UNIVERSITYOFSUNDERLAND

SCHOOLOFCOMPUTINGANDTECHNOLOGY
LEVEL3EXAMINATION
ENX314:PROJECTMANAGEMENTandAPPRAISAL

Revision/TutorialQuestionsandAnswers

Question1.
The lifecycle of a project may be broken down into 4 stages, namely concept,
design,implementationandcommission.FigureQ1belowshowshowthelevel
ofefforttypicallychangesthroughthelifecycle.

Figure Q1. The stages of the project lifecycle and the level of effort
associatedwitheach
(a) Explain why the level of effort is likely tovary between lifecycle phases as
showninFigure1.
(5marks)
(b) Whattypicaltasksarelikelytofeatureineachofthegenericlifecyclephases
listedabove?
(12marks)
(c) Explain how theabilityof theproject managertoinfluencetheproject(i.e.
add value) varies through each of the lifecycle phases. How does the cost to
changetheprojectvarythroughthesephases?
(8marks)

Question2.
(a) TheProjectManagementInstituteBodyofKnowledge(PMIBOK)breaksthe
fieldofProjectManagementintoNINE(9)differentareas.ChooseTHREE(3)of
theseandgiveasummaryoftheimportantfeaturesofeach.
(3x5marks)
(b) Before any project can go ahead, the interests of stakeholders must be
considered and managed. Who are these stakeholders and how would you
managetheirinterests?
(10marks)
Question3.
A potential 6year project requires the purchase of a new piece of machinery.
You are the project manager and you must choose between two potential
machines (Machine A and Machine B), either of which would besuitable. The
cost of each machine is identical at 80,000. However, they differ in
performance such that the projected future cash flows are different for each
machine. Projectedcashflows overthe6yearsoftheprojectareasfollows in
TableQ3a:
Year

CashFlow:MachineA

CashFlow:MachineB

80,000

80,000

5,000

35,000

8,000

25,000

12,000

18,000

20,000

10,000

25,000

7,000

30,000

5,000

TableQ3a.SixyearcashflowfiguresforMachineAandMachineB.
(a)
(i) Bysimpleinspectionofthecashflowfigures,statewhichmachineyouwould
chooseandjustifyyourchoice.
(ii) Yourcolleague disagrees with your choice. Suggest onevalid reasonwhy
yourcolleagueschoicemaybejustified?
(3,3marks)

(b)CalculatethetotalNPVforeachmachineafter6yearsassumingadiscount
(inflation) rate of 7% for each year of theproject. Table Q3b provides a list of
discountfactorsforarangeofdiscount/inflationrates.
(10marks)
(c) Calculatethe InternalRate ofReturn (IRR)for Machine Aoverthe 6 year
period. You may do the calculation graphically or by any valid method of your
ownchoice.
(9marks)

DiscountFactorsforgivendiscount(inflation)ratesovera6yearproject
Years

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0.9901

0.9804

0.9709

0.9615

0.9524

0.9434

0.9346

0.9259

0.9174

0.9091

0.9803

0.9612

0.9426

0.9246

0.9070

0.8900

0.8734

0.8573

0.8417

0.8264

0.9706

0.9423

0.9151

0.8890

0.8638

0.8396

0.8163

0.7938

0.7722

0.7513

0.9610

0.9238

0.8885

0.8548

0.8227

0.7921

0.7629

0.7350

0.7084

0.6830

0.9515

0.9057

0.8626

0.8219

0.7835

0.7473

0.7130

0.6806

0.6499

0.6209

0.9420

0.8880

0.8375

0.7903

0.7462

0.7050

0.6663

0.6302

0.5963

0.5645

TableQ3b.DiscountFactorsover6yearsforvariousinflation/discountrates.

Question4.
TableQ4givesinformationonthedailyemployeeresourcerequiredfora6task
projecttogetherwiththeearlystartdates,durationsandassociatedfloatforeach
task.
Activity

Float
(Days)

EarlyStart
Date(Day)

Duration
(Days)

EmployeesRequired
(perDay)

A1

A2

A3

A4

A5

A6

TableQ4:ProjectEmployeeResourceRequirements

(a) On the basis of the information presented in Table Q4, draw up a Gantt
Chartshowingactivities andtheirrelativetiming.Indicateavailablefloatonthe
diagram. Finally, superimpose the required resources on each day of each
activity. Use a format (such as that shown below in the Figure Q4 template
(ActivityA1hasbeencompletedforyou).
Activity
Number
A1
A2
A3
A4
A5
A6
Total
Resources

Day
5

FigureQ4:TemplateforGanttChart
(10marks)
(b) Draw up Resource Histograms for (i) Early Starts and (ii) Late Starts.
Comment on the results in terms of employee resource requirements over the
duration of the project given that you are limited to a maximum of 6
employeesperday.
(15marks)

Question5.
(a) TableQ5showsthelogictableforaparticularproject.
Task
A
B
C
D
E
F
G

Predecessors

A
A
C
B
B,C
D,E,F

Duration(Days)
3
7
5
3
2
4
6

TableQ5.LogictableforprojectactivitiesAthroughG.
(i) Construct a Network Diagram showing the various logical activity
relationshipsfromthisinformation.
(5marks)

(ii) Performa forward andbackwardpasstocompleteactivity boxes. Arrange

datawithinactivityboxesasoutlinedinFigureQ5below.

FigureQ5.LayoutofActivityBoxinformation.
(5marks)
(iii)Highlightthecriticalpathonyourdiagram.
(3marks)
(b) Itissuggestedthatthedurationofthewholeprojectcouldbeshortenedby4
daysbycompletingActivityBin3daysratherthan7days.ReworktheNetwork
Diagram and comment on whether this strategy would succeed. State the
reasonsforyouranswer.
(12marks)

Question6.
(a) Consider the two graphs depicted in Figures Q6a and Q6b. Explain the
nature ofthe information providedbyeach graph andcommentonthediffering
viewstheypresentonprojectperformancetotimenow.

Planned

Actual

FigureQ6a

Planned

Actual

FigureQ6b
(10marks)

(b) WhatdoyouunderstandbythetermEarnedValue?
(5marks)
Draw a fullylabelled Earned Value Curve, ensuring you include the following
informationonyourgraph.

BCWS,BCWPandACWP
ScheduleVariance(SV)andCostVariance(CV)
Estimateatcompletion(EAC)andBudgetatCompletion(BAC)
OverrunandSlippage
Timenow.
(10marks)

Question7.
(a) Sales estimates for a project are given in Table Q7a. With the aid of this
informationprepareacashflowstatementforthemonthsJunetoNovember.
SalesEstimates:
JUN
JULY
Sales
1900
2400
estimate
s(units)

AUG
1300

SEPT
2000

OCT
2100

NOV
3800

DEC
2500

JAN
1800

TableQ7a
Additionalrelevantinformationisgivenbelow:

Salespricesperunitare40.Customersaregiventwomonthscredit(i.e.
theypayyou2monthslater).
Materialpriceperunitis10.Suppliersallowyouonemonthcredit(i.e.
youpaythem1monthlater).
Labourcostsperunitare15.Labourispaidforinthemonthofuse.
Overheadsare3,200permonth.
There is a scheduled loan repayment of 24,000 per month for the
durationofthisproject.

UseatemplatelikethatshowninTableQ7btoconstructyouranswer.
Income&ExpenditureDetails()formonthsof:
August

Brought
Forward
Income
TotalAvailable
Expenditure
Overheads
Materials
Labour
Loan
Total
Expenditure
ClosingBalance

September

October

November

December

January

6,000

TableQ7b
(15marks)
(b) As a project manager involved in planning and control, rigorous project
monitoring is vital to success. Efficient project control relies on the project
manager being given relevant and timely data on project performance. This
involvesdatacapture.
List,andbrieflydiscuss,5aspectsoffeedback/datacapturewhichyouconsider
importantinensuringefficientprojectmanagement.
(10marks)

Solutions

Question1.
The lifecycle of a project may be broken down into 4 stages, namely concept,
design,implementationandcommission.FigureQ1belowshowshowthelevel
ofefforttypicallychangesthroughthelifecycle.

Figure Q1. The stages of the project lifecycle and the level of effort
associatedwitheach
(a) Thegraphabovedepictsboth(i)the instantaneousinputtotheprojectand
(ii)theaccumulated inputtotheprojectoverthe4lifecyclephases.Duringthe
concept/initiationphase,thelevelofeffortisrelativelylowandmayinvolvevery
few people. Once the goahead is given to the design/development stage the
level of input required is likely to be higher as more detailed planning is put
together. When moving to the fullblown implementation/execution phase the
wholeprojectteamwillbeinvolvedandthelevelofinputwillrisetoamaximum.
Finally, once the execution is complete, only commissioning and handover
remainsandthelevelofinputwillfallagain.
(5marks)

(b) Themaintasksassociatedwitheachofthegenericprojectphases(concept,
design, implementation and commission) are likely to include those in the
diagrambelow.Thestudentsanswerneednotbeexhaustivewithrespecttothe
diagram below, but a comprehensive treatment is required for full marks.
Similarly,theanswermaybepresentedindiagram,listoressayformat,provided
thelevelofinformationpresentedisappropriate.

(12marks)
(c) In essence the level of ability to influence the project decreases with time
througheachsuccessiveprojectphase.Similarly,thecosttomakechangesto
the project increases with time through each successive project phase. The
studentmaywellchoosetoexplainthiswiththeaidofasketchgraphasbelow:

(8marks)

Question2.
(a) Thenineareas,plusassociatedimportantfeaturesaregivenbelow. Any3
maybechosenanddiscussedfor5marksperarea:

PROJECTINTEGRATIONMANAGEMENT
Asubsetofprojectmanagementthatincludestheprocessesrequiredtoensure
thatthevariouselementsoftheprojectareproperlycoordinated.Itconsistsof:
o
o
o

Projectplandevelopment integratingandcoordinatingallprojectplansto
createaconsistent,coherentdocument.
Project plan execution carrying out the project plan by performing the
activitiesincludedtherein.
Integratedchangecontrolcoordinatingchangesacrosstheentireproject.

PROJECTSCOPEMANAGEMENT
Asubsetofprojectmanagementthatincludestheprocessesrequiredtoensure
that the project includes all the work required, and only the work required, to
completetheprojectsuccessfully.Itconsistsof:
o
o
o
o
o

Initiationauthorizingtheprojectorphase.
Scope planning developing a written scope statement as the basis for
futureprojectdecisions.
Scope definition subdividing the major project deliverables into smaller,
moremanageablecomponents.
Scopeverificationformalizingacceptanceoftheprojectscope.
Scopechangecontrolcontrollingchangestoprojectscope.

PROJECTTIMEMANAGEMENT
Asubsetofprojectmanagementthatincludestheprocessesrequiredtoensure
timelycompletionoftheproject.Itconsistsof:
o
o
o
o
o

Activitydefinition identifyingthespecificactivitiesthatmustbeperformed
toproducethevariousprojectdeliverables.
Activity sequencing identifying and documenting interactivity
dependencies.
Activitydurationestimatingestimatingthenumberofworkperiodsthatwill
beneededtocompleteindividualactivities.
Schedule development analysing activity sequences, activity durations,
andresourcerequirementstocreatetheprojectschedule.
Schedulecontrolcontrollingchangestotheprojectschedule.

PROJECTCOSTMANAGEMENT
Asubsetofprojectmanagementthatincludestheprocessesrequiredtoensure
thattheprojectiscompletedwithintheapprovedbudget.Itconsistsof:
o

o
o
o

Resource planning determining what resources (people, equipment,

materials) and what quantities of each should be used to perform project
activities.
Costestimatingdevelopinganapproximation(estimate)ofthecostsofthe
resourcesneededtocompleteprojectactivities.
Cost budgeting allocating the overall cost estimate to individual work
activities.
Costcontrolcontrollingchangestotheprojectbudget.

PROJECTQUALITYMANAGEMENT
Asubsetofprojectmanagementthatincludestheprocessesrequiredtoensure
thattheprojectwillsatisfytheneedsforwhichitwasundertaken.Itconsistsof:
o
o

Quality planning identifying which quality standards are relevant to the

projectanddetermininghowtosatisfythem.
Quality assurance evaluating overall project performance on a regular
basis to provide confidence that the projectwill satisfy the relevant quality
standards.
Quality control monitoring specific project results to determine if they
comply with relevant quality standards and identifying ways to eliminate
causesofunsatisfactoryperformance.

PROJECTHUMANRESOURCEMANAGEMENT
A subset of project management that includes the processes required to make
themosteffectiveuseofthepeopleinvolvedwiththeproject.Itconsistsof:
o
o
o

Organizational planning identifying, documenting, and assigning project

roles,responsibilities,andreportingrelationships.
Staff acquisition getting the needed human resources assigned to and
workingontheproject.
Team development developing individual and group skills to enhance
projectperformance.

PROJECTCOMMUNICATIONSMANAGEMENT
Asubsetofprojectmanagementthatincludestheprocessesrequiredtoensure
timely and appropriate generation, collection, dissemination, storage, and
ultimatedispositionofprojectinformation.Itconsistsof:
o

o
o

Communications planning determining the information and

communications needsofthestakeholders:whoneedswhat information,
whentheywillneedit,andhowitwillbegiventothem.
Information distribution making needed information available to project
stakeholdersinatimelymanner.
Performance reporting collecting and disseminating performance
information. This includes status reporting, progress measurement, and
forecasting.
Administrative closure generating, gathering, and disseminating
informationtoformalizephaseorprojectcompletion.

PROJECTRISKMANAGEMENT
Risk management is the systematic process of identifying, analysing, and
responding to project risk. It includes maximizing the probability and
consequences of positive events and minimizing the probability and
consequencesofadverseeventstoprojectobjectives.Itincludes:
o
o
o
o
o

Risk management planning deciding how to approach and plan the risk
managementactivitiesforaproject.
Risk identification determining which risks might affect the project and
documentingtheircharacteristics.
Qualitative risk analysis performing a qualitative analysis of risks and
conditionstoprioritisetheireffectsonprojectobjectives.
Quantitativerisk analysis measuring theprobability andconsequencesof
risksandestimatingtheirimplicationsforprojectobjectives.
Riskresponseplanningdevelopingproceduresandtechniquestoenhance
opportunitiesandreducethreatsfromrisktotheprojectsobjectives.

Risk monitoring and control monitoring residual risks, identifying new risks,
executingriskreductionplans,andevaluatingtheireffectivenessthroughoutthe
projectlifecycle.
(3x5marks)

(b) In brief, stakeholders are people or organisations who are either actively
involved inthe project,orwhose interestsmaybeaffectedbythe projectbeing
implemented.Stakeholdersmaybeaffectedeitherpositivelyornegativelybythe
project. Hence some will support the project and some will oppose it. Hence
there is a need to identify and prioritise stakeholders needs and make this the
basis for action. This may be achieved via an amalgamation of relevant
informationcollected,e.g.byaproformasuchasshownbelow:

(10marks)

Question3.
(a)(i) Bothmachinesproduceanincomeof100,000overthesixyearsofthe
project. Hence return on investment over the six years is the same for both
machines.However,MachineBhastheshortestpaybackperiodsincethelevel
ofincomeishigherintheearlieryears.HencemachineBwouldbefavouredon
apaybackperiodargument.
(3marks)
(a)(ii) ThemainpointinfavourofMachineAisthatthelevelofincomeishighat
theendoftheprojectandhenceincomebeyondtheoriginalprojecttenurecould
besignificantlyhigherthanthatforMachineB.
(3marks)
(b) The cash flows should be discounted each year by the relevant discount
factorandthetotalNPVcalculated.Therelevantcalculationsareshowninthe
followingtables:

DiscountRate=

7%

Year
0
1
2
3
4
5
6

CashFlow:
MachineA
80,000
5,000
8,000
12,000
20,000
25,000
30,000

DiscountRatefor
Year

7%
7%
7%
7%
7%
7%

Year
0
1
2
3
4
5
6

CashFlow:
MachineB
80,000
35,000
25,000
18,000
10,000
7,000
5,000

DiscountRatefor
Year

7%
7%
7%
7%
7%
7%

DiscountFactor

0.9346
0.8734
0.8163
0.7629
0.7130
0.6663
TotalNPV

PresentValue
80,000
4,672.90
6,987.51
9,795.57
15,257.90
17,824.65
19,990.27
5,471.19

DiscountFactor

0.9346
0.8734
0.8163
0.7629
0.7130
0.6663
TotalNPV

PresentValue
80,000
32,710.28
21,835.97
14,693.36
7,628.95
4,990.90
3,331.71
5,191.18
(10marks)

(c) The IRR is the inflation (discount) rate at the point at which the total NPV
equalszero.HencethismaybefoundbyplottingthetotalNPVagainstdiscount
rateasshowninthegraphbelow:

IRRplotforMachineA
6000

4000

TotalNPV

2000

2000
IRR=5.25%
4000

6000
3

Rate(%)

(9marks)

Question4.
(a)ThecompletedGanttChartshouldappearasshown:
Activity
Number
A1
A2
A3
A4
A5
A6
TotalResources

1
2

2
2

2
6

2
6

Day
5

3
1

3
1

2
2

(10marks)
(b) Activities200and400haveadegreeoffloat,socanbescheduledflexibly
withinthisfloat.TheEarlyStartscenarioleadstodailyresourcerequirementsas
shownintheresourcehistogrambelow:

(5marks)

TheLateStartscenarioleadstodifferentdailyresourcerequirementsasshown
intheresourcehistogram(togetherwithrevisedGanttChart)below:

(5marks)
The discussion should centre on the resourcesmoothing effect which can be
achievedbymovingactivitieswithintheirfloat.Ifthismechanismisnotsufficient,
otherremediesmustbesoughttobalanceavailableandrequiredresources.
(5marks)

Question5.
(a) ThecompletedNetworkDiagramshouldappearasbelow:

Logicalstructure:

(5marks)

ActivityBoxData:

(5marks)

CriticalpathABFG(highlightedred):

(3marks)

(b) AftercrashingActivityB,theredrawnNetworkDiagramwouldappear:

(8marks)
ProjectwouldNOTbeshortenedoverallby4daysonlyby2days(20daysto18daysduration):

(2marks)

ThisisbecausethechangetothedurationofactivityBhaschangedthecriticalpath(ABFGtoACFG):

(2marks)

Question6.
(a) Twoprojectperformancegraphsarepresentedseparately:

Inthefirstdiagram,theprojectspendingperformance(plannedandactual)is
plottedasafunctionoftimeuptotimenow.Onthebasisofthisgraph,the
projectappearstobeperformingwellbecauseexpenditureisbelowthatplanned
(45%ofbudgetcomparedtoanexpected55%ofbudget).Theprojectappears
tobecominginunderbudget.
Intheseconddiagram,theprojectprogressperformance(plannedandactual)is
plottedasafunctionoftimeuptotimenow.Hereitcanbeseenthattheprogress
achieveduptotimenowisbelowthatexpected(40%completecomparedtoan
expected55%complete).
Hencethefirstsuggestsgoodperformancewhilethesecondsuggestspoor
performance.Infact,45%oftheprojectbudgethasbeenspent,whiletheproject
hasonlybeen40%completed.Thishighlightsthefactthatexpenditureand
progressdatashouldbepresentedinanintegratedform,suchthatatruepicture
ofperformanceagainstplanispresented.
(10marks)

(b) Earned Value is a method of providing the integrated progress & cost
informationthatpart(a)ofthisquestionidentified.
Earned value is also often termed the Budgeted Cost for Work Performed
(BCWP). It is a measure of the value of the work that hasbeen performed to
date(i.e.uptotimenow).Itmaybecalculatedasaproportionofthetotalproject
Budget at Completion (BAC), depending on how much of the project has
actuallybeencompletedatthattime.Verysimply,ifaprojectis50%complete,
theEarnedValueis50%ofthetotalprojectBAC.
Earned Value (BCWP) = Percentage Complete (PC or earned progress) x
BAC
(5marks)

Expenditure,

Thegraphshouldappearmuchlikethatshownbelow.

Foracompletediagram:

(10marks)

Question7.
(a) Thecashflowtableshouldbecompletedasshownbelow:
Income&ExpenditureDetails()formonthsof:

Brought
Forward
Income
TotalAvailable
Expenditure
Overheads
Materials
Labour
Loan
Total
Expenditure
ClosingBalance

August

September

October

November

December

January

6,000

11,300

37,100

10,400

14,800

33,500

76,000
82,000

96,000
107,300

52,000
89,100

80,000
90,400

84,000
69,200

152,000
118,500

3,200
24,000
19,500
24,000
70,700

3,200
13,000
30,000
24,000
70,200

3,200
20,000
31,500
24,000
78,700

3,200
21,000
57,000
24,000
105,200

3,200
38,000
37,500
24,000
102,700

3,200
25,000
27,000
24,000
79,200

11,300

37,100

10,400

14,800

33,500

39,300

(15marks)
(b) This is a somewhat more openended question, but something along the
followinglinesisexpected(thoughmarkswillbeavailableforanyvalid/relevant
pointsmade:

The frequency of datacaptureshould be sufficient to allow for adequate

response.Daily,weeklyormonthlymaybeappropriatedependingonthe
project.

Datashouldbereceivedbeforeimportantdecisionpoints.

Accuracyofdatais paramountasit affectscontroldecisions,e.g. 20%

data accuracyis notgood enough if control decisions are triggered on a
10%deviationfromplan.Inanyevent,accuracyofdatashouldbebetter
thantheprofitmargin.

Ahigherlevelofaccuracyisusuallyneededforcriticalactivities,sinceany
delaysinthesewillextendprojectduration.

Itoftenhelpstouselotsofmilestonestoreportagainst.Thesehelpavoid
optimistic reporting. Accuracy of data can be improved by reporting
progress(%complete)againstminimilestones
(10marks)