Quantitative techniques exam questions answers

Project Management Programme PMGT 6867 Quantitative Methods in Project Management Time Allowed: 2 Hours Total Marks: 60 Instructions to Candidates 1. The paper comprises of 4 question sets, each with several parts. Answer all four questions. You have to answer in separate answer script that will be provided. 2. This is closed book exam. 3. The mark to be awarded for each part is indicated. 4. Write your final answers in ink. 5. Only electronic calculators are permitted to use in this examination. Question Set: 1 (a) What are the advantages and disadvantages of Return on Investment (ROI)? (1+1=2 marks) (b) Distinguish Net Present Value (NPV) and Economic Value Add (EVA). (1 mark) (c) Cash flows of two projects (i.e., Project A and Project B) are as follows. Years 0 1 2 3 4 Project A - 11,000 5,000 1,500 4,000 1,000 Project B -12,000 6,000 5,000 3,000 2,000 Calculate the Payback Period for these two projects. (2 marks) (d) Sydney Builder (a construction company) is considering building either a one-storey (Project A) or five-storey (Project B) block of offices on a prime site. Both projects have oneyear duration. The following information is available: Initial Investment Outlay Net Inflow at the Year End Project A -9,500 11,500 Project B -15,000 18,000 In terms of Net Present Value (NPV), which project is better or more acceptable? (Assume that discount rate is 10%). (2 marks) In terms of Internal Rate of Return (IRR), which project should Sydney Builder undertake? (2 marks) (e) A company is planning to produce 1,000 bicycles in next 2 years (each year 500). The fixed cost is $100,000. The variable cost for each bicycle is $100 and $120 for the first and the second year respectively. The unit selling price is $200 (same for the first and the second year). (i) Does the company make a profit or loss? (2 marks) (ii) What should be break-even selling price for each bicycle if the company produces 500 bicycles in 1st year and 500 in the second year? (2 marks) (iii) How many bicycles that company needs to sell at break-even point if the selling price is $200 per bicycle? (2 marks) Question Set: 2 (a) What is PERT and CPM? In a project, for a task (say updating a computer software to comply with the new system), the following information is given: