining or oil and gas projects perform an extensive desktop investigation into the mining
history at the site, taken from government records and files. This is an important component of
the feasibility study as it gives the executives a context in which to make the decision to approve
the project.

Likewise, solar and wind farms must measure and analyze the amount of resource at the
site. Data from nearby existing operations, or monitoring stations that didn’t result in
developments, are priceless information for project feasibility.

Social

Many projects have a societal impact that is an

integral component of project feasibility. Even if the societal impacts are moderate and unlikely
to be the determining factor in project feasibility, they can factor into project budgets and
schedules.

Societal impacts are often difficult to quantify prior to a project decision. Although it is often not
possible to get societal buy-in prior to approving the project, it should be addressed to the
maximum extent possible to make a project decision.

Stakeholders who are opposed to the project should be identified and classified into five
categories:

1. Unaware
2. Opposed
 3. Neutral
4. Supportive
5. Leading (actively promoting the project)
When a stakeholder is in the first or second category (negative) but must be moved into the third
or fourth category (positive) in order for the project to proceed, this is a situation that demands a
high level of active management. A stakeholder engagement plan should be created which
details the strategy used to convert the stakeholder. The project control phase must include an
assessment of what stakeholder communications were completed in that period, how well they
worked, and what adjustments to the plan are necessary for the next period.
Q.3.Define Project Finance. What is working capital finance?
Discuss the various sources of finance

Project finance refers to the funding of long-term projects, such as public

infrastructure or services, industrial projects, and others through a specific financial
structure. Finances can consist of a mix of debt and equity. The cash flows from the project
enable servicing of the debt and repayment of debt and equity.

Working Capital Financing

Working capital financing refers to the activity of obtaining funds in
order to finance the working capital. There are various sources to
finance working capital that include trade credit, cash credit/bank
overdraft, working capital loan, discounting of bills, bank guarantee,
factoring, commercial paper, inter-corporate deposits, etc.

Need to Finance Working Capital

The arrangement of working capital financing forms a major part of
the day-to-day activities of a finance manager. It is a very crucial
activity and requires continuous attention because working capital is
the money that keeps the day-to-day business operations smooth. A
business may get into trouble without appropriate and sufficient
working capital.

Different Sources of Finance

1. Retained Earnings:
In most cases, a company does not release all of its earnings or share its
profits with its shareholders as dividends. A part of the net earnings may be
retained in the company for future use. This is known as retained earnings. It
is a source of internal finance, self-financing, or profit ploughing. The profit
available for reinvestment in an organisation is dependent on a variety of
factors, including net profits, dividend policy, and the age of the organisation.
2. Trade Credit:
Trade credit is credit given by one trader to another for the purchase of
products and services. Trade credit facilitates the purchase of goods without
the need for immediate payment. Such credit shows in the buyer of goods’
records as ‘sundry creditors’ or ‘accounts payable.’ Business organisations
frequently utilise trade credit as a form of short-term finance.
It is granted to consumers that have a solid financial status and a good
reputation. The amount and period of credit provided are determined by
criteria, such as the purchasing firm’s reputation, the seller’s financial status,
the number of purchases, the seller’s payment history, and the market’s level
of competition. Trade credit terms might differ from one industry to another
and from one person to another.
3. Factoring :
Factoring is a financial service in which the ‘factor’ provides a variety of
services such as :
• Bill discounting (with or without recourse) and debt collection for the
client: Under this, receivables from the sale of goods or services
are sold to the factor at a certain discount. The factor takes over all
credit control and debt collection from the buyer and protects the
company against any bad debt losses.
Factoring has basic two methods: Recourse and Non-recourse.
The customer is not safeguarded against the risk of bad debts while
using recourse factoring. Non-recourse factoring, on the other
hand, involves the factor assuming the complete credit risk, which
means that the full amount of the invoice is reimbursed to the client
if the debt goes bad.

• Factors retain vast volumes of information on the trading history of

businesses, which they use to provide information about the
creditworthiness of prospective clients, among other things. This
can be beneficial to individuals that use factoring services, and
therefore avoid doing business with consumers who have a bad
payment history. Factors may also provide appropriate consulting
services in areas, like finance, marketing, and so forth.
4. Lease Financing:
A lease is a contractually enforceable arrangement whereby a one party, the
owner of an asset, grants the other party the right to use the asset in
exchange for a monthly payment. In other terms, it is the rental of an asset
for a certain amount of time. The party who owns the assets is known as the
‘lessor,’ while the party who utilises the assets is known as the ‘lessee.’ The
lessee pays the lessor a predetermined periodic sum known as lease rental
in exchange for the usage of the asset.
The lease contract includes the conditions and terms that regulate the lease
arrangements. At the end of the lease agreement, the asset will be returned
to the owner. Lease financing is a critical tool for the firm’s modernization
and diversification.
5. Public Deposits:
Public deposits are deposits gathered from the public by organisations.
Interest rates on public deposits are often higher than those on bank
deposits. Anyone who wants to make a monetary contribution to an
organisation can do so by filling a specified form.
In return, the organisation gives a deposit receipt as proof of payment. A
business’s medium and short-term financial needs can be met through public
deposits. Deposits are beneficial to both the depositor and the organisation.
While depositors receive higher interest rates than banks, the cost of
deposits to the corporation is lower than the cost of borrowing from banks.
Companies often seek public deposits for up to three years. The Reserve
Bank of India regulates the acceptance of public deposits.
6. Commercial Papers:
Commercial Paper (CP) is an unsecured promissory note. It was first created
in India in 1990 to allow highly rated corporate borrowers to diversify their
sources of short-term borrowings and to give investors an additional
instrument.
Following that, primary dealers and all-India financial institutions were
authorised to issue CP in order to cover their short-term funding needs for
their operations. Individuals, banks, other corporate organisations (registered
or incorporated in India), unincorporated bodies, Non-Resident Indians
(NRIs), and Foreign Institutional Investors (FIIs), among others, can invest in
CPs. CP can be issued in denominations of Rs.5 lakh or multiples thereof
with maturities varying from 7 days to up to one year from the date of issue.
7. Issue of Shares:
A share is the smallest unit of a company’s capital. The firm’s capital is split
into small units and issued to the public as shares. The capital gained via the
issuance of shares is referred to as ‘Share Capital.’ It’s a kind of Owner’s
Fund.
There are two kinds of shares that can be issued:
• Equity Shares: These are shares that do not pay a fixed dividend,
but do have ownership and voting rights. Owner of the firm refers to
the company’s equity shareholders. They do not get a set dividend,
but are paid dependent on the company’s profitability.
• Preference Shares: Preference shares are shares that have a
slight preference over equity shares. Preference Shareholders get a
set dividend rate and have the right to receive their capital before
equity shareholders in case of liquidation. They do not, however,
have any voting rights in the company’s management.
8. Debentures:
Debentures are an effective instrument for raising long-term debt capital. A
firm can raise capital by issuing debentures with a fixed rate of interest. A
firm’s debenture is a recognition that the company has borrowed a specified
amount of money, which it commits to repay at a later period. Debenture
holders are part of the company as the company’s creditors. Debenture
holders get a definite stated amount of interest at predetermined periods,
such as six months or a year.
Debentures issued publicly must be assessed by a credit rating agency such
as CRISIL (Credit Rating and Information Services of India Ltd.) on factors
such as the company’s track record, profitability, debt payment capability,
creditworthiness, and perceived risk of lending.
9. Commercial Banks:
Commercial banks play an important role in providing finances for a variety
of purposes and time periods. Banks provide loans to businesses in a variety
of ways, including cash credits, overdrafts, term loans, bill discounting and
the issuance of letters of credit. The interest rate imposed on such credits
varies depending on the bank as well as the nature, amount, and duration of
the loan.
10. Financial Institutions:
The government has established many financial institutions in the country to
give financing to businesses. They provide both owned and loan capital for
long- and medium-term needs. These organisations are often known as
‘Development Banks’ since they aim to promote a country’s industrial
development. In addition to financial help, these institutes conduct surveys
and provide organisations with technical assistance and management
services. Financial institutions provide funds for the expansion,
reorganisation and modernisation of an enterprise.