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IBA Hands-on Activity- 01 Project Management Workshop 1 Tip You will need to lay out the actual infows for each year and apply the present value formula to each year, then subtract the initial investment. Also, round to the nearest dollar. To make this easier check out the following interest rate table Year 1: (1+0S)'-1.0500 . Year 2: (1+05-1.1025 * Year J: (1+.05)'# 1.1576 Year 4: (1+.05) 1.2155 . Year S:(1+05)-1.2763 4 Based on these three projects, which one will provide the best NPV? Rank them. 5. Will the project manager be able to calculate this information? 6. For Best Investment Company, what are some of the advantages/disadvantages of this method? Finally, for Questions 7-10, you will use IRR without actually calculating IRR. In the case of the three projects, the following shows the IRR value for each project Build an investment kiosk. IRR- 5.5 percent Create a program to recruit community financial advisors. IRR- 3 percent Build franchises in strip malls that work like a fast food restaurant. IRR 5 percent Based on the kiosk, financial advisor, and franchise projects, which one will provide the best IRR? 7. Rank them. 8. Will the projeet manager be able to calculate this information? 9. For BIC, what are some of the advantages disadvantages of this method? 10. Which financial return method would you recommend for BIC and why? Instructor Syed Irfan Nabi Hands-on Activity -01 Project Management Workshop Exercise 1: Project Selection Methods-Financial Returns Seenario Your consulting company, Temific Project Management Partners (TPMP), has been asked to help an estments company, Best Investments Company (BIC), use project selection methods. Best ents Company tends to take on any project proposal so it has become increasingly difficult to hanage the company's project pontfolion. Just as BIC helps its cussomers achieve the best return for their money, BlC would like to ensure that its tfiree grujects have the best fimancial return; BIC decided to use inancial retern as their major projest sefection method. In order to select the best fimancial reture method,ou will take the evecutives at BIC through several exercises to help them decide which one they should use. They lave decidied that they want their project managers to be able to calculate these financial return mettodolozies; they do not want to make the work too complex, but they want the west accurate method possible. Use the following projects and fimanciall projecions to help tle compuny see how these methods work Build an investment kiosk. Initial cosat is $S million te iwstall in targeted Tocations, and return is expected to be S750,000 the first year, $300,000 per quarter over the net two years, and $750,000 semianrually, thereafter. Create a program to recruit community mancinl adsisers. Initial cost is $8 million to recruit and train the advisors, and retum is expacted to be S1.5 million dhe first year, $100,000 per quarter over the next three years, and $750,000 semianmually thereafter. Build franchises that work like fast foedl restanrcnes in strip mls Iniial cost is $11 million to build or convert existing buildngs in targaterdl locations and to hire employees, and retum is expected to be S million the first six months,$2.5 million die savond siv montas, $500,000 per quarter the second year S600,000 per quarter the third year, S3 mil Tion amually thereafier 1. Based on the three projexs, whicth one lius tihe best payback? Rank them. 2. Will the project manager be atble to calculane tihis intormanion Why? 3. For Best Investments Company, we hat are some of the advantages/disadvantages of this method? and franchise projects, use the net present value method to answer Based on the kiosk, financial advisor, Questions 4-6. You may use the same investment and expected financial described in the project setup, but in this case, the time value of money (interest rate) is 5 percent and you will calculate NPV over five years for each project. projcction information Instructor: Syed Irtan Nabl

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