Project Management

Instructions to Candidates:

  1. Do not open this exam paper until you are told by the invigilator.
  2. This exam paper consists of __6__  pages ( including this cover sheet)
  1. Students are expected to respect the College code of Academic honesty and conduct themselves according to these standards. Students who violate academic integrity standards during the exams will be subject to disciplinary measures as stated in the Student Academic Integrity Policy in the student handbook.

 

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Q1Answer the following questions on Feasibility Study:(CLO4) (10marks)

  1. Explain the difference between Feasibility study and business plan?( 1 marks)

 

 

 

 

 

 

 

  1. Al Dar wants to invest in a new portable solar electricity product with a life of 8 years. Mr. Assif the project manager is tasked to perform an economic feasibility study about the project and submit a report. Mr. Assif collected the following data about the project to conduct the feasibility analysis:
  • State Government in order to promote solar energy provides a tax-free subsidy for $2.5 million on initial capital investment.
  • The equipment cost at the beginning of the project will be $17.5 million. The project also requires some additional equipment at the end of the third year for $1.25 million.
  • The total life of the original equipment is 8 years with zero resale/ salvage value. Life of additional equipment is 5 years and a salvage value of $125,000.
  • The working capital requirement at the initiation of the project is $2 million. The working capital will get fully realized in the ending year.
  • Full financing for the project is done by issuing equity.
  • The estimated sales volume over the 8 year period is:-
  • Expected Sales price = $120 per unit.
  • Variable expenses will amount to 60% of sales revenue.
  • The fixed operating cost will amount to $1.8 million per year.
  • The loss of any year will be set- off from the profits of the subsequent two years.
  • AlDAR is subjected to a tax rate of 30%.
  • AlDar follows the straight-line method of depreciation.

Mr. Assif calculates the net present value (NPV) of the project by discounting the cash-flows at 12%. If NPV is positive then the project is feasible and the company can consider the project to be taken.

Answer the following questions: ( 9 marks)

  1. The Initial Cash outflow? (1 Mark)

 

 

  1. Find out the depreciation value by using the following equation:

(1 Mark)

Depreciation = Asset Cost – Salvage Value / Useful Life of Asset

 

 

  1. Find out the Statement of Profit Before Tax (PBT) ( 2 marks)
Year Sales Volume Sales price Net sales Variable cost Fixed cost Depreciation PBT
1              
2              
3              
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  1. Find out the Statement of Net Cash Inflow:( 2 marks)

Hint: when company incur loss it pay zero tax for that year

Year PBT Tax @30% PAT( Paid after Tax) Depreciation Cash inflows
           
           
           
           
           

 

  1. Find the Statement for Calculation of Discounted Cash Flows ( 2 Marks)
Year Cash inflows PV factor @12% Discounted Cash flows
1      
2      
3      
4      
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6      
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8      
8      
Total Discounted Cashflows  

 

  1. What is the NPV? ( 1 Mark)

NPV = Trade Discount Cash Inflows – Initial Cash Outflows

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Q2.Risk Assessment : ( CLO5) (10 marks)

  1. What are the project risk assessment steps? (5 Marks)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  1. Apply the steps in question A to perform a risk assessment for a Marketing Campaign project. ( 5 Marks)

 

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