Question 3: Classify projects based on the ways they influence investment decisionprocess.

Answer: Certain projects are sensitive on the basis of the degree of technical and human difficulty. Thetechnical difficulty involves dealing with technology and related problems such as new andinnovative technology, management of technological development, risks and dependencies.While the human difficulty (usually politics)resulting from the interests of internal and externalstakeholders or public, who influence the outcome of the project. The internal factors beingproject resourcing, conflict management and agreement of client and suppliers on what is beingdelivered as per contract.Investment projects are classified into three categories on the basis, of the way they influencet h e investment decision process: independent projects, m u t u a l l y e x c l u s i v e p r o j e c t s a n d contingent projects. Independent projects: An independent project is one, where the acceptance or rejection does not directly eliminateother projects from consideration or affect the likelihood of their selection. For example, if management plans to introduce a new product line, as well as, replace a machine which iscurrently producing a different product. These two projects can be considered independent of e a c h o t h e r , i f t h e r e a r e s u f f i c i e n t r e s o u r c e s t o a d o p t b o t h , p r o v i d e d , t h e y m e e t t h e f i r m s investment criteria. Mutually exclusive projects: The mutually exclusive projects are projects that cannot be followed at the same time. Theacceptance of one prevents the

substitute proposal from accepting. Most of them have either o r decisions. You will not be able to follow more than one project at the same time. Thee v a l u a t i o n i s d o n e o n a separate basis so that one that brings the highest v a l u e t o t h e company is chosen. Contingent projects: A contingent project is one where the acceptance or r e j e c t i o n d e p e n d s o n t h e d e c i s i o n t o accept or reject multiple numbers of other projects. Such projects may be complementary ors u b s t i t u t e s . L e t u s t a k e t h e e x a m p l e o f b i o f u e l p l a n t c u l t i v a t i o n i n a l a r g e s c a l e a n d t h e decision to set up a bio fuel manufacturing unit. In this case, the projects are complementaryto each other. The cash flows of the plant cultivation will be enhanced by the existence of an e a r b y manufacturing plant. Conversely, the cash flows of the m a n u f a c t u r i n g u n i t w i l l b e enhanced by the existence of a nearby cultivation farm.