# Project Management

Question 1

The following are the cash-follow information for two candidate projects.

Period

Cash Flow Project 1

Cash Flow Project 2

0

-72200

-76000

1

18300

35560

2

20200

40440

3

21340

31850

4

42360

22750

5

45620

21200

6

52480

20250

Interest Rate = 12%

Please, select all the correct options

1.  Project 1 has sorter pay back period

2.  Project 2 has sorter pay back period

3.  Project 1 has higher IRR

4.  Project 2 has higher IRR

5.  Profitability Index of Project 1 is better than Project 2

6.  Profitability Index of Project 2 is better than Project 1

7.  NPV of Project 1 is greater than Project 2

8.  NPV of Project 2 is greater than Project 3

9.  Based on IRR, project 1 should be selected

10.  Based on IRR, project 2 should be selected

11.  Based on NPV, project 1 should be selected

12.  Based on NPV, project 2 should be selected

Question 2

Calculate the RPN for each of the following threat

Threat

Probability

Impact

Ability to Detect

RPN

A

7

4

6

B

5

5

5

C

9

1

7

Question 3

Suppose your organization is using a legacy software. Some influential stakeholders believe that by upgrading this software your organization can save millions, while others feel that staying with the legacy software is the safest option, even though it is not meeting the current company needs.

The stakeholders supporting the upgrade of the software are further split into two factions: those that support buying the new software and those that support building the new software in-house.

In this scenario, you can either:

Build the new software: the associated cost is \$500,000.

Buy the new software: the associated cost is \$750,000.

Stay with the legacy software: the associated cost is mainly maintenance and will amount to \$100,000.

The Buy the New Software and Build the New Software options will lead to either a successful deployment or an unsuccessful one. If the deployment is successful then the impact is zero, because the risk will not have materialized. However, if the deployment is unsuccessful, then the risk will materialize, and the impact is losing of \$2 million. The Stay with the Legacy Software option will lead to only one impact, which is losing of \$2 million, because the legacy software is not currently meeting the needs of the company.

For the Buy the New Software, the chance for successful deployment is 95%.

For the Build the New Software options, the chance for unsuccessful deployment is 40%.