PM0012 – Project Finance & Budgeting

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Fall-2013

Master of Business Administration - MBA Semester 3

PM0012–Project Finance & Budgeting-4 Credits

(Book ID: B1238)

Assignment (60 Marks)

Note: Answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme. Each Question carries 10 marks 6 X 10=60.

Q1. Evaluate the golden rules of project risk management.

Answer. Rule 1: Make Risk Management Part of Your Project

The first rule is essential to the success of project risk management. If you don't truly embed risk management in your project, you cannot reap the full benefits of this approach. You can encounter a number of faulty approaches in companies. Some projects use no approach whatsoever to risk management. They are either ignorant, running their first project or they are somehow confident that no risks will occur in their project (which of course will happen).

Q2. Explain different types of discounted cash flows.

Answer. Discounted cash flow (DCF) is a valuation method used to estimate the attractiveness of an investment opportunity. DCF analysis uses future free cash flow projections and discounts them (most often using the weighted average cost of capital, which we'll discuss in section 13 of this walkthrough) to arrive at a present value, which is then used to evaluate the potential for investment. If the value arrived at through DCF analysis is higher than the current cost of the investment, the

Q3. What are the decisions to be considered while making capital investment?

Answer. Capital investment decisions also can be called ‘capital budgeting’ in financial terms. Capital investment decisions aim includes allotting the capital investment funds of the firm in the most effective manner to make sure that the returns are the best possible returns. Assessing projects as well as the allocation of the capital depends on the project requirements are some of the most crucial capital investment decisions aspects.

Q4. Explain IRR and WACC.

Answer. IRR stands for Internal Rate of Return, and last week reader Sandeep emailed me asking about this, so I thought I’d do a post on the subject.

It’s impossible to understand IRR without understanding the concept of Net Present Value (NPV) first, so let’s begin with NPV.

You know that the cash that you receive today is more valuable than the cash you receive two years down the line or

Q5. What is sensitivity analysis?

Answer. Sensitivity analysis is the study of how the uncertainty in the output of a mathematical model or system (numerical or otherwise) can be apportioned to different sources of uncertainty in its inputs. A related practice is uncertainty analysis, which has a greater focus on uncertainty quantification and propagation of uncertainty. Ideally, uncertainty and sensitivity analysis should be run in tandem.

Q6. Analyze the parametric cost estimation.

Answer. PCE - Definition

PCE is a set of cost estimating techniques based on estimating algorithms or cost estimating relationships (CER) that are highly probabilistic in nature (i.e., the parameters or quantification inputs to the algorithm tend to be abstractions of the scope). Typical parametric algorithms include, but are not limited to, factoring techniques, gross unit costs, and cost models (i.e. algorithms intended to replicate the cost performance of a process of system). Parametric estimates can be

Solved assignments for Rs.150 each

Mail me at: subjects4u@gmail.com or at

08627023490