Project Planning & Management Objective questions

1. Define Project Management and outline its features clearly.

Project management is an organised venture for managing projects, involves scientific application of modern tools and techniques in planning, financing, implementing, monitoring, controlling and coordinating unique activities or task produce desirable outputs in accordance with the determined objectives with in the constraints of time and cost

2. Discuss the process of generating and screening the project ideas.

The process of project selection consists of following stages :

·         Idea generation

·         Environment appraisal.

·         Corporate appraisal

·         Scouting for project ideas.

·         Preliminary screening.

·         Project rating index

·         Sources of positive Net Present Value.

·         Entrepreneur qualities

 3. What is financial analysis of Projects?

Finance is one of the most important prerequisites to establish an enterprise. It is finance only that facilitates an entrepreneur to bring together the labour, machines and raw materials to combine them to produce goods. In order to adjudge the financial viability of the project, the following aspects need to be carefully analysed :

• Cost of capital

• Means of finance

• Estimates of sales and production

• Cost of production

• Working capital requirement and its financing

• Estimates of working results

• Break-even point

• Projected cash flow

• Projected balance sheet.

 4. Discuss the concept of project life cycle.

Project lifecycle is spread over a period of time. There is an unavoidable gestation period for the complex of activities involved to attain the objectives in view. This gestation period, however, varies from project to project but it is possible to describe, in general term, the time phasing of project planning activities common to most projects. The principal stages in the life of a project are :

•        Identification

•        Initial formulation

•        Evaluation (selection or rejection)

•        Final formulation (or selection)

•        Implementation

•        Completion and operation

5. What factors are considered in technical analysis ?

Technical analysis implies the adequacy of the proposed plant and equipment to prescribed norms. It should be ensured whether the required know how is available with the entrepreneur. The following inputs concerned in the project should also be taken into consideration.

•        Availability of Land and site

•        Availability of Water Power, transport, communication facilities.

•        Availability of servicing facilities like machine shop, electric repair shop etc.

•        Coping with anti pollution law

•        Availability of work force

•        Availability of required raw material as per quantity and quality.

 6. Define the term ‘Project’.

Gillinger defines “project” as the whole complex of activities involved in using resources to gain benefits. Project management institute, USA defined project as “a system involving the co-ordination of a number of separate department entities throughout organization, in a way it must be completed with prescribed schedules and time constraints”.

7. What are the methods of Project Appraisal?

Appraisal of a proposed project includes the following analyses :

•        Economic analysis

•        Financial analysis

•        Market analysis

•        Technical analysis

•        Managerial competence

•        Ecological analysis

•         

 8. How would you use SWOT analysis to identify and select a project for SSI?

SWOT analysis represents conscious, deliberate and systematic efforts by an organisation to identify opportunities that can be profitably exploited by it

9. What is capital expenditure?

Capital expenditures, commonly known as CapEx, are funds used by a company to acquire, upgrade, and maintain physical assets such as property, buildings, an industrial plant, technology, or equipment. ... This type of financial outlay is also made by companies to maintain or increase the scope of their operations

10.What are the method of evaluating investment project.

There are two broad criteria of capital budgeting :

1. Non discounting criteria

The method of capital budgeting are the techniques which are used to make comparative evaluation of profitability of investment.

The non-discounting methods of capital are as follows :

• Pay back period method (PBP)

• Accounting rate of return method (ARR)

2. Discounting Criteria

• Net present value method (NPV)

• Internal rate of return method (IRR)

• profitability index method (PVI)

11. What is capital budgeting ?

A capital budgeting decisions may be defined as the firm’s decision to invest its current funds most efficiently in the long-term assets in anticipation of an expected flow of benefits over a series of years. In other words, “capital budgeting is used to evaluate the expenditure decisions such as acquisition of fixed assets, changes in old assets and their replacement.”

12. What is capital budgeting  process?

Capital budgeting is a complex process which may be divided into five broad phases. These are :-

•        Planning

•        Analysis

•        Selection

•        Implementation

•        Review

13. What are the Elementary Investment Strategies

The building blocks of the corporate resource allocation strategy are the following elementary investment strategies :

•        Replacement and modernisation

•        Capacity expansion

•        Vertical integration

•        Concentric diversification

•        Conglomerate diversification’

•        Divestment

14.  What is BCG Product Matrix ?

A tool for strategic (product) planning and resource allocation, the Boston Consulting Group (BCG) product portfolio matrix analyses products on the basis of (a) relative market share and (b) industry growth rate. BCG Product Portfolio Matrix classifies products into four broad categories

•        Stars Product which enjoy a high, market share and a high growth rate are referred to as stars.

•        Question marks Products with high growth potential but low present market share are called question marks.

•        Cash Cows Products which enjoy a relatively high market share but low growth potential are called cash cows.

•        Dogs Products with low markets share and limited growth potential are referred to as dogs.

15. What is Market Survey?

 It refers to the systematic collection, recording and analysis of data in order to develop an appropriate information base for decision-making.

16. What is Trend Projection Method ?

It consists of determining the trend of consumption by analyzing past consumption statistics and projecting future consumption by exptrapolating the trend.

17. What is Survey ?

A survey consists of gathering data by interviewing a limited number of people selected from a larger group.

18.  What is Work Schedule ?

The work schedule, as its name suggests, reflects the plan of work concerning installation as well as initial operation. The purpose of the work schedule is:

·         To anticipate problems likely to arise during the installation phase and suggest possible means for coping with them.

·         To establish the phasing of investments taking into account availability of finances.

·         To develop a plant of operations covering the initial period (the running in period).

19.What is Interest rate risk ?

Interest rate risk is the variation in the single period rates of return caused by the fluctuations in the market interest rate. Most commonly interest rate risk affects the price of bonds, debentures and stocks. The fluctuations in the interest rates are caused by the changes in the government monetary policy and the changes that occur in the interest rates of treasury bills and the government bonds.

20. What is Purchasing Power Risk ?

 Variations in the returns are caused also by the loss of purchasing power of currency. Inflation, is the reason behind the loss of purchasing power. The level of inflation proceeds faster than the increase in capital value. Purchasing power risk is the probable loss in the purchasing power of the returns to be received. The rise in price penalizes the returns to the investor, and every potential rise in price is a risk to the investor.

21. What do you understand ny word social costs ?

The term “social costs” refers to all those harmful consequences and damages which the community on the whole sustains as a result of productive processes and for which private entrepreneurs are not held responsible.

22. What do you understand by word social cost-benefit analysis ?

The social cost-benefit analysis is a tool for evaluating the value of money, particularly of public investments in many economies. It aids in making decisions with respect to the various aspects of a project and the design programs of closely interrelated projects.

23. What are market imperfections ?

The common market imperfections found in developing countries are: (i) rationing, (ii) prescription of minimum wage rates, and (iii) foreign exchange regulation.

24.What are the steps  social-cost benefit analysis ?

Social-cost benefit analysis involves the following steps:

1. Estimates of costs and benefits which will accrue to the project implementing body.

2. Estimates of costs and benefits which will accrue to individual members of society as consumers or as suppliers of factor input.

3. Estimates of costs and benefits which will accrue to the community.

4. Estimates of costs and benefits which will accrue to the National Exchequer.

5. Discounting the costs and benefits which accrue over a period of time to determine the feasibility of the project.

25. What are the stages of UNITED NATIONS INDUSTRIAL DEVELOPMENT ORGANISATION (UNIDO) APPROACH ?

The UNIDO method of project appraisal involves five stages:

1. Calculation of financial profitability of the project measured at market prices.

2. Obtaining the net benefit of project measured in terms of economic (efficiency) prices.

3. Adjustment for the impact of the project on savings and investment.

4. Adjustment for the impact of the project on income distribution.

5. Adjustment for the impact of project on merit goods and demerit goods whose social values differ from their economic values.

26. What is Capital rationing ?

Capital rationing  exists when funds available for investment are inadequate to undertake all projects which are otherwise acceptable. Capital rationing may arise because of an internal limitation or an external constraint. Internal capital rationing is caused by a decision taken by the management to set a limit to its capital expenditure outlays; or, it may be caused by a choice of hurdle rate higher than the cost of capital of the firm. Internal capital rationing, in either case, results in rejection of some investment projects which otherwise are acceptable. External capital rationing arises out of the inability of the firm to raise sufficient amounts of funds at a given cost of capital. In a perfect market, a firm can obtain all its funds requirement at a given cost of capital. In the real world, however, the firm can raise only a limited amount of funds at a given cost of capital. Beyond a certain point, the cost of capital tends to increase.

27. What is Project Indivisibility ?

When a capital project is to accepted or rejected in toto and cannot be accepted partially it is said to be project in divisibility.

28. How does PERT/CPM help?

The PERT/CPM is capable of giving answers to the following questions to the project manager :

·         when will the project be finished ?

·         when is each individual part of the scheduled to start and finish ?

·         of the numerous jobs in the project, which one must be timed to avoid being late ?

·         is it possible to shift resources to critical jobs of the project from other non-critical jobs of the project without affecting the overall completion time of the project ?

·         among all the jobs in the project, where should management concentrate its efforts at one time ?

29 .What are Rules for constructing a project network :

Three simple rules govern the construction of a project network :

1) Each activity must be represented by only one directed arc or arrow.

2) No two activities can begin and end on the same two nodes circle. A situation like the one shown in the following figure is not permissible.

3) There should be no loops in the network. A situation like the one shown in the figure given below is not permissible

30. What do you mean by Project Finance ?

Project finance refers to the financing of long-term infrastructure, industrial projects and public services based upon a non-recourse or limited recourse financial structure where project debt and equity used to finance the project are paid back from the cash flow generated by the project

31. Where is Project Finance required ?

Project finance is used extensively in the following sectors.

·         Oil and gas

·         Mining

·         Electricity Generation

·         Water

·         Telecommunications

·         Road and highways

·         Railways and Metro systems

·         Public services

32. What are the sources of Project Finance ?

·         Equity Capital

·         Preference Capital

·         Debentures

·         Rupees term loans

·         Foreign currency term loans

·         Euro issues

·         Deferred credit

·         Bill rediscounting scheme

·         Suppliers line of credit

·         Seed capital assistance

·         Government subsidies

·         Sales tax deferment and exemption

·         Unsecured loans and deposits

·         Lease and hire purchase finance

·         Public Deposit

·         Bank Credit

33. What is Deferred Credit ?

Many a time the suppliers of machinery provide deferred credit facility under which payment for the purchase of machinery is made over a period of time. The interest rate on deferred credit and the period of payment vary rather widely. Normally, the supplier of machinery when he offers deferred credit facility insists that the bank guarantee should be furnished by the buyer

34. What are Key Financial Indicators ?

The key financial indicators used by financial institutions while evaluating projects are the internal rate of return, the debt service coverage ratio, and the breakeven point.

35. What is leasing?

 It is an agreement between two parties whereby one party gives the right to use an asset to another party for a consideration for a definite period of time.