PROJECT MANAGEMENT

MBA Full Time 3rd Sem

SECTION – A

Note: Last date of Submitting assignment is 29/01/11.

1. The assignments are to be hand written only, typed assignment will get zero marks.
2. In case assignment write-ups of two students are similar both would award zero marks.
3. Please make sure on top of every page the information given below is available:
Name:
Father’s Name
Programme /Subject

Q. 1 Why is the concept of project Planning and scheduling such an important part of
Project management?

Q.2 What are the key characteristics all project possess?

Q.3 What do you mean by social cost benefit analysis? Discuss its relevance in project
management?

Q.4 Write Short note on

• Abandonment analysis
• Human aspect in project management
• Appraisal criteria
• Technical analysis

Q.5 Zedex Inc. is planning to design, develop and market a sports car. The company
planned to get the new sports car ready for their dealers in 21 weeks. The project is
compiled with the following activities:
Activity Description Predecessors Time (weeks)
A Design frame - 3
B Design wheels - 4
C Design gears - 2
D Design handlebars C 5
E Test steering A, B, D 6
F Test gears A, B, D 3
G Performance test E, F 4
H Design manufacturing layout A, B, D 2
I Manufacture demonstrators H 3
J Prepare advertising G 3
K Prepare users’ manual G 2
L Distribute to dealers I, J, K 2
You are required to
a. Draw the network diagram of the project.
b. Determine the critical path of the project and all the floats of the activities.
c. State which would be more helpful: Assigning more designers for the design of
gears or assigning more designers for design of frame? If so, from what activity should
the designers be taken?

Q. 6 A small marketing project consists of number of activities. Normal time (in days), a
minimum or crash time (in days) and the cost (in Rs. per day) of crashing each activity is
as follows:
Normal duration Minimum crash Cost of crashing
Activity
(days) duration (days) (Rs. per day)
1–2 9 6 20
1–3 8 5 25
1–4 15 10 30
2–4 5 3 10
3–4 10 6 15
4–5 2 1 40

You are required to

a. Find out the normal project length and the minimum project length.
b. Determine the minimum crashing cost of schedules ranging from normal length
down to, and including the minimum length schedule, i.e., if L is the length of the normal
schedule, find the cost of schedules which are L, L – 1, L – 2, and so on days long. If
overhead cost total is Rs.60 per day, what is the optimal length schedule duration on each
activity for optimal solution

Q.7 Viswa Lamps Ltd. (VLL) is in the business of specialty lamps for factory
illumination. Most of its products are made in its own factory while some are outsourced.
Currently the company wants to introduce a new Lamp for railway sheds, which can be
made in its factory or bought from its suppliers.
If VLL wants to produce the Lamp it requires an investment of Rs.20,00,000 in plant and
machinery, which can be fully depreciated on a straight-line basis over its useful life of 10
years. The cost of production (excluding depreciation) per Lamp is expected to be Rs. 82.
A supplier is quoting a price of Rs.90 per Lamp and is ready to supply any quantity at the
same price. The company’s cost of capital is 12% and the tax rate is 30%. Assume all
cash flows are certain.

You are required to

a. Advise the company (with detailed working notes) whether to Make or

Buy the Lamps if the market demand is for 50,000 Lamps per annum.
b. Compute the minimum annual demand (quantity) so that the company can
produce on its own and the NPV is not negative.
 Case Study
Read the case carefully and answer the following questions:
1. You are the team leader of a credit research section of a financial consultancy firm.
Your team is required to prepare a detailed project report based on the information
provided herewith and also you are required to suggest the client whether he should
invest or not. With this objective-
a. You are required to estimate the cost of the project and show the means of
financing.
b. Show the computations for estimating working capital margin and projected
profitability statement. Show all necessary working.
c. Prepare the projected profitability statement for the next 5 years.

2. Prepare the projected cash flows of the project from the long-term funds point of
view.

3. Appraise the project in terms of the following criteria:

a. Net Benefit Cost Ratio.
b. Modified Internal Rate of Return.
c. Discounted Pay-back Period.
d. Debt Equity Ratio at the end of each year for the first five years.
e. Debt Service Coverage Ratio at the end of each year for the first five years.
Assume that the intermediate cash flows are invested in government securities at
the rate of 6% p.a. It is very important for you to comment on the validity of the
project.

United India Limited

United India Limited is planning to go public in the coming days. These are the following
guidelines on which the financial projections of its new project has to be calculated.
The Company and its management:
United India Ltd. has been formed with its Registered Office at New Delhi. Its
manufacturing unit is being proposed to be set up at Bhiwadi, Rajasthan. The company
will be engaged in the manufacture of Metallized Plastic Film, Multilayered Co-extruded
Plastic Film and Holography film. Metallized films are used to manufacture flexible
packages, which enhance the gas, moisture, aroma and light barrier properties of the
pouch. These are also used in textile threads, decorative laminates, insulation labels,
stamping and transfer foils, light reflective application, capacitors etc. The Multilayered
co-extruded films proposed will find applications in the flexible packaging of consumer
products such as dairy products, edible oil, vanaspati, lubricants, tea, coffee, pan masala,
meat and marine products, fruit pulp, snack foods, dry fruits etc. The company will also
produce coated films which will be used for flexible packaging in improving the shelf
appeal of pouches and for making Metallic Yarn of D.G. grade which has various textile
applications and for hot stamping foils and transfer foils. The company will also have
facilities for manufacturing of Metallized Plastic Film of 1200 MTPA and will regularly
manufacture Metallized Polyester Film, Metallized BOPP Films etc., of various sizes and
thickness.
The management of the Company will be controlled by the Board of Directors of the
newly formed company. Mr.I.P.Singh., will be the Managing Director. Mr. Uttam
Ahujawill be responsible towards overall control over the day to day matters of the
company as well he will be responsible for Corporate Planning and framing strategies for
the future. Mr. Ashok Ahuja will be the whole time director who will be looking after the
Finance. Mr.Inder Singh (Director) will take care of the administration. Smt. Shukla
Bansal, also a Director will be looking after Legal and Company Affairs related to the
company. The overall management of the Company will be vested with the Board of
Directors comprising of experienced people mentioned above from various fields. Under
the control and supervision of the Board of Directors along with a team of professionals
comprising of persons from varied fields, like Manufacturing, Finance, Marketing,
Management and Administration, the Company has also picked on its top Executives.
Name of key personnel:
Name Qualification Experience Proposed Designation
Shri Dinesh Mankotia B.E (Electronics) 8 years Maintenance Manager

Shri Rakesh Malik M.B.A 17 years General Manager (Marketing)

Shri Rajinish Malhotra M.Com/ A.I.C.W.A 15 Years Sr. Manager Accounts

Shri Rakesh Jain C.A 4 Years Asst. Manager Accounts

Products and its uses

UIL will be engaged in the manufacturing of customized packaging films with specific
base material (Plastic Film / Polyester Film), manufacturing process (Metallized / Coated
Films), specified thickness of metallizing coating, specified barrier properties of metal
adhesion / Heat Sealability and customized width of film etc. The manufacturing process
is designed to impart specified Tensile Strength / Elongation at Break / Water Vapour
Transmission rate and Oxygen Transmission rate. The Company will also have facilities
for lacquer and other coating on plastic films and embossing for holography.
APPLICATIONS:
Metallized Plastic Films is a low priced packaging material as compared to other
materials. These films are used in the packaging of food products like tea, coffee, dairy
products, pan masala products, products in pouches, ice cream, confectionery etc. Due to
rapid growth of processed food industry and market preference for acceptance of these
products in consumer packs in the recent years in India, this form of packaging is slowly
replacing tin containers, glass bottles and rigid plastic containers primarily because of its
lower cost, weight of packaging and easy disposability.
Holography Films give protection to the products from being duplicated.
The product manufactured by the Company is a flexible packaging material which is part
of Packaging Industry in the country. The rough estimates indicate the size of flexible
packaging industry to be around Rs. 2000-2200 crores. With the increase in use of such
packaging in the industry, the industry wise share of flexible packaging is estimated as
under:
Industry Share (%)
Processed Foods 60
Personal Products 15
Tea & Coffee 10
Industrial Product 10
Others 5

The flexible packaging industry which is already growing at the rate of 25% - 30% is set
to grow to a rate of 40% - 45% in a couple of years. Some of the possible reasons for
such a growth are:
(a) Flexible packaging offers functional and economic benefits.
(b) In India only 1.5% of the total processed food is packaged as against 65% in the US
and 70% in Brazil and therefore there is a considerable growth potential in this
sector.
(c) The bulk distribution is on the downslide due to change in the consumer buying
preferences.
(d) Export of processed foods.
(e) With increase in standard of living and preference for hygiene and cleanliness, the
demand for packaging is on the increase.
ESTIMATED SUPPLY:
There are limited number of manufacturers in India.

The Proposed Project

The installed capacity of unit would be 69.02 THTPA (Thousand tonnes per annum).
Commercial production is expected to start from December 1, 2012.
Land and its Location
A patch of land measuring one lakh square meters has already been acquired at Bhiwadi
for the proposed project and is sufficient to take care of the requirements of Metallized
Plastic Film manufacturing plant. Bhiwadi is situated in Alwar District – Rajasthan. It is
an approved industrial area of Rajasthan State Industrial Development & Investment
Corporation Ltd. (RIICO). Bhiwadi is approximately 60 kms from Delhi and the plot is 3
kms from NH-8, which links Delhi and Jaipur. The nearest railway station is Rewadi,
which is approximately 20 kms from the site. As the site is located in a approved
industrial area, adequate infrastructure facilities will also be available. The basic cost of
this land is estimated to be Rs.1350 per square meter. The costs associated with registration
and stamp duty will amount to 16% of the basic cost of land. The cost of leveling the site
is estimated to be Rs.31,60,000. The cost of laying internal roads and approach roads are
approximately Rs.38,63,000 and Rs.12,11,000 respectively. The cost of boundary walls
will amount to be Rs.9,56,000. Tube Well digging cost would be Rs.2,56,000. Cost of
construction of Main Gate will be Rs.0.80 Lacs.
Building and Other Civil Works
The main working sheds and DG (Deisel Generator) shed will be made of AC sheet
roofing supported over structural steel trusses resting over RCC columns with brick
masonry pillar walls with Isolated / Spread foundation and cement concrete flooring. The
other buildings will be of RCC / Stone Slab roof structure supported over structural steel
bims resting over load bearing brick masonry walls with spread foundation, mosaic /
cement concrete flooring. There will 4 factory sheds in all. In 1st shed, raw material will
be stored and in 2nd shed - Metallizing Plant and Slitter / Rewinders, in 3 rd shed, Coating
Machine will be installed and the 4th shed will house 3 nos. of Multilayer Film Plants.
Also, there will be Generator Room, Stores, Offices and Guest Room.
The details of proposed buildings and associated costs are as follows:

Particulars Cost (Rs.)

Main Machine Shed:
- Metallizing 1,82,63,000
- Slitting 1,55,63,000
Coating Machine Shed 95,58,000
Multi-layer Machine Shed 65,99,000
Raw-Material Godown 35,67,000
Finished Goods Godown 51,92,000
Generator Room 17,55,000
Utilities Room 11,57,000
Office Block 46,19,000
Quarters for essential Staff 46,88,000
Guest House 35,26,000
Other civil Engineering Works 22, 36,000
Sanitary Disposal Arrangement 31,63,000
Plant and Machinery
The main plant and machinery at the Bhiwadi Unit will comprise of the Metallizing &
Rewinding Section, Multilayered Film Section and the Coating / Lamination Section. The
plants and machinery to be used will be based on foreign as well as indigenous
technology. Every effort is made to know the latest development in technology in India
as well as abroad.
METALLIZING AND REWINDING:
The Metallizing & Rewinding Section will consist of one Vacuum Metallizing Plant
Model EHF 1650 – 2122 of General Vacuum Equipment Ltd. U.K., one Titan Model SR-
6 Slitten Rewinder including accessories imported from Atlas Components Equipments
U.K. and other Slitting and Rewinding machines from indigenous sources.
The two imported machines are estimated to cost £529896.38 and £401688.63
respectively. The cost of the indigenous machine would be Rs.93.54 lac.
The Vacuum Metallizing Plant is capable of metallizing films in various thickness as
under:
6 – 80 micron

PET
BOPP 9 – 80 micron
CPP 15 – 80 micron
LDPE 20 – 80 micron
Nylon 9 – 80 micron
UPVC 15 – 150 micron
Paper 30 – 80 gsm

MULTILAYERED FILM:
The Multilayered Film section will consist of one Multilayered Co-Extruded Film Plant
to be imported from M/s Paul Kiefel Gmbh and Co., Germany, one REL make 3-layer
Co-extruded film Plant and one REL make 2-layer Co-extruded Film Plant purchased
from M/s Raju Engineers Ltd, Rajkot. The cost of the three machines are € 554288.90,
Rs. 21.45 Lac and Rs.32.67 Lac. The machines are capable of making Multilayered Film
using combination of LDPE, HDPE, EVA, PP Co-Polymer, HMHDPE of thickness
ranging from 25 micron to 150 micron.
GRAVEARE COATING / LAMINATION / PRINTING:
Coating / Lamination Machine : Rs.22,54,000.
Printing Machine : Rs.12,58,000.
Coating Machine : Rs.11,11,000.
The Coating and Lamination Machine will be modified to a Two - Station Coating
machine with a long tunnel. Printing Machine will be modified to an Embossing Machine
for Holography.
Customs will be payable at 8%. Excise Duty payable for the new machinery would be
15%. Octroi, Freight, transportation, Loading, Unloading, Clearing and Forwarding
charges is estimated @ 4% of the basic cost of the machinery. Erection charges are
estimated @ 10% of the basic cost. All the machines are expected to be installed within
the next one month so that at the end of the month, payments can be done.
Miscellaneous fixed assets:
- Office Equipments - Rs.165 Lacs
- Water Cooling Tower - Rs.22.22 Lacs
- Water Softening Plant - Rs.10.54 Lacs
- Storage Tanks - Rs.2.32 Lacs
- Electric Gadgets - Rs.10.55 Lacs
- Air Compressor - Rs.2.11 Lacs
- Laboratory Equipment - Rs.3.18 Lacs
- Electrical Installation - Rs.5.63 Lacs
- DG Sets – Rs.85 Lacs.
Legal charges for drafting agreements for memorandum and articles of association will
cost Rs.85,000. The cost of market survey will be Rs.1,00,000. Your company will
charge Rs.2.50 Lacs for preparing the feasibility report. Other expenses expected to be
incurred by the company till the date of commencement of commercial production are as
follows:

• Travelling expenses to the tune of Rs.8,90,000

• Printing and Stationery expenses to the tune of Rs.2,25,000
• Miscellaneous Expenses to the tune of Rs.10,00,000
• Advertisement expenses to the tune of Rs.5,50,000
• Insurance premium during construction to the tune of Rs.85,00,000
• Establishment Expenses Rs.23.50 Lacs.
Technical Know How fees of Rs.0.25 Crores includes a lumsum payment to be made to
the engineers from UK and Germany who will be present for plant supervision till
production rolls.
Power and Captive Generation
The total connected load works out to be 3000 KVA at 100% utilization. The unit has
installed 6 nos. of 400 KVA Diesel Generating sets and two 180 KVA DG Set with total
installed capacity of 1380 KVA.
Water
Water requirement for the process is insignificant. The water requirement at Bhiwadi will
be met by its own tubewell, borewell and water connection from overhead tank of RIICO.
The company will have adequate water storage and circulation arrangement.
Other Utilities
(i) No steam is required in the Metallizing / Co-extrusion process
(ii) Compressed Air Supply will be installed in Bhiwadi to meet the requirement.
(iii) H.S.D. Oil: H.S.D. Oil is required for running the Generator Sets and is available
directly through Bharat Petroleum and also locally at all petrol pumps.
(iv) Other lubricant oils etc., are available easily in principal markets.
Effluent Treatment
The process of metallizing and co-extrusion does not involve discharge of Air / Water
effluent. The plastic scrap generated by the co-extrusion process can be used in-house /
sold for recycling purposes. The slitting waste generated in metallising and slitting
process at Bhiwadi can be sold for decoration purpose to the scrap dealers. The consent
for running the Bhiwadi unit has already been obtained from Rajasthan Pollution Control
Board.
Raw Material and other Expenses
The principal raw materials consumed by the unit for the production of Metallized Plastic
film are Polyester Film and Biaxially Oriented Polypropylene Film (BOPP). The main
suppliers of Polyester film to the Company would be:
M/s Garware Polyesters Ltd., New Delhi
M/s Ester Industries Ltd., New Delhi
M/s Polyplex Corporation Ltd., New Delhi
In order to meet the short supply of Polyester Film in the market, the Company also plans
to develop the metallising technique on BOPP film, which is being procured from Max
India Ltd. and Biax India Ltd. BOPP film is available in the market more easily
compared to Polyester films. For the production of Co-Extruded Film the raw materials
used by the company are Resins of LDPE, HDPE, LLDPE, PP co-polymer and
HMHDPE. These resins are procured from Indian Petrochemicals Ltd., Oswal Agro Ltd.,
Reliance Polypropylene Ltd., Reliance Polytylene Ltd.
METALLISING CONSUMABLES:
The metallising consumables used by the company for its production are:
Evaporator Boats or Crucibles and Aluminium Wire. Evaporator Boats will be imported
from M/s Boride Ceramics and Composite Ltd., U.K.(now known as Sintec Ltd.) and M/s
ELEKTROSCHEMELZWERK, Germany. The lead time in import of Evaporator Boats /
Crucibles would be about one month. Aluminium wires will be imported from Melton
Wires, U.K. & Shaped Wires, USA.
COATING RAW MATERIALS:
Solvents; Polymers of acrylic & vinyle resins; Coating Cylinders; Dyes.
EMBOSSING:
Shims & adhesive tapes.
Process of Production:
The Process of manufacturing consists of three phases, namely: Metallizing, Co-
Extrusion process and Coating and Embossing Process for Holography.
Metalllizing Process :
Rawmaterials like the aluminium wire and umc boats are feeded into the metallizer. The
Rewinded core then undergoes inspection, rewinding and slitting as per the requirement
and then quality check. The final product is packed and is ready for dispatch.
Co-Extrusion Process:
The Granules are fed into the Extruder machine. Then the product is passed through the
Barrel and Srews Section, Die Heads Section and Air Blowing Section. After cooling and
rewinding, the process is over.

Coating and Embossing Section (Holography):

The prepatory film under goes a process of Coating 2-3 times along with solvents and
chemicals like resins. Thereafter a process of embossing is done with shims. Thereafter a
process of metallizing is conducted followed by inspection and slitting. Finally the
product is packed and dispatched.
Manpower
At present, the existing manpower strength of the company would be 163 including 16
Nos. Managerial Staff, 20 Nos. Technical Staff and 110 nos. of workers. The details of
the proposed employment strength is given below:

CATEGORY OFFICE WORKS TOTAL

Managerial 4 12 16
Clerks/Supervisors 16 24 40
Skilled Workers - 26 26
Semi-skilled workers - 34 34
Unskilled Workers - 50 50
Other Category - - -
TOTAL 20 146 166

Additional Information

1. The capacity utilization is expected to be as follows:

Products Year 1 Year 2 Year 3 onwards

Metallized Plastic Film 80% 90% 100%
Coated Film 85% 90% 100%
The product wise installed capacity is as follows:
i. Metallized Plastic Film – 67220 MT per annum
ii. Coated Film – 1800 MT per annum.

Rate/MT
RAW MATERIALS
(Rs.)
For Metallized Plastic Film :
Plastic Film (including provision of
rejection for 20.48 kg) (kg per MT of
Finished Product) 1020.48 90500
Aluminum Wire (kg per MT of Finished
Product) 7.73 237000
Crucibles (Nos. per MT of Finished
Product) 1.37 1015
Cost per MT of Finished
Product (Rs.)
For Coated Film :
Raw Material (in house processed) 102404.74
Chemicals 70000.00

CONSUMABLES:
Cost/MT of Finished
Oil Lubricants, Stores, Packing Materials.
Product(Rs.)
(Consumption per MT of Finished Product)
For Metallized Plastic Film : 1900.00
For Coated Film : 5100.00

UTILITIES:
Cost/MT of Finished
Power/Fuel, Diesel Oil
Product (Rs.)
(Consumption per MT of Finished Product)
For Metallized Plastic Film : 4283.50
For Coated Film : 9712.50

OTHER MANUFACTURING
Cost/MT of Finished
EXPENSES:
Product (Rs.)
(Consumption per MT of Finished Product)
For Metallized Plastic Film : 1336.00
For Coated Film : 3678.00
 WAGES: Cost/MT of Finished
(Consumption per MT of Finished Product) Product (Rs.)
For Metallized Plastic Film : 1726.35
For Coated Film : 2878.75

ADMINISTRATIVE EXPENSES: Cost/MT of Finished

(Consumption per MT of Finished Product) Product (Rs.)
For Metallized Plastic Film : 679.37
For Coated Film : 2038.11

Other Miscellaneous Expenses: Cost/MT of Finished

(Consumption per MT of Finished Product) Product (Rs.)
For Metallized Plastic Film 2875.00
For Coated Film 5625.00

Average Selling Price (Rs. in Lacs/MT)

For Metallized Plastic Film 1.35
For Coated Film 2.60

2. The margin money for working capital requirement of first year is to be included in
the cost of the project.
3. The promoter’s contribution would be Rs.8.00 crore. The remaining amount of
share capital would be raised from market through an IPO of its common stock.
The cost of primary issue of equity shares would be 5%.
4. Development Credit Bank has agreed on principle that it will provide a secured
long-term loan of Rs.50 crore to the Company in a consortium with IDBI. The rate
of interest would be 100BP above the PLR. The principal amount of the
outstanding term loan at the end of the third year has to be repaid in equal annual
installments in the fourth and fifth year. The first repayment installment of Rs.1000
Lac falls due after a period of 3 years.
5. Syndicate Bank, Commercial Branch has agreed to finance the working capital
requirement to the extent of 75% at an interest rate of 14 % p.a.
6. Depreciation Rates applicable to different categories of fixed assets are as follows:
Particulars Buildings Machinery Miscellaneous Fixed Assets
As per Companies Act 3.34% 10.34% 10.34%
As per Income Tax 5% 20% 20%
7. Income tax rate applicable to the company is 30%. Surcharge applicable is 10.00%
along with an education cess of 2%.
8. Excise payable is 13.00% on Gross Sales.
9. Cost of equity is 15%.
10. The 1-m forward rate quoted by the bank is : Rs./£ : 78.17 and Rs./€ : 53.86.
11. The company is also entitled to receive a state subsidy of 10% of Plant &
Machinery or Rs.50,00,000, which ever is less.
12. Estimates for computation of Margin Money for Working Capital:
Particulars Period (Months)
Current Assets
Raw Materials 1
Consumables 1
Work In Progress 0.25
Finished goods 0.25
Debtors 1
Cash Requirement 1
Current Liabilities
Raw Materials 0.75
13. The entire portion of the net profit of the company is transferred to Reserves and
Surplus.
14. In order to meet escalation in cost, contingencies are to be provided at 10% on
fixed assets yet to be created, excluding land.
15. The existing PLR is 11%.
16. Tax rate has to be assumed only 30% for calculation of cost of capital and cash
flow calculations.
17. Further Assumptions (these estimates are according to expected market
conditions). These factors have to be incorporated while evaluating the viability
of the project. The cost/price of the following heads are expected to move as
below:

CONSUMABLES
For Metallized Plastic Film 2.5% increase from 2nd year onwards
For Coated Film 2% increase from 2nd year onwards
UTILITIES 3% increase from 2nd year onwards
OTHER MANUFACTURING 8% increase from 2nd year onwards
EXPENSES
WAGES 5% increase from 2nd year onwards
ADMINISTRATIVE EXPENSES 5% increase from 2nd year onwards
OTHER MISCELLANEOUS 5% increase from 2nd year onwards
EXPENSES
AVERAGE SELLING PRICE OF
 FINISHED GOODS
For Metallized Plastic Film 3% increase from 2nd year onwards
For Coated Film 4% increase from 2nd year onwards

18. The Salvage value of fixed assets at the end of fifth year would be equal to its book
value.