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Chapter !: &ro"le$s !'

!. wo new software pro#ects are proposed to a youn%* start'up co$pany. he

+lpha pro#ect will cost ,1-*--- to develop and is epected to have annual netcash flow of ,/-*---. he 0eta pro#ect will cost ,!--*--- to develop and is

epected to have annual net cash flow of ,-*---. he co$pany is very

concerned a"out their cash flow. sin% the pay"ack period* which pro#ect is

"etter fro$ a cash flow standpoint Why

$ayback + Investment -nnual Savings

$roject -lpha" )/0,000 10,000 + *.2/ years

$roject #eta" (00,000 /0,000 + 1.0 years

$roject -lpha is the better payback.

2. + five'year pro#ect has a pro#ected net cash flow of ,1*---* ,!*---* ,2-*---*

,!-*---* and ,1*--- in the net five years. 3t will cost ,-*--- to i$ple$ent the

pro#ect. 3f the re4uired rate of return is !- percent* conduct a discounted cash

flow calculation to deter$ine the 5&6.

+ 0 C 7 8 9 H

1

! 8ercise !.2

2 5et &resent 6alue 8a$ple

/ &ro#ect !.2 ;ear - ;ear 1 ;ear ! ;ear 2 ;ear / ;ear

< 3nvest$ent ',-*---

= Cash 3nflows ,1*--- ,!*--- ,2-*--- ,!-*--- ,1*---

> Re4uired Rate of Return !-?

@

1- 5&6 A ,1!*>@ 9or$ula: AC*7=:H=)

Since the 3$4 is positive, accept project.

/. ;ou work for the 2 co$pany* which epects to earn at least 1> percent on its

invest$ents. ;ou have to choose "etween two si$ilar pro#ects. ;our analysts

predict that inflation rate will "e a sta"le 2 percent over the net = years. 0elowis the cash flow infor$ation for each pro#ect. Which of the two pro#ects would

you fund if the decision is "ased only on financial infor$ation Why

O$e%a +lpha

;ear 3nflow Outflow 5etflow ;ear 3nflow Outflow 5etflow

Y0 0 ((/,000 &((/,000 Y0 0 *00,000 &*00,000

Y) 0 )50,000 &)50,000 Y) /0,000 )00,000 &/0,000

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Y( )/0,000 0 )/0,000 Y( )/0,000 0 )/0,000

Y* ((0,000 *0,000 )50,000 Y* (/0,000 /0,000 (00,000

Y1 ()/,000 0 ()/,000 Y1 (/0,000 0 (/0,000

Y/ (0/,000 *0,000 )2/,000 Y/ (00,000 /0,000 )/0,000

Y6 )52,000 0 )52,000 Y6 )70,000 0 )70,000

Y2 )00,000 *0,000 20,000 Y2 )(0,000 *0,000 50,000

Total ),072,000 /0/,000 /7(,000 Total ),(00,000 /*0,000 620,000

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+ 0 C 7 8 9 H 3

1

! 8ercise !./a

2 5et &resent 6alue 8a$ple Co$parin% wo &ro#ects

/

&ro#ect O$e%a ;ear - ;ear 1 ;ear ! ;ear 2 ;ear / ;ear ;ear < ;ear =

< Re4uired Rate of Return 1>?

= 3nvest$ent ',!!*---

> Cash 3nflows ',1@-*--- ,1-*--- ,1@-*--- ,!1*--- ,1=*--- ,1@=*--- ,=-*---@ 5&6 A ,11@*@ 8ormula $roject 9mega" +'2:3$4;#6,%7"?

12 3nvest$ent ',2--*---

1/ Cash 3nflows ',-*--- ,1-*--- ,!--*--- ,!-*--- ,1-*--- ,1>-*--- ,@-*---

1 5&6 A ,1=-*--- ,@-*---

2! 5&6 A ,1!@*2< 8ormula $roject -lpha" +'*0:3$4;#(5,%*)"

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=. he Custo$ 0ike Co$pany has set up a wei%hted scorin% $atri for evaluation of

potential pro#ects. 0elow are three pro#ects under consideration.

a. sin% the scorin% $atri "elow* which pro#ect would you rate hi%hest Eowest

". 3f the wei%ht for FStron% SponsorG is chan%ed fro$ !.- to .-* will the pro#ect

selection chan%e What are the three hi%hest wei%hted pro#ect scores with this new

wei%htc. Why is it i$portant that the wei%hts $irror critical strate%ic factors

a. ate $roject / the highest and $roject ( the lowest.b. Yes. Three highest are $rojects *, /, and ). >iven the new strong sponsor weight,

$roject * becomes the first choice. ?owever, note that $roject / is still the neare@uivalent of $roject * by the weighting scheme.

c. It is important that the weights mirror critical strategic factors because failure to do sowill cause selection of projects that do not contribute the most to the strategic plan.

'hapter ( Organization Strategy and Project Selection )2

68

57

99

85

107

95

66

117

88

116

Part b.Part a.

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Chapter 2: Case: Orion Syste$s

OR3O5 Syste$s (+)

1. What reco$$endations would you $ake to Rosas a"out or%aniin% the a%uar pro#ect*

and why

3nclude $anufacturin%* 4uality* and lo%istical support in the pro#ect $ana%e$ent

structure the desi%n phase.

se a dedicated pro#ect tea$to i$prove the inte%ration and pro#ect efficiency.

Consider concurrent en%ineerin%Ioperationto shorten the pro#ect duration.

!. How would you chan%e the or%aniational chart and $aster plan to reflect thesechan%es

Redraw the $aster plan to en%a%e in $anufacturin% and lo%istical support in

parallel to desi%n* to shorten its lead ti$e. Consider the use of start'to start la%s.

Refor$ulate the co$position of the top pro#ect $ana%e$ent tea$ to "etter cross'

functional inte%ration. +dd J+ and 3ES $ana%ers to the pro#ect or%aniation.

OR3O5 Syste$s (0)

1. What are the $a#or chan%es "etween this plan and the way OR3O5 has $ana%edpro#ects in the past

8nhanced cross'functional inte%ration (especially "etween desi%n and

$anufacturin%)

+ccelerated pro#ect co$pletion ti$e

&ro#ect $ana%e$ent now covers the entire desi%n* $anufacturin%* and delivery

process* with &roduction* 3ES* and J+ $ana%ers as part of the top pro#ect

$ana%e$ent tea$.

8panded responsi"ilities of the tea$ leaders* responsi"le for developin% and testin%

of specific su"syste$s (includin% su"syste$ 4uality and $anufactura"ility* "ud%et*

cost and 4uality). ea$ leaders will act as pro#ect $ana%ers for their specific

syste$ (delivera"le) of the pro#ect.

!. How well do you "elieve these chan%es deal with the pro"le$s identified in &art +

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&roduction costs should "e reduced "ecause $anufacturin% issues will "e

incorporated in the desi%n and develop$ent process.

Juality should "e i$provedsince it will "e factored directly into the desi%n of new

products.

Custo$er supportshould "e i$proved "ecause they will "e $ore actively involved

in the desi%n and develop$ent phase. 8valuation should enhance their co$$it$ent

as well as provide the$ with a head start in preparin% docu$entation and desi%nin%

trainin% pro%ra$s.

&ro#ect ownership should "e enhanced "y insistin% that at least half of the personnel

work full ti$e on the pro#ect. Core %roup workin% full ti$e on the pro#ect should

i$prove tea$ cohesion and productivity.

Scope creep should "e reduced "ecause tea$ leaders are $ore accounta"le for"ud%et and schedule. Eikewise* the active involve$ent of professionals fro$

$anufacturin%* support* and J+ should help the desi%n en%ineers to pay attention

to (re$ain focused on) practical considerations.

2. Who is likely to support this plan Who is not likely to support this plan

he desi%n en%ineersare likely* at least at first* not to "e supportive of the plan*

"ecause they now $ust work as partners with $anufacturin%* J+* and lo%istical

support to co$plete pro#ects.

he other %roups are likely to "e very supportiveof the plan since they have $uch

$ore say over decisions that i$pact their work.

ea$ leaders should welco$e the chan%eas their role has epanded with added

responsi"ility and %reater accounta"ility.

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Chapter /: &