Project Management

 

 

 

ASSIGNMENT 1

 

 

Course Title: Project Management

 

 

 

 

 

Exercise:

Suppose a small city is considering building a set of public baseball diamonds on vacant land owned by the city. The Recreation Department presents two proposals. Proposal A is to build the entire park in the first year. Proposal B is to build half of the park in the first year and expand the park in the sixth year at a higher cost. Both proposals generate revenue from concession sales. Since the baseball diamonds would be located on city property, an opportunity cost of $10000 is included as the initial cost of both proposals. Assuming a discount rate of 3 percent and that both options have a life of eight years.

 

• Proposal A:

 

Year	0	1	2	3	4	5	6	7	8
Benefits	$0	$0	$2500	$2500	$2500	$25000	$25000	$25000	$25000
Costs	$10000	$20000	$4000	$4000	$4000	$4000	$4000	$4000	$4000

 

• Proposal B:

 

Year	0	1	2	3	4	5	6	7	8
Benefits	$0	$0	$5000	$5000	$5000	$5000	$15000	$15000	$15000
Costs	$10000	$15000	$2000	$2000	$2000	$2000	$1700	$4000	$4000

 

 

For each proposal,

1. a) Calculate: (You are requested to submit a word file for this section)
2. Net present value (NPV)
3. Return on investment (ROI)
4. Payback period (PBP)

 

1. b) Use Excel sheet to find: (You are requested to submit an excel file for this section)
2. Net present value (NPV)
3. Return on investment (ROI)
4. Internal rate of return (IRR)
5. Payback period (PP)