Hw Solution Chapter 1-2-3

Lebanese International University School of Engineering Department of Electrical Engineering Fall 2012 IENG300 – Engineering Project Management

Assignment # 1 Solution
Exercise 2.1 (10 Points): Projects may be classified as follows:    Compliance: d., g., i. Operational: a., c., j. Strategic: b., e., f., h.

It was easy to classify the Compliance projects but not so easy to distinguish between Operational and Strategic projects. Given the limited information, we have to make judgment calls. In real life, such information will be available. Debates may occur around whether converting the heating system to solar polar was an operational necessity or to fit the ecofriendly image. Likewise, launching the promotional campaign with Hawaii Airlines would be considered strategic if it promoted the eco-tourism theme, otherwise it could be considered operational. Classification of the different types of projects is very useful for managing projects at a hotel as it is very helpful in the project prioritization process. Exercise 2.4 (20 Points):

A 1 2 3 4 5 Project Omega 6 Required Rate of Return 7 Investment 8 Cash Inflows 9 NPV = 10 11 Project Alpha 12 Required Rate of Return

B

C

D

E

F

G

H

I

J

Exercise 4a Net Present Value Example Comparing Two Projects Year 0 18% -$225,000 -$190,000 $150,000 $190,000 $215,000 $175,000 $197,000 $70,000 $119,689 Formula Project Omega: =C7+NPV(B6,D8:J8) Year 0 18% Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

IENG300 – Engineering Project Management

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Investment Cash Inflows NPV =

-$300,000 -$50,000 $150,000 $200,000 $250,000 $150,000 $180,000 $90,000 $176,525 Formula Project Alpha: =C13+NPV(B12,D14:J14)

NPV comparison: Accept both Omega and Alpha; or select Alpha that has the highest NPV of $176,525 Exercise 4b Net Present Value Example Comparing Two Projects (with inflation)

Project Omega