ADL-53 Project Management and Control

Assignment A

1. Describe briefly the aspects of a business environment that needs to

be monitored as well as the dimensions along which a firm may
appraise its strengths and weaknesses for identifying investment
opportunities.
Aspects of a business environment, which needs to be monitored:
a) A new market demand which is identified for a specific product or service
offering
b) A competing company closes or changes in business direction
c) Changes in legislation or regulation
Factors depend on which a firm may appraise its strengths and
weaknesses for identifying investment opportunities:
Primary Factors:
1) Feasibility study over alternative solutions
2) Identification of risk involved, probable likelihood of happening risk, risk
impact & responsive actions required to mitigate, time & cost involved.
Other important Factors:
1) Location advantage
2) Market demand for the desired product / service
3) Customer preferences / database available
4) Raw material / suppliers availability
5) Manpower resources availability
6) Finance availability from financial institutions
7) Local laws, taxes & statutory compliance.

2. The sales of a certain product during a 14 year period have been as

follows:
Period Sales (Rs)
1
2
3
4
5
6
7
8
9
10
11
12
13
14

2,000
2,200
2,100
2,300
2,500
3,200
3,600
4,000
3,900
4,000
4,200
4,300
4,900
5,300

Find out the least square regression line for the data given.
For the data given above assume that forecast for the period 1 was Rs
2,100. If the constant () is equal to 0.3, derive the forecast for the
periods 2 to 14.
Period
Let it
be 'X'
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Total
Count / 'n'
Mean

Sales
(Rs)
Let it X - x
Y-y
be 'Y' (mean)
(mean)
2,000
-6.5
-1464
2,200
-5.5
-1264
2,100
-4.5
-1364
2,300
-3.5
-1164
2,500
-2.5
-964
3,200
-1.5
-264
3,600
-0.5
136
4,000
0.5
536
3,900
1.5
436
4,000
2.5
536
4,200
3.5
736
4,300
4.5
836
4,900
5.5
1436
5,300
6.5
1836

105

48500

14

14

7.5

3464

[(X-x)(Yy)]

(X - x)
square

9518

42.25

6954

30.25

6139

20.25

4075

12.25

2411

6.25

396

2.25

-68

0.25

268

0.25

654

2.25

1339

6.25

2575

12.25

3761

20.25

7896

30.25

11932

42.25

57850

227.5

(total/'n')
Regression line is given as: y = mx + b
M is the slope which can be computed using = (Total of [(X-x)(Y-y)]) / Total of
(X - x) square
= 57850 / 227.5
Therefore slope 'm' = 254.29
therefore point of intercept or regression line = y =
mx + b
= 3464 = 254.29*7.5 + b
b = 3464-1907
Therefore b =
1557/Where 'm' is the slope, 'm' & 'b' provide a best fit line for the data
'Y' is a sales & 'X' is a period

3. What is Project Implementation Schedule? How it is important?

What information is required for preparing the project
implementation schedule?
Project implementation/execution: This is the very important and longest
phase in which deliverables are physically built and presented to the customer
for acceptance.
During this process, a group of management processes (managing time, cost,
quality, change risks & issues, procurement-handling suppliers, customer
acceptance etc.,) are undertaken to monitor and control the deliverables.
Project manager is responsible for the deliverables. Project Manager has to
prepare & be ready with the following information in order to prepare project
implementation schedule.
a) Documentation of project plan.
b) Work Breakdown structure (WBS) include a hierarchical set of phases,
activities and tasks to be undertaken on the project.
c) Resources (labor, equipment and materials) with quantities, specifications,
roles, responsibilities and skill sets in respect of human resources etc.,
d) Quantity of money required for each stage in the project.
e) Quality target provide a set of criteria and standards, which must be
achieved to meet the expectations of the customer.
f) Set of actions to be taken formulated to prevent risk from occurrence.
g) Criteria to judge each deliverable for customer acceptance
h) The types of information to be distributed, the methods & frequency of
distributing information to stakeholders & responsible person for delivering
information.

i) Description of the products (goods and services) to be procured from

suppliers, make or buy arrangements, schedule of procurement etc.,
4. What are replacement decisions? Explain three components of
the cash flow stream of a replacement decision.
Replacement decisions: It is a type of capital budgeting decision is
made when existing machinery / project is going to be replaced with new
machinery/project.
In simple, whether replacement of a machine can be done in place
of existing machine at a particular point of time for additional
benefits. This is being decided by Replacement decision.
Replacement decision can be carried out by 2 methods:
A) Incremental cash flow method
B) Based on Equated Annual cost method (EAC) = [net present value
(NPV) / present value annuity factor] a project/machinery with EAC
can be selected.
Components of the cash flow stream of replacement decision:
1) Incremental Initial outflows = [Purchase of new asset + Working
capital expenditure in new asset Sale/realizable value of old asset
Working capital re-capture of old asset].
2) Operational incremental net flows = [year wise operational cash
flows from new asset year wise operational cash flows from old asset]
which is being discounted at time value of money.
3) Incremental Terminal flows = [Salvage value of new asset + Working
capital re-capture of new asset scrap value of old asset Working
capital re-capture of old asset] which is being discounted at time value
of money.
4) Net present value (NPV) = 1 + 2 + 3
5) Replacement decision: If NPV is positive, then replace the
existing machinery / project with new one, else continue with
the existing.
5. A company is considering an investment proposal to install new
milling controls at a cost of Rs 50,000. The facility has a life
expectancy of 5 years and no salvage value. The tax rate is 35
percent. Assume that the firm uses straight-line depreciation
method and the same is followed for tax purposes. The
estimated cash flows before depreciation and tax (CFBDT) from

the investment proposal are as follows:

Year
1
2
3
4
5

CFBDT
Rs
Rs
Rs
Rs
Rs

10,000
11,000
12,500
13,500
21,000

a. Compute the following

(i)
(ii)
(iii)
(iv)

Payback period
Accounting Rate of Return
IRR
NPV at 10 % discount rate.

(i) Payback period:

Year

CFBDT

Depreciation*

PBT

Taxes @
35%

(A)

(B)

( C)

(D) = (B) (C )

(E)

0
1
2
3
4
5

(50,000
)
10,000
11,000
12,500
13,500
21,000

10000
10000
10000
10000
10000

1,000
2,500
3,500
11,000

0
350
875
1225
3850

PAT
(F) =
(D) (E)

CFAT
(G) = (F) +
(C )

650
1,625
2,275
7,150

(50,000)
10,000
10,650
11,625
12,275
17,150

Cumulative
CFAT

(50,000)
(40,000)
(29,350)
(17,725)
(5,450)
11,700

Total
11,700
Payback period = Base year +( [unrecoverd cashflow of base year / cash flow of next year
of unrecovered year] * 12)
= 4 + ([5450 / 11700]*12)
there fore payback period = 4 years + 5.5897months = 4 years 6
months
CFBDT = Cash flows before depreciation & taxes
* depreciation - adopted SLM method & no salvage value, therefore
Rs.50000/5 years
(i.e.) Rs.10,000/- at the end of every year
PBT = Profits before taxes
PAT = Profits after taxes
CFAT = Cash flows after taxes
Base year = (just previous year of unrecovered cashflows turns into 0 or
+ve)

(ii) Accounting rate of return : (Average profits after depreciation & taxes / Initial
Investment (net)) * 100

Average profits after depreciation & taxes = Total Profits after tax / no of
years
= 11700 (as could be seen above) / 5 years
= Rs.2340/- per year
Initial investment = Rs.50,000/Therefore, accounting rate of return per year = (Rs.2340 /
Rs.50,000) * 100
= 4.68%
(iv) NPV at 10% discount Rate :
Year

0
1
2
3
4
5
NPV

CFAT

Discount rate *

(refer (i)

@ 10% (TVM)

(50,000)
10,000
10,650
11,625
12,275
17,150

1.000
0.909
0.826
0.751
0.683
0.621

Discounted
cash flows

(50,000)
9,091
8,802
8,734
8,384
10,649
(4,341)

Net present value = Present value of inflows - Present value of

outflows
Therefore, NPV = 45,659 50,0000
* Time value of money is calculated as 1 / (1+r)
power n
(iii)
IRR:
IRR is the rate of return at which NPV = 0
Which is calculated as follows: L1 + [NPV L1 / NPV L1 - NPV L2] (L2 L1)
Where L1 = 1st discount guess rate
L2 = 2nd discount guess rate
L1 assumed as 7%
Therefore NPV computed at 7% discount rate as
below:
NPV at 7% discount rate:

Year

0
1
2
3
4
5
NPV

CFAT

Discount rate *

(refer (i)

@ 5% (TVM)

(50,000)
10,000
10,650
11,625
12,275
17,150

1.000
0.935
0.873
0.816
0.763
0.713

Discounted
cash flows

(50,000)
9,346
9,302
9,489
9,365
12,228
(270)

L2 assumed as 6%
Therefore NPV computed at 6% discount rate as
below:
NPV at 7% discount rate:
Year

0
1
2
3
4
5
NPV

CFAT

Discount rate *

(refer (i)

@ 6% (TVM)

(50,000)
10,000
10,650
11,625
12,275
17,150

1.000
0.943
0.890
0.840
0.792
0.747

Discounted
cash flows

(50,000)
9,434
9,478
9,761
9,723
12,815
1,211

Applying the above in IRR formulae, we get = 7 + [-270/(-270+1211)]

(7 - 6)
= 7 +[ -270 / 941](1)
therefore IRR

=70.287
=
6.713%

ASSIGNMENT - B
1. (a) What are key issues considered by financial institutions while
appraising a project for term financing?
The primary aspect considered by financial institutions is feasibility of the
project. They review feasibility of the project in the following aspects:
1) Technical aspects (product/service demand, potential etc.,)
2) Commercial aspects (how margins are expected to yield, pricing etc.,)
3) Economic aspects (government rules & regulations regarding such product
or service etc.)
4) Financial implication (source of finances & mode of funding, etc)
5) Managerial aspects (managerial team behind the project/ capability of
management etc)
6) Security going to be offered, repayment terms & capability etc.
7) Time period etc.
1 (b) Discuss the key consideration in determining the debt-equity ratio
of the firm.
Debt equity ratio of the firm:
From managements perspective, Debt funds are always cheaper & it doesnt
result in dilution of control. Raising debt fund enhances the financial risk with
the firm, since obligation towards capital & interest repayments. Debt funds
are secured against assets of the company.
On the other side, Raising fund through equity involves low risk but result in
dilution of control. Repayment arises only in the event of liquidation
Ideal ratio for the firm 2 : 1 (i.e.) a firm can have two times of equity as its
debt funds.
2. What is Performance review and control in respect of the projects?
What are advantages of conducting it? What problems are
encountered in performance review and how can they overcome?
Performance review and control in respect of the projects:
The Performance review & control is undertaken to determine whether all the
planned activities and tasks have been successfully completed and to proceed
further in the project. In simple, this is basically a checkpoint to ensure that
the project has achieved its stated objectives as planned.
Advantages of Performance review: The following can be determined:

a) Is the project currently on schedule

b)
Is the project currently within budget
c)
Any critical project risks
d)
Any high priority issues
e)
Any substantial changes etc.,
Problems encountered in performance review and how can they
overcome:
A performance review is a critical step in delivering a successful project. If
reviews are not undertaken formally within the project life cycle, then the
project board will have reduced control over the progress of the project,
thereby increasing the level of risk to the overall project delivery.
To overcome the above, a project manager will present the performance
review at a board meeting detailing the below:
a) The original project vision, objectives, scope and deliverables
b) The deliverable completed by the project to date
c) The progress of the project against the delivery dates
d) Areas of slippage in terms of time, cost and quality
e) Key issues and risks that require attention.
3. A project has the following time schedule:
Activity

Time in weeks

1-2
1-3
2-4
3-4
3-5
4-9
5-6
5-7
6-8
7-8
8-9
8-10
9-10

4
1
1
1
6
5
4
8
1
2
1
8
7

Construct PERT network and compute

TE (Tail Event) and TL (Head Event) for each event.

Float for each activity.
Critical path and its duration

Note: Network diagram is given in excel format:

From the above network diagram, following paths have been

identified
:
Activity:
Time in weeks
Breakup
Total
1
2
3
4
5
6

1 - 2 - 4 - 9 - 10
1 -3 -4 -9 -10
1 - 3 - 5 - 7 - 8 - 9 - 10
1 - 3 - 5 - 7 - 8 - 10
1 - 3 - 5 - 6 - 8 - 9 - 10
1 - 3 - 5 - 6 - 8 - 10

4+1+5+7
1+1+5+7
1+6+8+2+1+7
1+6+8+2+8
1+6+4+1+1+7
1+6+4+1+8

Activity

1-2
1-3
2-4
3-4
3-5
4-9
5-6
5-7
6-8
7-8
8-9
8 - 10
9 - 10

17
14
25
25
20
20

duration

Tail
event

Head
event

EST
3*

LFT
4*

4
1
1
1
6
5
4
8
1
2
1
8
7

0
0
4
1
1
5
7
7
11
15
17
17
18

Critical path & its

duration
Critical path & its
duration

12
1
13
13
7
18
16
15
17
17
18
25
25

Note: Activities with '0' float are

critical & cannot be delayed
* Refer working note 1
EST - Earliest start time
LFT - Latest finish time
EFT- Earliest finish time
LST- Latest start time
Working Note: 1
EST - Computed from tail to head
LFT - Computed from head to tail
head
node

EST (in weeks)

(Breakup)

Total

EFT
5
(3
+
2)

LST
6

Total
float
7

(4 2)

(6 3)

4
1
5
2
7
10
11
15
12
17
18
25
25

8
0
12
12
1
13
12
7
16
15
17
17
18

8
0
8
11
0
8
5
0
5
0
0
0
0

1
2
3
4
5
6
7
8
9
10
Tail node

1
2
3
4
5
6
7
8
9
10

0
0+4(EST of head node 1 + duration of activity
1-2)
0+1(EST of head node 1 + duration of activity
1-3)
Highest of (4+1) or (1+1)
1+6 (EST of head node 3 + duration of activity
3-5)
7+4 (EST of head node 5 + duration of activity
5-6)
7+8(EST of head node 5 + duration of activity
5-7)
Highest of (15+2) or (11+1)
Highest of (5+5) or (17+1)
Highest of (18+7) or (17+8)
LFT (in weeks)
(Breakup)
Least of (1-1) or (12-4)
13-1
Least of (7-6) or (13-1)
18-5
Least of (16-4) or (15-8)
17-1
17-2
Least of (25-8) or (18-1)
25 7
Critical path duration

0
4
1
5
7
11
15
17
18
25

Total
0
12
1
13
7
16
15
17
18
25

Case Study
1. Detailed Report:
Introduction:
Any project will have following stages like INITIAION, PLANNING, EXECUTION &
CLOSURE collectively known as the project life cycle.
a) Preliminary Activities to be taken up before a large infrastructure
project can be started:
Proposed project needs to be studied in detail in respect of requirements,
feasible results, assess & select the desired result & obtaining a approval from
project sponsor.
CURRENT SCENARIO:
1) Proposed project: Task of Metro Project
2) Customer: Government of India
3) Requirements: To be completed with in a period of seven years.
4) Feasibility study:
Problem / constraint before me (project manager): to be completed within
a period of seven years
In this regard, Delhi metro project implementation (completed/delivered
with in a targeted time limit) history has been studied. From the study, it is
observed that the reasons that have contributed for completion with in
time schedule & budget is as follows:
a) Funding to the project very well frozen before commencement.
b) Proper & effective systems are put in place to overcome disputes,
corruption Political interference etc., & which has resulted in smooth
progress of the project.
c) Good professionalism & accountability
Solution for the current scenario: Before taking an approval from
Government of India for the metro project task, the issues in respect of
funding, approval for systems etc., needs to be put in place for smooth
implementation; needs to be agreed on, so as to complete the task with a
scheduled period of seven years.
b) Understanding the significance of the role of a project manager in
project execution:
The key objectives for the project manager are:
1. Project Initiation, which include defining the project scope, structure &
approach towards implementation.

2. Project Planning, which include freezing budget requirements & time

scheduling.
3. Project execution &
4. Closure of the project, which include releasing staff, resources and
equipment.
Role of a project manager in project execution:
a)
b)
c)
d)
e)
f)
g)
h)

Deployment of staff, assets and processes to the project

Regular monitoring of project progress against schedule
Control expenditure to ensure project delivery within budget
Ensure that defined quality targets are achieved, by undertaking quality
assurance and quality control.
Monitor, control and manage the implementation of project change
requests
Responsible for ascertaining risks & implement responsive actions
Gain customer acceptance of each deliverable
Keep project stakeholders regularly and suitably informed of project
progress.

c) Understanding the importance of the right work culture in successful

project management:
The following ensures right work culture exists, which is very important for
project success:
1) Roles and responsibilities of the team members need to be clearly defined
and communicated.
2) Time bound targets defined for each member
3) Clear criteria for rewards will promote and reinforce desired behavior.
Recognition and Rewards should be based on activities and performance
ensures improved work culture.
4) Policies and Procedures needs to be framed such that protect team
members from safety hazards.
The implementation study of Delhi Metro Project reveals that: during
the process of implementation, the project team faced many number of
technical and systematic challenges during the construction of the metro.
However, through thorough planning and an effective project design and a
good work culture, they were able to overcome all these hurdles. Further,
organizational culture was based on punctuality, honesty and a strict
adherence to deadlines.
Conclusion: As could be seen from the above facts, right work culture is very
important for project to achieve deadlines and overall success.
d) Recognize the importance of managing the various stake holders in a
project:

A stakeholder is a person or entity outside the project with a Specific Key

Interest or stake in the project.
Effective project management is not only completing the project on schedule
and with in the budget, but also managing the projects stakeholders.
Project manager is responsible to communicate to the stakeholders very
regularly through various reports such as;
a) Status reports (indicates how much of the work has been done),
b) Progress reports (indicates whether the project is on track, behind/ahead of
schedule, over/under budget etc.,
c) Trend analysis (indicates, from past performance data, predicts whether
performance is going to improve or fade in future, necessitates action to be
taken)
d) Forecast reports (indicates, based on current performance, how the project
will perform in future)
e) Variance reports (indicates, what the actual performance is compared with
the planned performance)
f) Earned value report (indicates the earned value of the project)
The study of Delhi Metro Project reveals that: the project team done well
in managing the projects stakeholders. The stakeholders included the
governments, contractors, the funding agencies and the general public.
Despite assurances that the team would enjoy autonomy, it faced political
pressure not only in its recruitment processes, promotions, and contract
awarding but also in land acquisition. The successful completion of the project
effectively silenced the critics who had been skeptical about the ability of an
Indian public sector organization to complete any project, let alone one as
complex and costly as the Delhi Metro, on time and within the budget.
e) Understand the difficulties involved in the execution of large
infrastructure projects in developing countries, and how these can
overcome:
This is the phase in which deliverables are physically built and presented to
the customer for acceptance.
During this process, a group of management processes (managing time, cost,
quality, change risks & issues, procurement-handling suppliers, customer
acceptance etc.,) are undertaken to monitor and control the deliverables.
Project manager is responsible for the deliverables. During the execution
process, he has to overcome following hurdles by performing above group of
management processes.

a) Risk issues (which include identification of risks, Risk analysis &

risk response planning): these issues can be overcome by Performing
Risk Management
b) Quality issues: The quality of the outcome is very important in order to
meet customers acceptance for the project. This can be achieved by
planning, training, product design validation, process validation, tests &
evaluation, quality audits, inspection etc. some of the techniques like,
sampling, standard deviation or sigma, control charts, scatter diagram are
all being used to achieve quality.
c) Procurement issues: It is one of the important and major project
execution processes. This include decisions like make or buy, type of
suppliers etc., These issues can be overcome by performing procurement
process which include planning, contracting, request seller responses,
select sellers etc.,
Project manager also has to overcome Political influences & legal & statutory
compliance issues to successfully execute the project with in the time
schedule & budget.
f) Importance of Financial Management tools:
Financial management tools are very important while accepting the project &
during the execution phase of the process.
Some of the tools like financial ratios, Net present value (present worth of
expected future cash flows at discounted rate), IRR (expected rate of return
out of the project) etc., are useful for decision-making.
Following Project financial tools are useful to review the progress and
performance of the project is as below:
Description
Indicates
Cost Variance Planned expenditure vs. actual spent. Negative
(CV)
indicates spent over budget, Positive means spent
under budget.
Schedule
Difference between planned to be in schedule vs.
Variance (SV)
actual scenario. Negative is behind schedule,
Positive is ahead of schedule.
Cost
The rate at which the project is performing in
Performance
comparison to how expect it to perform in terms
Index (CPI)
of costs. (means getting X cents out of every $1)
Schedule
The rate at which the project is performing in

Performance
Index (SPI)

comparison to how expect it to perform in terms

of the schedule.

2. Similarities between the two projects and dissimilarities.

A) SIMILARITIES:
a) Both are large infrastructure metro projects
B) DISSIMILARITIES:
a) Delhi metro project was a joint venture project between Government of India
& government of the national capital territory of Delhi collectively formed a
Delhi metro rail corporation to execute a project, whereas proposed
Government of India sponsors metro project.
b) Delhi metro project was a 10-year project, whereas proposed metro project is
scheduled to complete with in a period of 7 years.
3. Activities required immediately:
Assumptions: Project cost: 100 billion, Time Schedule: Seven Years, Project
estimated to complete in 3 phases. Each Phase is expected to take 2.3 years
appx & estimated to cost 33 billion each. (Appx.)
1. After obtaining an approval from sponsor, the first activity to start with is
Develop Project Charter, which defines the vision, objectives, scope and
deliverables for the project. It also provides the organization structure (roles
& responsibilities) and a summarised plan of the activities; resources and
funding required undertaking the project. Further, risks, issues, planning
assumptions and constraints are listed.
2. Develop Preliminary project scope statement which include planning,
definition, create a WBS (work breakdown structure)-subdividing the major
project deliverables into smaller, more manageable components.
3. Develop project management plan which include a group of plans such as
Resource plan, financial plan, quality plan, risk plan, acceptance plan,
communications plan, procurement plan etc.,
4. Direct and manage project execution, which include implementation of various
management processes (cost, quality, risk, communication, procurement
etc.,) to monitor and control the activities being undertaken.

Assignment - C

1. Risks will be identified during which risk management process(es)?

a) Quantitative risk analysis and risk identification
b) Risk identification and risk monitoring and control
c) Qualitative risk analysis and risk monitoring and control
d) Risk identification
e) None of the above.
Answer: (d) Risk Identification
2. Who is ultimately responsible for quality management on the project?
a) Project engineer
b) Project manager
c) Quality manager
d) Team member
Answer: (b) Project manager
3. A project manager has just been assigned to a new project and has been
given the
preliminary project scope statement and the project charter. The first thing
the project
manager must do is:
a) Create a project scope statement.
b) Confirm that all the stakeholders have had input into the scope.
c) Analyze project risk.
d) Begin work on a project management plan.
Answer: (d) Begin work on a Project management plan
4. You are taking over a project during the planning process group and discover
that six individuals have signed the project charter. Which of the following
should most concern you?
a) Who will be a member of the change control board
b) Spending more time on configuration management
c) Getting a single project sponsor
d) Determining the reporting structure
e) Both (a) and (b)
Answer: (d) Determining the reporting structure
5. A project manager is employed by a construction company and is responsible
for the furnishing of the completed building. One of the first things that the
project manager for this project should do is to write a:
a)
b)
c)
d)

Work breakdown structure.

Budget baseline.
Project charter.
Project plan.

Answer: (c) Project Charter

6. All of the following are characteristics of a project EXCEPT:
a) Temporary
b) Definite beginning and end
c) Interrelated activities
d) Repeats itself every month
Answer: (d) Repeats itself every month
7. The equivalent of cost reimbursable contracts is frequently termed:
a) Back charge contracts.
b) Fixed price contracts.
c) Progress payment contracts.
d) Cost plus contracts.
Answer: (d) cost plus contracts
8. A buyer extends a formal invitation that contains a scope of work that seeks a
response that will describe the methodology and results that will be provided
to the buyer. This is called:
a) Invitation to bid.
b) Request for information.
c) Request for proposal.
d) Request for bid.
Answer: (c) Request for proposal
9. A project manager must have some work done by an outside contractor. This
work has a great deal of risk associated with it, and it has become very
difficult to find a contractor willing to take on the job. Which of the following
types of contract would offer the greatest incentive to the contractor?
a) Cost plus percentage of cost as an award fee
b) Cost plus fixed fee
c) Cost plus incentive fee
d) Firm fixed price.
Answer: (c) Cost plus incentive fee
10.

The project management process groups are:

a) Initiating, planning, expediting, and control.

b) Plan, organize, develop, and control.
c) Plan, do, observe, commit.
d) Initiating, planning, executing, controlling, and closeout.
Answer: (d) Initiating, planning, executing, controlling, and closeout
11. In which project management process group is the detailed project budget
created?
a)
b)
c)
d)

Initiating
Before the project management process
Planning
Executing

Answer: (b) Before the project management process

12. Contract closure is different from administrative closure in that contract
closure:
a) Occurs before administrative closure.
b) Is the only one to involve the customer?
c) Includes the return of property.
d) May be done more than once for each contract.
Answer: (a) Occurs before administrative closure
13. During the full life cycle of the project, a plot of the projects expected
expenditures will usually follow a characteristic..S.. shape. This indicates
that:
a) There is a cyclic nature to all projects.
b) Problems will always occur in the execution phase.
c) There are high expenditures during closeout.
d) The bulk of the project budget will be spent in the execution phase.
Answer: (d) The bulk of the project budget will be spent in the execution
phase
14. What conflict resolution technique is a project manager using when he
says, "I cannot deal with this issue now!"
a) Problem solving
b) Forcing
c) Withdrawal
d) Compromising
Answer: (c) Withdrawal
15. A group of related projects that are managed in a coordinated way that
usually include an element of ongoing activity is called a:
a) Major project.
b) Project office.
c) Program.
d) Group of projects.
Answer: (a) Major Project
16. To control the schedule, a project manager is reanalyzing the project to
predict project duration. She does this by analyzing the sequence of activities
with the least amount of scheduling flexibility. What technique is she using?
a) Critical path method
b) Flowchart
c) Precedence diagramming
d) Work breakdown structure
e) Both (a) and (b).
Answer: (a) Critical Path Method
17. A project manager has just been assigned to a project. The document that
recognizes the existence of the project is called:

a) The statement of work.

b) The project assignment.
c) The project charter.
d) The product description.
Answer: (c) The Project charter
18.

A manager that manages a group of related projects is called a:

a) Project manager.
b) Project expediter.
c) Program coordinator.
d) Program manager.
Answer: (a) Project manager
19. If project A has a net present value (NPV) of Rs 30,000 and project B
has an NPV of Rs 50,000, what is the opportunity cost if project B is
selected?
a) Rs 23,000
b) Rs 30,000
c) Rs 20,000
d) Rs 50,000
Answer: (b) Rs 30,000
20. A project manager is using weighted average duration estimates to
perform schedule network analysis. Which type of mathematical analysis is
being used?
a) Critical path method
b) PERT
c) Monte Carlo
d) Resource leveling
Answer: (b) PERT
21. An activity has an early start (ES) of day 3, a late start (LS) of day 13, an
early finish (EF) of day g, and a late finish (LF) of day ig. The activity:
a) Is on the critical path.
b) Has a lag.
c) Is progressing well.
d) Is not on the critical path.
Answer: (d) Is not on the Critical Path
22. Which phase of the project is likely to have the greatest amount of its
funding spent?
a) Initiating
b) Executing
c) Planning
d) Closeout
Answer: (b) Executing
23. Which of the following represents the estimated value of the work actually
accomplished?

a) Earned value (EV)

b) Planned value (PV)
c) Actual cost (AC)
d) Cost variance (CV)
Answer: (a) Earned value (EV)
24. A project manager is managing a project. The original scope baseline of the
project was budgeted at Rs 100,000. Since works on the project started there
have been seventeen authorized and approved changes to the project. The
changes have a value of Rs 17,000 and the cost of investigating them prior to
their approval was Rs 2,500. What is the current budget (in Rs) for the
project?
a) 100,000
b) 114,500
c) 117,000
d) 119,500
e) None of the above
Answer: (c) 117,000
25. You are managing a project in a just in time environment. This will require
more attention, because the amount of inventory in such an environment is
generally:
a) 45 percent.
b) 10 percent.
c) 12 percent.
d) 0 percent.
Answer: (d) 0 percent
26. A task was scheduled to use two persons, full time, and take two weeks to
complete.
Instead, the project manager was only able to assign one person to this task.
At the end of two weeks, the person assigned to the task was 75% complete.
What is the cost
performance index?
a) 0.75
b) 1.50
c) 0.25
d) 1.15
Answer: (a) 0.75
27.

Which of the following is considered to be a simulation technique?

a) PERT analysis
b) GERT analysis
c) Monte Carlo analysis
d) Critical path method
Answer: (c) Monte Carlo analysis
28. Project A has an internal rate of return (IRR) of 21 percent. Project B has
an IRR of 7
percent. Project C has an IRR of 31 percent. Project D has an IRR of ig
percent. Which of these would be the BEST project?

a) Project A
b) Project B
c) Project C
d) Project D
Answer: (c) Project C
29. The program evaluation and review technique (PERT) method of scheduling
differs from the critical path method (CPM) because the PERT method:
a) Uses weighted averages of activity durations to calculate project duration.
b) Uses dummy activities to represent logic ties.
c) Uses free float instead of total float in the schedule calculations.
d) Uses bar charts instead of logic diagrams to portray the schedule.
Answer: (a) uses weighted averages of activity durations to calculate
project duration
30. In attempting to complete the project faster, the project manager looks at
the cost
associated with crashing each activity. The best approach to crashing would
also include looking at the:
a) Risk impact of crashing each activity.
b) Customer's opinion of which activities to crash.
c) Boss's opinion of which activities to crash and in which order.
d) Project life cycle phase in which the activity is due to occur.
Answer: (a) Risk impact of crashing each activity
31.

The project is not completed until:

a) The project scope is completed, administrative closure is completed and

payment is received.
b) Formal acceptance is received, and any other requirements for project
closure as stated in the contract are met.
c) The customer is satisfied and final payment is received.
d) Lessons learned are completed.
Answer: (d) Lessons learned are completed
32. During project executing, a team member comes to the project manager
because he is not sure of what work he needs to accomplish on the project.
Which of the following documents contain detailed descriptions of work
packages?
a) Work breakdown structure (WBS) dictionary
b) Activity list
c) Preliminary project scope statement
d) Project scope management plan
Answer: (a) Work breakdown structure (WBS) dictionary
33. You are asked to prepare a budget for completing a project that was
started last year and then shelved for six months. All the following would be
included in the budget except?
a) Fixed costs
b) Sunk costs

c) Direct costs
d) Variable costs
Answer: (b) Sunk costs
34. During the project life cycle, in which part of the life cycle will risk be the
lowest?
a) Initiation
b) Planning
c) Execution
d) Closeout
Answer: (a) Initiation
35. A project manager managing any project should perform risk analysis at
what stage of the project:
a) Just before any major meeting with the client.
b) On a regular basis throughout the project.
c) Only when justified by the awareness of new risks becoming a possibility.
d) When preparing the project plan.
e) None of the above
Answer: (b) On a regular basis throughout the project
36. You are the project manager for a high visibility project. The margin on this
project is low, and it is extremely important that the cost estimates for the
work on the project be accurate. While reviewing the cost estimates for this
project you notice that one of the cost estimates for an element in the WBS is
10% higher than two previous projects for very similar work. What should you
do?
a) Accept the estimate because you trust all of the people on your project
team, and they are responsible for estimates.
b) Reduce the estimate and add the additional budget to the management
reserve.
c) Ask the person responsible for the estimate to explain the difference
and bring supporting information to you.
d) Reduce the estimate and add the additional budget to the contingency
reserve.
Answer: (c) Ask the person responsible for the estimate to explain
the difference and bring supporting information to you.
37. The project life cycle differs from the product life cycle in that the project
life cycle:
a) Does not incorporate a methodology.
b) Is different for each industry.
c) Can spawn many projects.
d) Describes project management activities.
Answer: (d) Describes project management activities
38. A manager and the head of engineering discuss a change to a major work
package. After the meeting, the manager contacts you and tells you to
complete the paperwork to make the change. This is an example of:

a) Management attention to scope management.

b) Management planning.
c) A project expediter position.
d) A change control system.
Answer: (d) A change control system
39. All of the following are parts of direct and manage project execution
except?
a)
b)
c)
d)

Identifying changes
Using a work breakdown structure
Implementing corrective actions
Setting up a project control system

Answer: (a) Identifying changes

40. A project manager does not have much time to spend planning before the
mandatory start date arrives. He therefore wants to move through planning as
effectively as possible. Which of the following would you recommend?
a) Make sure you have a completed preliminary project scope statement and
then start the WBS.
b) Create an activity list before creating a network diagram.
c) Document all the known risks before you document the high-level
assumptions.
d) Finalize the quality management plan before you determine quality metrics.
Answer: (a) Make sure you have a completed preliminary project scope
statement and then start the WBS.
41.

Which of the following is not a typical project milestone?

a) Completion of design
b) Production of a prototype
c) Training of project members
d) Completed testing of the prototype
e) Approval of a pilot run
Answer: (e) Approval of a pilot run
42. Which of the following are organizational structures used to tie the project
to the parent firm?
a) Pure project
b) Functional project
c) Matrix project
d) Only A and B
e) Only B and C
f) A, B, and C
Answer: (c) Matrix project
43.

The advantages of pure project include all but:

a) The project manager has full authority over the project.

b) Team pride, motivation, and commitments are high.

c) Decisions are made quickly.

d) A team member can work on several projects.
e) Team members report to one boss.
Answer: (a) The project manager has full authority over the project
44. The advantage(s) of the network planning models over the Gantt chart is
(are) that:
a) they are easy to use and quite widely understood
b) the precedence relationships in network scheduling are explicitly shown
c) they are less costly to use
d) both A and B
e) both B and C
Answer: (d) both A and B
45.

"Slack" refers to the difference between:

a) latest and earliest times

b) finish and start times
c) observed and predicted times
d) optimistic and pessimistic times
e) none of the above
Answer: (e) none of the above
46. Which of the following would not be considered in deciding how far to
minimum-cost schedule (crash) a project?
a) Project overrun penalties
b) Incentives for early completion
c) Indirect project costs (e.g. interest on a construction loan)
d) The normal duration times of tasks not on a critical path
e) How far individual tasks can be crashed
Answer: (d) The normal duration times of tasks not on a critical path
47.

Which statement is true about Project Scheduling?

a) Slack is defined as the difference between the earliest start and the latest
finish of a task.
b) The critical path seldom has a slack time of zero.
c) Project crashing is an effort to maximize project duration.
d) The earliest finish for a task is equal to the early start plus the task
duration.
e) None of the above statements are true.
Answer: (e) None of the above statements are true
48. There is an activity "A". The earliest activity "A" can be completed is 8
minutes, the most likely time is 10 minutes, and the latest activity "A" can be
completed is 12 minutes. Assume that a Beta Distribution is used to describe
the activity time. What is the expected time needed to complete activity A?
a)
b)
c)
d)

8 minutes
10 minutes
12 minutes
11 minutes

e) None of the above

Answer: (b) 10 minutes
49. There is an activity "A". The earliest activity "A" can be completed is 8
minutes, the most likely time is 10 minutes, and the latest activity "A" can be
completed is 12 minutes. Assume that a Beta Distribution is used to describe
the activity time. Which of the following is the standard deviation of this
activity A?
a) sqrt (4/36)
b) sqrt (16/36)
c) sqrt (10/36)
d) 4/36
e) 16/36
Answer: (b) sqrt (16/36)