Feasibility Analysis

Question 1: Feasibility Analysis – project initiation & planning [total pts = 18]
The following Tables 1 and 2 show each cost component for a new information system as well as annual
maintenance costs over a five-year period.

Table 1 – Information System Components Year 0 ( 2012) Costs
Item Quantity Cost/each
PCs 50 $1,700
Network Cards 50 $50
Servers 2 $3,000
Color Laser Printers 3 $5,500
Color Laser Plotters 2 $3,100

Backup Unit 1 $1,200
Cabling w/plugs 2,000 feet $0.75/foot
Routers w/Firewall 2 $500
Switches 2 $700
Telephone Connection Costs —– $5,000

CAD Software 50 licenses $3,500/license
Database 50l licenses $80
Network 50 licenses $70
Office Software 50 licenses $250/license

In-house Trainer 1 $50,000
AutoCAD Training 50 hours $75/hour
In-house Systems Personnel 1 $75,000

Table 2 – Estimated Annual Maintenance Costs
2013 2014 2015 2016 2017
PCs $5,000 $5,000 $5,000 $5,000 $5,000
Network cards $500 $500 $500 $500 $500
Servers $1,000 $1,000 $1,000 $1,000 $1,000
Color laser printers $500 $500 $500 $500 $500
Plotters $500 $500 $500 $500 $500
Tape Backup $500 $500 $500 $500 $500
Cabling w/plugs (in feet) $100 $100 $100 $100 $100
Routers w/firewall $100 $100 $100 $100 $100
Switches $100 $100 $100 $100 $100
Telephone connection costs $1,000 $1,000 $1,000 $1,000 $1,000
CAD software $1,000 $1,000 $1,000 $1,000 $1,000
Database $500 $500 $500 $500 $500
Network $500 $500 $500 $500 $500
Office software $1,000 $1,000 $1,000 $1,000 $1,000
In-house trainer $40,000 $30,000 $20,000 $10,000 $10,000
AutoCAD training $1,000 $1,000 $1,000 $1,000 $1,000
In-House systems personnel $75,000 $76,000 $77,000 $79,000 $82,000

The system is expected to be completed at the end of year 0 (2012). From 2013 to 2017, the new system is
expected to reduce labor costs by $250,000 per year and to increase gross revenue $150,000 per year.

Use a spreadsheet to calculate the following:
• Net Present Value (NPV) assuming an interest rate of 5% [5 pts]
• Rate of Return on Investment (ROI) using the NPV method. [5 pts]
• Break Even Point [5 pts]
• Should the project be accepted for financing? [3 pts]

Question 2: Earned Value Management – Project monitoring and controlling [total pts = 23]

The following table below shows the planned activities along with the respective costs and schedules for
building a deck project for a client.


You are a project manager whose role is to monitor the progress of this project. Based on the schedule above,
everything has been going according to plan for activities 1-4. Activity 5, “Dig footings”, has started, but
is not yet finished and it is running over plan.

1. Based on the 0-100% rule, please calculate the following:
a. CPI and SPI and explain what the values mean.
b. Estimated cost at completion for the deck project
c. Estimated time to complete the project.
2. Based on the proportionality rule (assume that for activity 5, 3 out of 4 holes had been completed,
thus activity 5 has been completed in proportion of about 75%) recalculate:
a. CPI and SPI and explain what the values mean.
b. Estimated cost at completion for the deck project
c. Estimated time to complete the project.
3. Which of the 2 rules above (0-100% or proportionality rule) would you use a project manager and why?
4. Based on your answer at (2), discuss possible corrective actions for the current project (please see
slide #17 under Earned Value Management). What would you recommend to your client and why? In your discussion
of the options, please be specific to the deck project.

Question 3: Risk analysis using decision trees
An aerospace firm is planning to submit bids on 2 separate federal government defense contracts (projects).
Based on a quantitative risk analysis, the firm needs to decide whether it should submit a proposal for any of
the 2 projects.
The company president believes that there is a 20% chance (probability) that the firm will win the contract
for Project 1 which is estimated to be worth $300,000 in profits. At the same time, there is an 80%
probability that the firm will not win the contract for Project 1 and the outcome is estimated at ($40,000) in
costs, meaning that the firm will have to invest $40,000 in Project 1 with no reimbursement if it is not
awarded the contract.
The president also estimates that there is a 20% probability that the firm will lose $50,000 on Project 2, a
10% probability that it will lose $20,000 and a 70% probability that it will earn $60,000.
Perform a quantitative risk analysis by doing the following
1. Build a decision tree and show all probabilities and outcomes
2. Based on EMV, recommend to the company president which project(s) should be selected. Project 1,
Project 2, both projects, or neither project? Why? Assume unlimited resources. [3 pts]
3. If resources are in fact limited, which project(s) should be selected? Project 1, Project 2, both
projects, or neither project? Why?

Question 4: Project lifecycle management
The table below shows 4 main project phases/process groups in the project’s lifecycle.
1. Describe the main purpose of each project management phase/process group in the 2nd column of the
table below.
2. List one specific output for each project phase/process group in the 3rd column below. Hint: think
about some of the outputs you created for the group project. You may also consult the text and other sources
if necessary.
3. Briefly describe each output document that you identified at (2).

Phase/Process Group Purpose Specific Output Documentation Brief Description of Output Document
Monitoring & Controlling

Question 5: Risk Response Planning
In the table below, the risk officer documented 5 risks for a project involving development and implementation
of a new information system at a large financial organization. The impact and the probability of occurrence
for each risk have also been documented below.
Risk ID Risk (Event) Description Risk Consequence Impact Probability of Occurrence Risk
Response Strategy
Specific Actions Describing the Proposed Strategy
1 Employee Resistance 3 80%
2 Loss of key project team member 2 50%
3 Loss of project manager 2 25%
4 Security breach resulting in unintended and unauthorized release of confidential data 3
5 Implementation of new requirements 1 30%
Note: Impact assessment (Low-1, Medium=2, High=3)

For each risk documented in the table above, please do the following:
1. State potential consequences (column 3).
2. Propose a risk response strategy (column 6)
3. Describe specific actions involved in implementing your proposed risk response strategy (column 7)

Question 6: Project Classic Mistakes
Based on 99 project retrospectives, Ryan Nelson (2007) in his MISQ Executive paper documented 36 classic
project mistakes and best practices for project management. Use the classic project mistakes as identified in
Nelson’s (2007) paper and do the following:
1. Discuss which of the project classic mistakes were evident in the Denver airport case.
2. Discuss which of the project classic mistakes were evident in the ERP implementation at Bombardier
3. Discuss how in the Denver case, some of the classic mistakes you identified could have been mitigated
(use the lessons learned/best practices from Nelson 2007 article).
4. Discuss how in the Bombardier, some of the classic mistakes you identified have been mitigated such
that the project was successful (use the lesson learned from the Bombardier case). Is there anything else
Bombardier could have done to increase the success of the ERP project (use some of the lessons learned/best
practices from Nelson 2007 article).
5. Based on the lessons learned from the HBR article by Isabelle Royer (2003), discuss how the Denver
airport project could have been terminated earlier in order to avoid negative outcomes such as major losses
and negative public opinion

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