Unit 4 of 4 · MBA Sem 2

Unit 4: Project management

Entrepreneurship Development and Project Management notes · PTU syllabus (MBA 207-18)

3 min read9 topics10 exam questions
On this page
  1. Unit summary
  2. Concept, facets and key issues of project management
  3. Generation and screening of project ideas
  4. Market, technical and financial analysis
  5. Investment criteria and risk analysis
  6. Project financing including venture capital
  7. Venture capital for projects
  8. Project planning, control and PERT/CPM
  9. PERT and CPM network techniques
  10. Post-audit review
  11. Key terms
  12. Quick revision
  13. Important questions

Unit summary

Projects turn plans into assets. This unit covers the concept, facets and key issues of project management, generation and screening of project ideas, market, technical and financial analysis, investment criteria and risk analysis, project financing including venture capital, project planning and control, PERT and CPM, and post-audit review.

After this unit you can

  • Explain the concept, facets and life cycle of project management
  • Explain generation and screening of project ideas and feasibility analysis
  • Apply investment criteria and risk analysis and explain project financing
  • Explain project planning and control, PERT/CPM and post-audit

PTU syllabus topics

  • Concept
  • facets and key issues of project management
  • generation and screening of project ideas
  • market/technical/financial project analysis
  • investment criteria and risk analysis
  • project financing including venture capital
  • project planning and control
  • PERT and CPM network techniques
  • post-audit project review
Key formulasPERT and CPM
  • Expected time

    te = (a + 4m + b) / 6

  • Variance

    σ² = [(b − a) / 6]²

  • Total float

    LS − ES (or LF − EF)

  • Critical path

    Path with zero float: the longest path

1

Topic 1

Concept, facets and key issues of project management

  • Project: a temporary endeavour with a defined beginning and end to create a unique product, service or result (PMI).
  • Project management: applying knowledge, skills, tools and techniques to meet project requirements within scope, time, cost and quality (the triple constraint).
ProcessProject life cycle
  1. 1Conception
  2. 2Definition and feasibility
  3. 3Planning and organising
  4. 4Implementation
  5. 5Clean-up and closure
  • Facets of project analysis (Prasanna Chandra): market and demand analysis, technical analysis, financial analysis, economic (social cost–benefit) analysis, ecological analysis.
  • Key issues: time and cost overruns, scope creep, stakeholder management, risk, financing, approvals.
2

Topic 2

Generation and screening of project ideas

  • Sources of ideas: analysis of performance of industries, input–output analysis, import substitution, export opportunities, government plans and incentives, technology trends, unfulfilled needs.
  • Screening criteria: compatibility with promoters, consistency with government priorities, availability of inputs, market size, reasonable cost, acceptable risk.
  • Pre-feasibility and feasibility studies; detailed project report (DPR).
3

Topic 3

Market, technical and financial analysis

AnalysisKey questions
Market and demandMarket size, growth, demand forecast, competition, pricing, distribution
TechnicalTechnology choice, capacity, location, raw materials, plant layout, utilities, schedule
FinancialCost of project, means of finance, cost of production, profitability projections, cash flow, break-even, projected balance sheet
Economic (SCBA)Social benefits and costs — UNIDO and Little–Mirrlees approaches
EcologicalEnvironmental impact assessment, clearances
4

Topic 4

Investment criteria and risk analysis

  • Investment criteria: payback, ARR, NPV, IRR, profitability index, DSCR (for lenders).
Key formulasProject appraisal ratios
  • Debt service coverage ratio

    (PAT + Depreciation + Interest on term loan) ÷ (Interest + Principal instalment)

  • Break-even point

    Fixed costs ÷ Contribution per unit

  • NPV

    PV of inflows − PV of outflows

  • Risk analysis: sensitivity analysis, scenario analysis, simulation, decision trees, break-even analysis, risk-adjusted discount rate.
5

Topic 5

Project financing including venture capital

  • Means of finance: promoters' equity, term loans (banks, FIs), debentures, public issue, external commercial borrowings, government subsidies, venture capital and private equity, lease finance, unsecured loans; project finance for infrastructure (non-recourse, SPV-based).
6

Topic 6

Venture capital for projects

Venture capital (VC) is long-term equity or equity-linked finance provided to new, innovative, high-risk, high-growth ventures, along with management support.

  • Features: equity participation, high risk–high return, long-term (5–10 years), active involvement (board seats, mentoring), exit through IPO, trade sale or buy-back.
ProcessStages of venture financing
  1. 1

    Seed

    Proof of concept, prototype

  2. 2

    Start-up / early stage

    Product development and initial marketing

  3. 3

    Second stage

    Expansion of working capital

  4. 4

    Expansion / growth

    Scaling, new markets

  5. 5

    Mezzanine / bridge

    Pre-IPO financing

  6. 6

    Buy-out

    Management buy-out or buy-in

ProcessVC investment process
  1. 1

    Deal origination

  2. 2

    Screening

  3. 3

    Evaluation and due diligence

    Team, market, technology, financials

  4. 4

    Deal structuring

    Valuation, instrument (CCPS), term sheet

  5. 5

    Post-investment monitoring and value addition

  6. 6

    Exit

7

Topic 7

Project planning, control and PERT/CPM

  • Planning tools: work breakdown structure (WBS), Gantt charts, milestone charts, resource levelling, budgets.
  • Control: monitoring progress vs plan, earned value analysis (planned value, earned value, actual cost), corrective action, reporting.
8

Topic 8

PERT and CPM network techniques

ComparisonPERT vs CPM
PERT
CPM

Origin

US Navy Polaris project (1958)

DuPont and Remington Rand (1957)

Activity times

Probabilistic — three estimates

Deterministic — one estimate

Orientation

Event-oriented

Activity-oriented

Used for

R&D, new projects with uncertainty

Construction, repetitive projects

Cost

Time-focused

Time–cost trade-off (crashing)

Construction of networks

  • Activity (arrow), event (node), dummy activity (dashed — shows dependency without time).
  • Rules: each activity has one arrow; no loops; no dangling events; only one start and one end node; dummies to avoid two activities with the same start and end nodes.
ProcessCritical path computation
  1. 1Forward pass

    Earliest start (ES) and earliest finish (EF)

  2. 2Backward pass

    Latest finish (LF) and latest start (LS)

  3. 3Compute floats
  4. 4Critical activities have zero total float
  5. 5Critical path = longest path = project duration
9

Topic 9

Post-audit review

  • Post-completion audit: compares actual performance (cost, time, benefits) with projections after the project is operational.
  • Benefits: improves future forecasting and appraisal, disciplines planners, identifies corrective actions, organisational learning.
  • Problems: isolating project cash flows, cost of audit, defensive behaviour.

Key terms

Project
Temporary endeavour creating a unique result
Triple constraint
Scope, time and cost (with quality)
Feasibility study
Analysis of a project's market, technical and financial viability
DSCR
Ability of a project to service its debt
Post-completion audit
Review of a project after implementation

Quick revision

  • Project life cycle; facets of project analysis.
  • Idea generation and screening; feasibility; DPR.
  • Market, technical, financial, economic and ecological analysis.
  • Investment criteria (NPV, IRR, DSCR) and risk analysis.
  • Financing (equity, loans, VC, project finance); WBS, Gantt, PERT/CPM; post-audit.

Important exam questions

Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).

Short-answer questions

  1. Q1.Define a project.
  2. Q2.What is the triple constraint?
  3. Q3.State the facets of project analysis.
  4. Q4.What is DSCR?
  5. Q5.What is a work breakdown structure?
  6. Q6.What is a post-completion audit?

Long-answer questions

  1. Q1.Explain the concept, facets and life cycle of project management.
  2. Q2.Explain market, technical and financial analysis of projects.
  3. Q3.Explain investment criteria, risk analysis and project financing.
  4. Q4.Explain project planning and control using PERT and CPM and the post-audit review.

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