## Project Description:

mid-term exam (v.1)
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date:
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be sure to show all work in excel as appropriate—do not put excel or cb derived answers in ms word—that does not show the work you did to produce your answers. for cb output, you should paste the forecast output in your excel setup file. show split view in all cb output.
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1. two investments (a and b, below) have been proposed to the capital investment committee of your organization;
a. the required rate of return for your company is 6%. what is the npv for each investment?
b. what is the payback period for each investment?
c. which investment would you recommend and why?

2. unfortunately, the capital investment committee refused to approve your recommendation (problem 1) since you did not consider the uncertainty inherent in these types of investments. you pull out your very dog-eared text from pman 635 and repeat your analysis, this time using crystal ball and the following information:
a. investment a:
i. year 0 investment cost: triangular distribution (optimistic: \$125,000; most likely: \$150,000; pessimistic: \$175,000)
ii. year 1-5 operating cost: normal distribution (mean of \$10,000, standard deviation of \$2,000)
iii. year 1 benefits: normal distribution (mean of \$90,000, standard deviation of \$20,000)
iv. year 2 benefits: normal distribution (mean of \$55,000, standard deviation of \$15,000)
v. year 3 benefits: normal distribution (mean of \$35,000, standard deviation of \$10,000)
vi. year 4 benefits: normal distribution (mean of \$20,000, standard deviation of \$5000)
vii. year 5 benefits: normal distribution (mean of \$20,000, standard deviation of \$5000)
b. investment b:
i. year 0 investment cost: triangular distribution (optimistic: \$75,000; most likely: \$80,000; pessimistic: \$95,000)
ii. year 1 benefits: normal distribution (mean of \$45,000, standard deviation of \$20,000)
iii. year 2 benefits: normal distribution (mean of \$15,000, standard deviation of \$5,000)
iv. year 3 benefits: normal distribution (mean of \$10,000, standard deviation of \$3,000)
v. year 4 benefits: normal distribution (mean of \$10,000, standard deviation of \$3,000)
vi. year 5 benefits: normal distribution (mean of \$15,000, standard deviation of \$5,000)
c. if the irr is still 6%, what is the npv for each investment?

3. which of the following is not true concerning the differences between the project manager (pm) and the functional manager (fm)?
a. the pm is a facilitator; the fm is a technical specialist.
b. the pm is a generalist; the fm is a technical supervisor.
c. the pm must be able to integrate tasks; the fm must be able to analyze tasks.
d. the pm uses an analytical approach; the fm uses a systems approach.
e. all of the above are true

5. the first unit produced by a manufacturer required 6 hours. if the industry uses a 90 percent learning rate, how long should the fourth unit take?

6. you have been assigned to estimate the cost of installing fiber optic cable in a country in the middle east. fortunately, you have done a number of similar projects in this area in the past and you have accumulated the following parametric cost estimates based on this experience:

mobilization/demobilization cost = \$10,000

buried cable construction:
cost per kilometer = \$10,000 sand
cost per kilometer = \$17,500 sand & clay
cost per 100 meters = \$ 5,500 rock

cost per kilometer = \$ 7,500

cost per road crossing = \$12,500
cost per pipeline crossing = \$ 5,000

the scope of the new project is as follows:

predominately sand 150 km
predominately sand & clay 100 km
rock 500 meters
pipeline crossings 5

estimate the cost of construction for this project. assume the estimates are fully loaded, ie they include labor, materials, applicable indirect costs such as overhead, etc. show your work.

a. what is the expected time to complete a task with an optimistic, most likely, and pessimistic times of 3, 4 and 7 days respectively?
b. what is the standard deviation of the same task, assuming the estimates were made at the 99% plus level?
c. what is the standard deviation of the same task, assuming the estimates were made at the 90% level?

9. there are three (and only three) paths through a network (project), each with a probability of completion in less than 24 months as indicated:
a. s-a-b-f p1(_24) = .95
b. s- d-e-f p2(_24) = .85
c. s- g-h-f p3(_24) = .90
if the tasks are independent, what is the probability of the network being completed within 24 months? note: s is the start node, f is the finish node.

10. you have a network with a critical path a-b-c-d. for our purposes, you are allowed to ignore the other paths through the network. the values for optimistic (a), pessimistic (b) and most likely (m) durations for each task are as shown below. these are based on the probability that virtually all (at least 99.7%) of the values of each task fall within the range from a to b.

a. what is the value of μ for the network?
b. what is the value of σμ2 for the network?
c. what is the probability that this network can be finished within 27 days?
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