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Project economics and finance.
Project Management Economics and Finance.
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Project management is a identified as a very perplexing task to many of the project managers. It is a multi-disciplinary feature of management that largely deals with carrying people together with diverse skill and knowledge on whom to join hands, hence, give the various features of a project so that they can invent with a necessary work or end consequence (Duncan pg There has been expanding ascend in the issues confronted by different venture supervisors over the previous years, particularly the money related and monetary parts of venture administration (Munns pg. 81). The different part of venture administration that have as of late turned out to be testing include: the cost of venture usage, quality change and the timetable of the venture. There are additionally other relieving components that a venture supervisor won’t not have control of. These outside components that the venture directors have no control of likewise affect extend administration similarly as alternate elements that the venture administrators have control of. In this manner, for a venture to be effective, the chief needs to direct a legitimate investigation of some of these difficulties and put in measures to guarantee that these issues are managed fittingly to guarantee the accomplishment of the venture. Along these lines, extend administration preparing is a fundamental stride for dealing with the sudden snags extend administrators can confront every day. This is to remove the mistakes that goes to the organization due to a fizzled extend. The more viable a given organization is in the administration of different ventures they attempt, the more clients’ fulfilment and the more benefits the organization would make thus adding to the development and extension of the organization. This study will discuss the financial and economic aspect of FATA Water Resources Development Projec in Iran
One of the many trials that managers come in contact with during project administration is high-quality assurance. Most of the clients would prefer high-quality foodstuffs at a lower price. A noteworthy test to leaders and managers is the means by which to make their merchandise, reasonable to the clients without bargaining on the quality. Quality can likewise be a test to the venture proprietors all the more so if the venture is relegated to an outsider otherwise called the customer.most of the time, the customers use their time in trying to uplift the will of the managers. This entails that the client at times might not be absorbed on offering best quality administrations as much as they ought to. This will make the customer thought of a disgraceful work that may prompt the fall of the venture. The customer may not likewise have the satisfactory mastery and aptitudes to finish the venture. This should be due to a hopeless bureaucratic tendering manner where the contractors may not be correctly appraised to investigate if they have the essential abilities to assume a specific project which extra concessions on the quality.
The second project area where the project managers may get a few of the task is the project price. This serves as one of the trials that the said project managers should keep on undergoing virtually on a daily foundation and on virtually every project they anticipate to start. Some of the time, the projects are then started even without an appropriate investigation of what the project needs. This brands the undertakings be begun with deception as the venture cost gauge is made to seem lesser than what it would be truly so that to become a speedy and last endorsement to start the venture. This issue significantly comes up particularly when a hierarchical administration’s fundamental concentration is slashing the cost of their costs without paying attention to the ultimate result. This issue in intensified by the way that we are active in a blunder where assets are rare including work assets. This prompts absence of rivalry in the offering procedure for contracts additionally expanding the venture cost (Donaldson 372). Now and again, the organization may choose to agree to not as much as what they had been seeking after. This can prompt reaching out of the calendar, expanding cost and even the quantity of wounds on the venture. The absence of rivalry in offering for the agreements may make the organization’s administration feel that they are not getting the best customer for the agreement (Donaldson 372).
The third significant zone that can influence extend administration is the issue of a timetable. Most ventures work under exceptionally strict courses of events. To meet these timetables, the contracted organization ought to have enough workforce and cash to finish the venture inside the expressed courses of events. This is hard to execute, particularly in a resource-scarce setting as many of the workers don’t have enough staffing heights that empower them to supply enough schedulers and organizers for huge activities. In this manner, if the contractual worker doesn’t fill these spots in great time beforehand to the begin of the venture, it can prompt disarray of the venture booking and efficiency arranges. One of the elements that can prompt venture deferrals is extended targets. These objectives are for the most part over eager and require a different leap forward strides before they are executed. This will require the representatives to work past their customary prerequisites. At the point when these objectives are not accomplished in great time, it can prompt disheartening to the general workforce and the venture administration group.
Keeping in mind the end goal to viably run a venture, there should be answers for the above-expressed issues. This will make the smooth running of venture administration and for the most part expanded achievement rates in venture implantation. The following are a portion of the recommendations on how the above issues can be handled.
Insightful solutions provided
In the first place, having in mind the end goal to ensure that the tasks embraced are of better quality, there is a requirement for quality confirmation and quality control to be overseen by the contracting organization and not the temporary worker or whatever another outsider. Thusly, with a specific end goal to do as such, the contracting organization ought to have the capacity to audit and endorse the temporary worker’s quality arranges before the begin of the venture. The work that involves huge part of the venture ought to be held to the most astounding standard of value when contrasted with the reimbursable work (Meredith et al). These principles ought to be legitimately and plainly expressed with no uncertainty all through the offering procedure and in the agreement terms. The temporary worker ought to be put to assignment to profit all the required hardware for the venture usage preceding the begin of the venture. Amid the procedure, the temporary worker ought to be educated to tell his/her field representatives to be in steady correspondence with the venture director before any innovative stride is embraced in the process extend usage. This will ensure that there occurs stability that exists between what was at first arranged and what is really occurring. All venture engineers should likewise be capable and ought to be well tremendous with the nearby principles and sets of accepted rules. Hence the venture architects ought to be assessed or taken through specific preparing to ensure they are comfortable and agreeable with the nearby benchmarks and codes where the venture is occurring (Laverty 857).
With a specific end goal to show symbols of improvement and a reasonable photo of the genuine cost of a specific venture, the venture bookkeepers and the venture control board individuals ought to be included ideal from the earliest starting point of the venture. There ought to be a legitimate method for deciding the constantly changing business sector costs of merchandise and crude materials to wipe out the vulnerabilities that emerge in cost because of the perpetually changing business sector elements. The venture administration group ought to likewise hold refresh gatherings frequently and standardize the procedures for declaring. This will guarantee data lucidity that is unaffected by the changing methods for following and detailing expense and timetable. A few sections of the venture can be successfully overseen in pieces as opposed to assembling them in the general venture and following their expenses. This will prompt powerful venture cost administration (Thomas et al 440). The administration group can likewise set up somewhat motivating force to the temporary worker that conveys a quality work in an opportune successful and financially savvy way. The proprietors ought to likewise consider utilizing a lump sum or unit rate bonds as much as conceivable, to place the accountability for cost and program on the contractor’s shoulders.
Before the begin of any given venture, there ought to be an obviously expressed calendar. This makes the temporary workers obviously mindful of the expressed timetables before setting out on the agreement. On the off chance that there is lacking staffing to help attempt the venture, at that point this issue ought to be tended to the path before setting out on the venture. The venture chiefs ought to likewise direct a legitimate investigation of the venture they are going to embrace to ensure their objectives are sensible and feasible inside the predefined time before granting the agreement to stay away from extending focuses on that may postpone the venture usage prepare. The venture administrators ought to likewise consider the cost of bringing in labor and assets in the event that they are not locally accessible. Rather than the venture supervisors searching just for the locally accessible talented specialists, they ought to develop their hunt far and wide, for example, in nations like China and India who are known to give superb gifted laborers to unravel the issue of work deficiency (Munns 82).
At the start of the project, most of the group member had little experience on working in economics and finance project. The book knowledge was present. Therefore they needed a professional to show them how to apply the skills learned in class into actual projects. The move to take up the project was catalyzed by the fact that many organizations depend on finances and economics as the backbone for any decision made. Additionally, they need to attract more creditors and investors where they can invest their money expecting a huge revenue at the end of the business year. As a project manager one has to have the ability to predict the business future through estimation and use of financial figures posted on a continuing basis. The market should also be favorable to the business as it determined the amount and number of clients that will be available to the business. To ensure effective running of the project in a systematic and effective manner, a manager should ensure they are conversant with important project details such as the
A project that is proposed
Project financial type to be confirmed by the relevant authorities
The manager should have a project budget make up for effective decision-making process
Available solutions should be proposed
Available solutions challenges and other benefits evaluation
Any other available solution to the financial analysis present
And finally, the final decision making process should be outlined
In any project, budgeting is identified as the major process that a given manager should undertake, this si because it provides the framework that the project should be carried out in. Any deviation can be quickly and effectively identified for easy transformation. Additionally, the scope of which the project is to be taken should be provided. Here, a time frame should be set where each activity is given an appropriate amount of time. Effective, comprehensive financial formulas are used for the evaluation of the available options for the project to be based on reliable information, and data hence arrive at a more effective reliable decision at last
Among the commonly used formulas in finance used in evaluating how the business is operation includes the
Net present value (NPV)
Weighted average cost of capital (WACC)
Return on invest (ROI)
Benefit-Cost Ratio (BCR)
Internal rate of return (IRR)
Payback period (PBP)
Equivalent uniform annual cost (EUAC)
Connectively computer programs such as the QuickBooks, Excel and sage are used in decision-making process; this is because they effectively show the trend through which the project has been moving with, the applications also have inbuilt formula that helps in quick financial analysis making the calculations much easy to perform
In any project, communication is identified as the single most important tool this is because group members need to communicate their ideas, share opinions and also hold discussions on issues pertaining their project. In the group, there are a members who are from another different part of the world where English is not their first language. Communicating with such people tends to become hard making the rolling out of the project to be hard as the people are unable to communicate effectively. The language barrier where some of the group members had to take English classes at evening so that they could improve their language in a better and effective manner. However, through the frequent meeting, as the project advanced, the members were able to communicate effectively this is because the policy in the group was an open door policy making the process more effective. Some of the members were also given the role of leaders such as the chairperson, secretary and the spokesperson where the chairperson was given a role of ensuring that everything conducted was as per the required manifesto. The secretary was given the task of recording and writing the minutes by the group.
As a leader the process of making a flowchart and necessary contents related to the risk management were given priority. Some of the important issues to be taken should involve project finance to discuss the
The school should provide skills to the students with practical chances such a graduate and internship progrmans after the completion of their learning process. Additionally, the school should liaise with the organizations within the local region to search for chances for such students. Here, the skills and experiences learned in school can be applied for decision-making both in an organisation and individual perspective making the techniques would cover among them includes a balance sheet, prioritization of objectives, flipping a coin, automated decision and following the authority individuals order. In this perspective, the decision making techniques within the group could contain Delphi technique, dialectical inquiry, nominal group technique and brainstorming among others.
Self-reflection on the subject
Within the group, a lot was learned a lot was learned. First, my communication has improved tremendously since learnet the art of communicating through giving others a chance to speak listening to their points building their points through suggestions and ideas. My skills in project management have also developed at an alarming rate; I learnt how to manage a project through involving others delegating duties and making timely appropriate decisions when required. This has made the desire to have a career in project management to be more reliable. Within the group, through participations in discussions, debate and meetings held, real life situation have been revealed as we were working on the project, the skills learnt in the class are more and better pronounced. However, need more exposure to project since it is through such exposures that more experiences and skills can be acquired. The university should seek contract where the students are allowed to work with little supervision to ensure effective build up of skills in real life situations.
Subject relevance in career development
Within the project, time was spent in dealing with different issues within the project the planning stage largely involved estimations on what could help which acted as a guide throughout the project implementation. This was a major learning chance that a plan will always be a guide which helps to consider both sides of the study. Any deviation can be realized in a fast manner and then rectified soonest possible. Additionally, throughout the project different financial analysis were used which gave different results depending on the issues being analyzed. The observation of trends and ratio were instrumental in decision-making process which is a major boost in the career development since the analysis method on financial, the analysis was well identified and analyzed.
The project was instrumental in advancing the decision-making process where a decision can only be made after considering the different facts laid down within the analysis table. The project can be described as an important milestone in career development due to the exposure chances that it provided.
FInanciual and economic anayaya
This can be obtained from the average cost of debt and from the equity capital cost, weighted by the participation of each one of them in the investment associated to the project.
Participation of equity capital Pp =30%
Participation of debt = 70%
Average cost of debt (kp) =15%
Average cost of debt (Kd) = 8%
Therefore the WACC of this project will be WACC = Pp Kp + Pt Kd = 0.3 x 0.15 + 0.7 x 0.08 = 0.101 or 10.1%.
Average cost of debt
The debt is deductible to investigate the taxation of the project where, for a loan with a rate of 20% and tax aliquot (income tax + social contribution) of 33%, the real cost of the loan is: (1 — 0.33) x 0.20 = 0.134 or 13.4%. Thus, the Average Cost of Debt (Kd
) can be defined as:Kd = K (1 — T) Where K is the average interest of the loans and T is the applicable aliquot of taxation.
Here the recurrent cost Recurrent costs were estimated to be PRs7.89 million.
Capital cost was estimated as PRs5,031 million
Economic risk analysis
Donaldson, Lex. «The ethereal hand: Organizational economics and management theory.» Academy of management Review 15.3 (1990): 369-381.
Duncan, William R. «A guide to the project management body of knowledge.» (1996).
Meredith, Jack R., and Samuel J. Mantel Jr. Project management: a managerial approach. John Wiley & Sons, 2011.
Munns, A. K., and Bassam F. Bjeirmi. «The role of project management in achieving project success.» International journal of project management 14.2 (1996): 81-87.
Ng, S. Thomas, et al. «Problematic issues associated with project partnering—the contractor perspective.» International Journal of Project Management 20.6 (2002): 437-449.
Laverty, Kevin J. «Economic “short-termism”: The debate, the unresolved issues, and the implications for management practice and research.» Academy of Management Review 21.3 (1996): 825-860.
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