Question: A contractual term update has been made by the client because of the changing market condition. Specifically, the following information is added, If the project
A contractual term update has been made by the client because of the changing market condition. Specifically, the following information is added, If the project team can complete the project in 30 days, there will be a one-time $50,000 cash reward. The project manager reviewed several options. The following cost table was identified.
| Activity | Current Duration | Shortest Possible Duration | Number of Days can be Shortened | Cost to Shortened the Activity by 1 Day |
| A | 7 | 5 | 7- 5 = 2 | $ 14,000 |
| B | 13 | 10 | 13 10 = 3 | $ 8,000 |
| C | 16 | 12 | 16 12 = 4 | $ 9,000 |
| D | 10 | 8 | 10 8 = 2 | $ 10,000 |
| E | 8 | 6 | 8 6 = 2 | $ 18,000 |
| F | 7 | 4 | 7 4 =3 | $ 12,000 |
| G | 5 | 3 | 5 3 = 2 | $ 5,000 |
Is the contractual change worthy of pursuing? (Worthy of pursuing is defined as generating a positive cashflow that is as little as $0.01.) Please evaluate the decision. If it is worthy of pursuing, please find out how much net cash inflow does it incur?
Hint: Please think about the idea of critical path and what it means for the project duration. This problem will take several steps in order to be fully solved.
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
