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Section B Project Management Exercises (48 marks) Section B consists of Project Management key concepts and skills, Compotational cuercises are assigned to help you understand these coneepes and practice the shills. 1. Assume that your firm wants to choose between two project options: - Project A: $500,000 invested today will yield an expected income stream of $150,000 per year for 5 years, starting in Year 1 . - Project B: an initial investment of $400,000 is expected to produce this revenue stream: Year 1=0, Year 2=$50,000, Year 3=$200,000, Year 4=$300,000, and Year 5=$200,000. Assume that a required rate of return for yoor company is 10% and that inflation is expected to remain steady at 3% for the life of the project. Which is the better imvestment (5) ? Why (10)? 2. When deciding on wbether or not to crash project activities, a project manager was faced with the following information. Activities of the critical path are highlighted with an asterisk: Nomal Crashed a. Identify the sequencing of the activities to be crashed in the first four steps. Which of the eritical activities should be crashed first? (2) Why (2)? b. What is the project's critical path? After four iterations involving crashing project activities, what has the critical path shrunk to? (Assume all noncritical paths are a fully crashed critical poah.)(5) c. Suppose project overhead costs accrued at a fixed rate of 5500 per weck. Chart the decline in direct costs over the project life relative to the increase in overhead expenses (6). d. Assume that a project penalty clause kicks in after 19 wecks. The penalry charged is $5,000 per week. When the penalty charges are added, what does the total project cost curve look like? Develop a table listing the costs accruing on a per-weck basis ( 5 ). e. If there were no penalty payments accruing to the project, woald it make sense to crash any project activities? (5). 3. Assame you have collected the following data for your project. Its budget is $75,000 and it is expected to last four months. After two months, you have calculated the following information about the project Calculate the SPI and CP1. Based on these values, estimate the time and budget necessary to complete the project? (2) How would you cvaluate these findings? (2) Are they good news or bad news? (4)