ASSIGNMENTS ON PROJECT ANALYSIS AND EVALUATION

1.     A small project consists of 7 activities whose time estimates are given below:

Activity	Activity Name	Time Estimate
		a	m	b
1-2	H	4	3	6
1-3	I	2	4	1
1-4	J	3	3	5
2-5	K	4	2	2
3-5	L	5	4	7
4-6	M	2	1	2
5-6	N	3	6	2

(a) Draw the network diagram

(b) Find the expected duration and variance for each activity.

(c) Calculate the variance and standard deviation of the project length.

2.  (a) What do you understand by Cost Benefit Analysis?

    (b)  Omoboriowo provides the following data from a project as shown in the

           table below:

Year	Cost	Benefit	Discount Factor@8%	NPV of Cost	NPV of Benefit
1	40,000	0	0.926
2	30,000	15,000	0.857
3	20,000	30,000	0.793
4	20,000	60,000	0.735
5	15,000	90,000	0.681
Total

Required:

i. Copy and complete the table above.

ii. Calculate Net Benefit

iii. Calculate Cost Benefit Ratio

iv. Calculate Benefit Cost Ratio

v. Calculate Net Cost if the total benefit reduced by 30%.

 

3.  Feyikogbon recently convinced her friends and relatives to grant her a loan of

N2,400,000 which she intends to invest in a farming project.

She estimates that the project will yield the following returns annually as follow:

Year                     N`000

1                               100

2-5                            300

6                               400

7                               700

8-10                      1,000

Feyikogbon `s cost of capital is 20%.

As a student of Southwestern University of Nigeria, HND to B.SC conversion programme, you are require to calculate using the following methods of capital budgeting techniques under certainty:

a.     Accounting Rate of Return (ARR)

b.     Discounted Payback Period (DPBP), assumed the initial investment to be half of the loan granted to Feyikogbon.

c.      Net Present Value (NPV)

d.     Internal Rate of Return (IRR)

Advice Feyikogbon based on your results in (a-d) above.

4.  Assignment Won Wa Die Enterprises Limited has two investment options, each of which involves an initial outlay of N3,000 and expected life of 3years.

Annual net cash flows from each project being one year after the initial investment is made and have the following probability distributions.

Project	State of the world	Probability	Annual net cash flows N
A	I II III	0.2 0.6 0.2	2,400 3,000 3,600
B	I II III	0.2 0.6 0.2	0 3,000 7,500

(a) What is the expected value of the annual cash flow from each project?

(b) What is the risk-adjusted net present value of each project if the company has decided to evaluate the riskier project at 10% and the less riskier project at 8%.

5. Discuss how Project Analysis and Evaluation is germane to your discipline? 

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