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Handstar Inc

In: Business and Management

Submitted By leelaupsc
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Project Management - Handstar Inc

NPV Method for Project Selection

The Net Present Value (NPV) of an investment is the present value of the expected cash flows, less the cost of the investment

NPV is calculated based on formula for growing annuity - a stream of cash flows that grows at a constant rate for a fixed number of periods

C= First year revenue r = Discount rate = 12% g = Annual Revenue Growth
T = Product Life Time = 3 years
Total development hrs available with 4 developers in a year= 4 X 2500=10000 hrs

Assumptions
1. In NPV calculation, we assume all projects are completed on same date
2. 3 years of Product Life time starts from date of completion of individual projects

Please refer the attached excel sheet for complete calculation
Project# Project Type Project Name Dev Hrs NPV (Refer Excel sheet) Project Rank
(Based on NPV)
1 Update Integration of calendar and email 1250 1575155.23 4
2 Update Expense report 400 607862.11 6
3 Update Portfolio tracking system 750 1218324.22 5
4 New Product Spreadsheet Program 2500 2501024.51 3
5 New Product Web Browser 1875 6779898.70 1
6 New Product Trip Planner 6250 2944042.97 2

Q1: As per NPV ranking and available development hrs. (i.e. 10000) following 4 projects can only be undertaken. By taking up these project total 9775 hrs. will be utilized.

Project Name Dev Hrs NPV (Refer Excel sheet) Project Rank
(Based on NPV)
Integration of calendar and email 1250 1575155.23 4
Expense report 400 607862.11 6
Web Browser 1875 6779898.70 1
Trip Planner 6250 2944042.97 2 9775

Weighted Scoring Method for Project Selection

There are two strategic considerations - leadership position of the product and internet use

Project# Project Type Project Name Project Rank
(Based on Only NPV) Strategic alignment
1 Update...

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