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1. AUG
15
Financial appraisal Learn from pages 36 to 72 . The topics that are there, you have learnt it already Posted 1 week ago by Project Appraisal 0
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2. AUG
14
Technical appraisal
TECHNICAL APPRAISAL 1. Inputs and utilities – number of raw materials, supplies, consumables, etc., and their cost, quantity to stocked, etc., 2. Product ranges – single or product mix/ by product, p roduct, plant capacity 3. Process know-how- plant layout, work schedule, 4. plant location- localization, socio-economic conditions of the project project and off-site facilties
5. plant and machinery – import licenses, installed capacity, investment 6. People – organization chart, HR policies and training and Development facilities 7. methods - project purchase mgt, vendor selection,, contract administration, procurement of equipment and materials
Refer your text and Project mgt by Prasanna Chandra Posted 1 week ago by Project Appraisal 0
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3. AUG
14
Market Appraisal Market and Demand Analysis Market analysis: market share the project wants to enjoy Demand analysis: how many consumers and customers will your product have
What is demand analysis and demand forecasting? Demand forecasting using primary data and secondary data. Advantages and Disadvantages –
] ] ] Refer page
no. 107 What are sampling learn from statistics text.
]
Key steps are :
Situational analysis and specification of objecti ves: Collection of secondary information – census of India, NSS reports, plan reports, statistical abstract of Indian Union (CSO), India Year book, statistical year book, economic survey, guideline to industries, annual survey of industries, annual reports of MoCI, Techno economic surveys, The stock exchange directory, monthly studies of production of select industries, monthly bulletin of RBI, publication of advertising agencies, others like exim reports, IIFT, etc., There are also industry specific reports – automobiles, chemical, fertilizers, drugs and pharmaceuticals, electrical and electronics, industrial machiners, metallurgical, textiles Conduct of market survey -census or sample survey - steps Chaterization of markets – effective demand = consumption = production +imports- exports – changes in stock level, price, breakdown of dd, distribution, consumers,government policy Demand forecasting – qualitative : jury of executive opion method, Delphi method, market survey (
Refer
Chapter 8 in the text) Time series : trend projection, moving average (Text
book pg. no. 107-110), omit exponential
smoothing method. Casual methods : chain ratio, consumption level, end use method, leading indicator method
(handout )
Also refer to Project analysis …………………….. By Prasanna Chandra
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4. AUG
14
Corporate Analysis - an example of Microsoft (corporate appraisal) SWOT ANALYSIS - MICRO SOFT INDIA STRENGTHS Strong based image. Ranked second globally with a brand value of $58.7 billion in , behind coco-cola; Spent over $6 billion contiuously on R&D for the last five years and increased R&D workforce to 31,000 employees (approximately 40% of the total workforce); Leading position i n operating systems and browsers In fiscal 2007, no sales to an individual customer accounted for more than 10 % of the total revenue. In comparison, for Dell, this figure was approximately 11 % an 10% of the total revenues in fiscal year 2006 and 2005, respectively. Evenly-spread revenues buffer the company from fluctuating sources of income, note ovum analysts. WEAKNESS Low search engine market share; In financial year 2007, Microsoft earned nearly 61% of its revenues from the US region out of more than 100 countries that it is operating in. In contrast, competitors like IBM and Sun Micro systems have more diversified revenue structure. The company‟s online services business accounts for jsst over 5 % of its total revenues. However, the global internet software and services market is forecasted to grow at 112% t o $942 billion by 2011 OPPORTUNITIES Healthcare is being considered a key vertical by Microsoft, as seen in its recent move in the European healthcare market with the European launch of Microsoft Amalga-its new unified intelligence system for hospitals. In Inda, it has done a lot of work in Gujarat and has tie-ups with private players like Apollo Hospitals and Fortis healthcare. It has also introduced a “Health Vault” concept here. The global market for IT applications is projected to grow at a CGAR of 10.08% between 2007 and 2012, out of which small and medium sixed enterprises will grow at 11.1% and 10.91% respectively. Microsoft India has made significant inroads here. THREATS Software vendors globally are losing close to $40 billion annually because of piracy. Legal proceedings in countries like India and China against software pirates have yet to bear fruit. It faces intense competition across all markets for its products and services. Internet as a distribution channel and non-commercial software model has further reduced barriers to entry. Microsoft‟s business coduct and prod ucts face scrutiny from government agencies under the US competition laws and the laws of other countries
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5.
AUG
14
Industry and Corporate analysis INDUSTRY ANALYSIS (Environment Analysis): studying the environment based on the sector: Economic sector: state of the economy, overall rate of growth, growth rate of primary, secondary and tertiary sectors, cyclical fluctuations, linkages with the world economy, trade surplus/deficit and balance of payments Government sector: industrial policy, government programmes/projects, tax framework, subsidies, incentives, and concessions, import and export policies, financing norms, lending conditions of financial institutions and commercial banks Technological sector: emergence of new technologies, access to technical know-how, foreign as well as indigenous and receptiveness on the part of industry Socio-technological sector: population trends, age shifts in population, income distribution, educational profile, employment of women and attitudes to ward consumption and investment Competition sector: number of firms in the industry and the market share of the top few, degree of homogeneity and differentiation among products, entry barriers, comparison with substitutes in terms of quality, price, appeal and functional performance, marketing policies and practices Supplier sector: Availabillity and cost of raw materials and sub-assemblies, availability and cost of energy and availability and cost of money
Corporate appraisal: (Swot analysis, pest analysis, porter model: profit potential model, life cycle approach etc.,) It is essential for identifying investment opportunities which can be profitably exploited. Marketing and Distribution: Market image, product line, market share, distribution network, customer loyality, marketing and distribution costs Production and operations : condition and capacity of plant and machinery, availability of raw materials, subassemblies, and power, degree of vertical integration, locational advantages and cost structure Research and development: research capabilities of the firm, track record of new product developments, laboratories and testing facilities, coordination between research and operations Corporate resources and personnel: corporate image, clout with governmental and regulatory agencies, dynamism of top mgt, competence and commitment of employees and state of industrial relations Finance and accounting: financial leverage and borrowing capacity, cost of capital, tax situation, relations with shareholders and creditors, accounting and control system, cashflows and liquidity. Source: Projects: planning, analysis, selection …………….. by Prasanna Chandra, Chapter 3
Pls also learn from your text pg. no. 84- 92 Posted 1 week ago by Project Appraisal 0
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6. AUG
14
Individual and Group creativity
REATIVITY- PROJECT IDEAS-INNOVATION Initiating process: idea generation - stages, individual ( preparation, incubation illumination, Verification), group (delphi technique, brain storming, nominal group technique) Corporate appraisal (production, operations, R&D, HR, Finance, Accounts, Marketing, distribution) Scanning the environment (Economic, govt, Technological, socio-demographic, competition) Searching for new ideas ( study existing ,observe the inputs and output of various industries, observe new technology, psychological needs, study thr government guidelines) Screening – rating index
IDEA GENERATION: “Learning gives creativity, Creativity leads to thinking, Thinking provides knowledge, Knowledge makes you great:” Minnesto Minning and Manufacturing (3M) fosters a culture of innovation throughout the firm. The company manages the innovation process through a sophisticated tool called „stagegate system‟. In this system, the entire innovation process is divided into several stages. There will be a gate or check point at the end of each stage. The project leader, who works with a cross-functional team, brings a set of known requirements to each gate before the project passes from one stage to the next stage. The project leader also performs a technical appraisal, competitive analysis and a market study of customer interests and preferences. Senior managers review the criteria at each stage to judge whether the project deserves to move to the next stage. Finally, the gatekeepers make one of four decisions: „go‟, „kill‟, „hold‟ or „recyle‟. The idea is passed to the next stage in a „go‟ decision, completely rejected in a „kill‟ decision, considered in the future in a „hold‟ decision. In a „recyle‟ decision, the process is repeated. Since all the steps are visible to all the people involved, these systems put a strong discipline into the innovation process. Lego, the Danish toy maker follows the same procedure to replace about one-third of its product line with new products every year. Pureit - Water Purifier -An innovation Pureit, a breakthrough offering of Hindustan Unilever, is with many unique benefits – complete protection from all water- borne diseases, great convenience, and unmatched affordability. Pureit‟s unique Germkill BatteryTM technology kills all harmful viruses and bacteria and removes parasites and pesticide impurities, giving you water that's 'as safe as boiled water'TM. It assures your family of 100% protection from all water-borne diseases like jaundice, diarrhea, typhoid and cholera. What‟s more, it doesn‟t need gas, electricity or continuous tap water supply. You will be further reassured to know that Pureit meets the stringent germ-kill criteria of the Environmental Protection Agency (EPA), the toughest regulatory agency in the USA. The Delphi method at BHEL BHEL the largest heavy-electrical equipment company in India, uses the Delphi process to explore new ideas and to decide the future directions of its systems. The process is carried out in three steps. In the first step, an open-ended questionnaire is given to all the prospective respondents. All the possible ideas regarding major technological breakthrough for next 30 to 40 years are gathered. Participants also mention when the technological breakthrough is l ikely to occur. Then the coordinator collects the questionnaires from all respondents and prepares the list of technological breakthroughs and its estimated timings. In the second step, the summarized list of technologies with its expected arrival I fed back to the participants. Participants are then asked to reconsider their earlier time estimates and give new ones with proper reasons. The information obtained at this stage provides a priority ranking for each technological development in terms of the urgency of each requirement. In the third stage, participants are given the new information about estimated timings that was collected in the second stage. In the final stage, participants are asked for their final estimates with their rationale for their forecasts. The company feels that the obtained ideas will be useful for corporate planning.
Pls learn also from your Text on Individual and group Creativity pg no, 93-95
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7. AUG
14 Project selection : Screening the ideas A Finance models 1. scoring model: factor/ project rating index( it requires project evaluation factors- refer Table :2.1 from your table chapter 2, page no. 45) 2. profit model: payback, ARR, DCF B. non-finance models Sacred cow, operating necessity, the competitive necessity, product line extension, comparative benefit model.
Pls refer to the material given in the class Criteria for choosing the project selection model Realism, capability, flexibility, ease of use, cost and easy computerization Example: Purchase of a car- How will you adopt project rating index? Table A : Criteria and weights for automobile purchase A. B. C. D. E. F.
appearance - 1.5 Comfort - 3 Cost - 2 Handling - 2 Mileage- 1 Maintenance - .5
criteria A B C D E F
1 ugly ugly >4
2 Poor Poor >3
3 4 adequate good adequate good 2.5 2 – 2.5
5 wow wow 1.45 -2
Project Rating Index 1. 2. 3. 4. 5. 6.
It is an evaluation method that helps mgt to streamline the process of initial screening. Factors for rating have to be identified and weights to be assigned, scores have to be given score. The steps involved are: Identify the relevant factors useful for rating a project Assign factor weights to each factor, based on the relative importance of each factor Use an appropriate rating scale and rate the project on the listed factors. Multiply the factor rating with the factor weight to calculate the factor score for each factor Add all the factor scores to determine the rating index of the project Reject the project if the rating index of the p roject is less than the desired value. Construction of a rating index Factor
Factor weight
Rating Scale Factor score
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8. JUL
27 Kindly follow the link http://innovationgrow.com/importance-of-innovation-and-creativity-in-business.htm Posted 5 weeks ago by Project Appraisal 0
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9. JUL
21
Assignment As was told in the last class to submit an assignment on CIAL case, next class come prepared and submit the assignment, This is for all. Posted 21st July by Project Appraisal 0
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10. JUL
21 Project Appraisal and financing Scope of Project Management & Project financing in Practice and inter-disciplinary nature
Starting a business- you need money, men, machine and methods- of all money is required- money : your own, venture capitalist, Banks , public, private etc., You cannot invest all your money. Hence you need to approach the financiers who may be bankers, FIs, friends and relatives How do you make an approach for borrowing - you go with your creditworthiness (capacity and capital ) and ability to convert your idea into a product or service( management skills).
How will you express your ability to start, run and make profits in your business. By preparing DPR/Business plan (What is the difference between the two- DPR and Business plan and how it is prepared) In practice, you want to start your business, you will do industry analysis/corporate analysis, map the environment , which product/service to produced or supplied. Once you decide the product, you should know the capital is sufficient or not. When you need more money, you have to approach a banker or consultant who would help in getting finance after explaining about the feasibility. So an initiator would receive inputs with respect to the product for which finance is available similarly, venture capitalist (example: Government organizations- MSME )would help in the same job. They approve the idea and the preparation of DPR and supply of finance. There are also supplier of projects who initiate the project, implement the project and sell it to the purchaser. What is the sequence of all these activities: Project formulation, Project appraisal and Project Management
a. b. c. d. e. f.
Project formulation to idea generation to scanning the environment: business, political, social, technological and legal. to carry out feasibility studies –market, technical, financial, economic etc, to prepare preliminary proposals – DPR preparation/business plan to finalise and consolidate to submit for approval
1.
Project appraisal -checking out feasibility by the Banks and Financial Institutions to discuss and approve
Project management1. Planning 2. Implementation 3. closure Example: Another example: metroliner by L& Larsen & Toubro Metro Rail (Hyderabad) Limited, a subsidiary and a special purpose vehicle of the L&T Infrastructure Development Projects, has achieved financial closure for the Rs 12,132-crore Hyderabad metro rail project. A consortium of 10 banks led by SBI has sanctioned the entire debt requirement of Rs 11,480 crore and the equity component of around Rs 3,440 crore would be infused by the L&T group for the project, according to a company release today. The project would get a viability gap grant of Rs 1,458 crore from the central government through the state, it said. L&T signed the concession agreement with the government of Andhra Pradesh on September 4, 2010. L&T Metro Rail (Hyderabad) Ltd has already submitted a performance guarantee of Rs 360 crore to the state government. The pre-construction works of the project has already started, and the soil testing and topographical surveys have been completed in most locations along the alignment and conceptual engineering is near to completion. As per the agreement, construction would have to be completed in five years and the concession period for the project is 35 years (including 5 years of construction) and is extendable by an additional 25 years.
What is DPR- details about various aspects of your business. : Technical aspects, Market aspects, finance aspects, economic aspect etc., Hence it is document which covers various aspects and a roadmap for your business. Interdisciplinary nature
II Topic - Session 2
Project, Project characteristics and Types Project Vs Programme, Project Life cycle Projects are set to achieve objectives, because it provides org with tools that increases the ability of planning, implementing and control its activities as well as the way in which it utilizes the people and resources. Some people argue that construction of Tower of Babels and Egyptian were some of the first projects as cavemen were set and sent for raw material for mammoth stew. Initially projects started by Military system than other sector. For example: 1. NASA’s Apollo space prog. , and the development of bombs missiles are few instances ( govt) 2. soft ware industries The responses to the above requires setting up of projects as it talks about utilization of people and resources. Slow transformation, technology supplementary and special service. Q`(Ex: Advertising co, advances from blanket print ads to regionally focused television ads to personally focused internet ads) Project definition : A TEMPRORARY ENDEAVOUR UNDERTAKEN TO CREATE A UNIQUE PRODUCT OR SERVICE - Project Management Institute, 2001 Basic purpose of initiating a project is to accomplish specific goals. The three project objectives are: 1. Performance/quality 2. Time 3. Cost PROJECT MANAGEMENT In India, development process in the real sense, using technology, engineering and construction, began only in the year 1951, that is with the five year plan. Since then govt spends on developmental projects like Agricultural projects like rural tech, irrigation etc., Industry minerals, Transport, communications, science, Technology and environ, special area programmes, housing and general economic services. Project characteristics Unique activities - ship building yard Attainment of specific goals – different projects with different objectives: no objectives are the same- Ex: marketing project for demand analysis/sale Sequence of activities - sequence should be followed which depend upon the technical requirements and interdependency, Ex. Construction project stars with soil testing, foundation, outline structure etc., Specified time – start and completion date to be fixed with duration expressed in hrs/days/months/years. Inter-related activities- output becomes input for the next job. Ex. Interior designing requires completion of flooring and fixtures.
APPLIED THEORY 1.”Make it fast, make it good, make it cheap” is what senior managers always ask of their project managers. But the project managers always wanted a traded-off between these three project variables. Why do you think the top management and project managers take such stands when implementing a project. Learn something about Olympic torch relay, Manhattan project and construction of Egypt pyramids
Project Vs Programme -
Project Vs Programme Plan - a comprehensive view of something involving large resource generation and availability and its allocation for different projects with well defined objectives. Ex. Five year Plan
Programme : It is a group of projects in a coordinated way to obtain benefits not available had it been performed individual . Ex : ISRO undertakes many projects like INSAT, GSLV, PSLV etc., other programmes are health programs, education programs, rural development programs etc., FOR EXAMPLE : A company wants to increase its revenue from 10 crores to 20 crores in three years. The company has to undertake a programme consisting of projects Project I : Enhance the existing product - upgrade Project ii: launch a basic version of new product Project III: launch a revised version of new product with all types of features Project iv : decrease the delivery time, increase the speed Project v : increase quality and decrease defects
1. 2. 3. 4. 5. 6. 7. 8. 9.
TYPES OF PROJECT Size of Investment Ownership Area concern Sector of activity Object Time Level of complexity Tech Risk
Mega, Public
Major, Private
Medium Mini Joint sector Cooperative of
Local regional National International Industrial agricultural service sector general new expansion modernization enrichment below 3 mths 3-9 mths 9-18 mths more 18 mths high medium low very low breakthrough contemprory best practical 100 no below 50 above 50 100 yes
PROJECT LIFE CYCLE INITIATING PROCESS : i dea generation - stages, individual & group (delphi technique, brain storming, nominal group technique) - background of idea generation. Scanning the environment ( Business, Economic, Political, Technological, legal etc.) Corporate appraisal (production, operations, R&D, HR, Fi nance, Accounts, Marketing, distribution) g. Project selection : Screening – rating index and to carry out feasibility studies –market, technical,
financial, economic etc, PLANNING PROCESS: a. to prepare preliminary proposals – DPR preparation - activity definition and scope, schedule and sequencing, cost estimating and sources and budget, duration etc., b. to finalise and consolidate – final DPR c. to submit for approval
IMPLEMENTATION PROCESS: bringing in the team under the supervision of the project manager and project under the top mgt to support one another and co-ordinate one another CONTROLLING
and
closure
PROCESS
: performance
reporting,
Pls also learn from the Material given in the class Posted 21st July by Project Appraisal 0
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11. JUL
21
syllabus VIGNANA JYOTHI INSTITUTE OF MANAGEMENT Post Graduate Diploma in Management (PGDM) Batch XIX 2011-2013 TERM IV Title of the Course: PROJECT APPRAISAL AND FINANCING Learning outcomes: At the end of the course, the students should be able to:
Adopt the techniques used for preparing a good project Learn the project appraisal criteria adopted by Financial Institutions. Appraise the projects with respect to its feasibility Preparation of detailed project report
Abstract of the course: The projects and operations are often considered similar as both are planned, implemented and controlled to produce results within specified resource constraints. But a project is undertaken to produce unique deliverable. The course enables the students to learn the techniques adopted by Financial Institutions for project appraisal and equips them with skill of preparation of detailed projects for the projects planned based on the criteria of financing of projects.
Session plan:
Session No.
1
Topic & Issues
Overview of the Course: Scope of Project Management & Project financing in Practice and inter-disciplinary nature
Reading Reference
2-3
Project, Project characteristics and Programme, Project Life cycle
4-6
Project selection: Generation of Project ideas, Criteria for Ch 3 Text selection of models, nature and types of selection models, factoring rating index.
7-8
Technical Appraisal and Market Appraisal
9- 22
Financial Appraisal: cost of projects, sources of finance- long Ch. 5, 6 Text term, working capital, Break even point, cash flow-NPV & IRR and Profitability estimates, ratios and sensitivity analysis
23-24
Economic Appraisal: Social Cost Benefit Analysis Management Appraisal
25-27
Preparation of Detailed Project Report, Project appraisal by FIs Handout and and Financial agencies, Techniques and steps. Pahwa. H.P.S (6th Edition) Presentation of DPRs
28-30
Types
Project
Vs Ch 1 & Handout
Ch. 4 Text
Handout
Pedagogy: The Pedagogy consists of right blend of the various methods for effective learning of the course - a mix of lectures on conceptual basics, exercise and real life situation analysis, discussion of case studies.
Recommended text: Project Appraisal and Financing
Additional references: Project Management and Appraisal
:
Project Management Practical Project Management Project Management Project Report & Appraisal Project Financing Project Finance of the Total Project Management Project Management Projects – Preparation, Appraisal, Budgeting Implementation Project Management
: Bhavesh : Ghattas R.G. & Sandra : PMP Wiley Edition : Pahwa. H.P.S (6th Edition) : Pahwa. H.P.S (4th Edition) : Joy. P.K. (PKJ) : Patel, Bhavesh : Chandra, Prasanna (PCA) :
Khatua, Sitangshu
Sharma. K.R
Students are free to refer any book on the subject
Journals & Dailies : Project -ICFAI, Chartered Accountant, Chartered Financial Analyst, Business Analyst, Money and Finance, Business India, Business World, Business Today, Business Standard, Economic Times, Business line. Evaluation:
Mode of Evaluation Quizz Selection of project idea using Project rating Index Review Examination Preparation of DPR End – Term Examination Total
Weightage 15% (2 Quizzes of 7.5 marks each) 10% 15% 15%(15% for presentation) 50 % 100% th
the
project
+10
for
th
Quizzes to be conducted during the 9 session, 1 session of the course for a duration of 20 minutes each.Quizzes are to be conducted only in the written form. Each student has to pick up 3 project ideas of various nature and should apply Factor rating index technique for all the projects ideas selected in order to rank them. This individual assignment has to be submitted on the 10thsession of the course. DPR to be prepared for the select project as a group and to be submitted not later than the th 25 session of the course.
Evaluation Criteria for the Group Project
%
Conceptual clarity Self analysis with reasoning and drawing results from various tests Ability to relate and draw inferences from various experiences and incidences Relevance of the content( no superfluous or irrelevant information) Information source, suitable referencing and bibliography Format and language: clear division into sections, page numbering, language etc. Student’s original contribution and creativity Any plagiarism shall be viewed seriously and the students have to rework.
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