Question

1. Carefully explain the various methods involved in sensitivity analysis and their importance in project appraisal. (50%) 2. NPV IRR and the ratio of discounted benefits to discounted costs are conceptually distinct criteria. Carefully explain how they can be applied to generate consistent decisions when evaluating investment projects under different scenarios. (50%) 3. Discuss the significance of stake holder participation within the context of a project's system boundary (50%) 4. Explain the benefits and limitations associated with undertaking a critical path analysis for a project. (50%)

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Answer 1

Answer:

1. Various methods involved in sensitivity analysis and their importance in project appraisal:

There are various methods to analyzed sensitivity analysis, actually these are techniques or ways which we can use to measure sensitivity between dependent variables and independent variables. It can be analyzed by using mathematical, statistical techniques. It can be further analyzed by Local Sensitivity Analysis and Global Sensitivity Analysis

Local Sensitivity Analysis: In this method generally, there is one variable to be compared with another variable independently. For that the techniques are used alike derivatives, Probabilities. In this Technique the all other parameters are fixed and focus on only one parameter.

Global Sensitivity analysis: In this method there are various factors and parameters are considered. Generally, in this simulation is used to analyze Sensitivity. In this technique various other mathematical statistical techniques are used like regression analysis, correlation analysis etc.

These methods are important in project appraisal as these decides that how critical is the area or object in the project.

2. NPV, IRR, and the ratio of discounted benefits to discounted costs are conceptually distinct criteria. They can be applied to generate consistent decisions when evaluating investment projects under different scenario in following way:

NPV, IRR and ratio discounted are interconnected and these affects the result of the outcome of the project drastically.

NPV decides whether project is viable or not as per time value principal. But to analyze that IRR and Ratio of discounted plays an important role.

IRR and discounted ratio may not be same difference in it resulted differently in calculating NPV.

  

3. Significance of stake holder’s participation within the context of a project system’s boundary

Stake holder’s role is very important in any organization. Stakeholders expectations and investment in project are decide the tasks to be performed in project. Project manager should consider the Stake holder’s participation in the project, there expectations etc. So that he can plan the project in a way to get expected outcome to stakeholders.

The project objective is depending on the stakeholder’s participation as it decides the investment, return and scope of the project.

4. Benefits and limitations associated with undertaking a critical path analysis of a project :

Benefits:

1. To know the critical activities on which the organization to work upon.
2. Timing and cost analysis of the project and activity is clear and one can decide that which activity to be focused in the project
3. Deadlines of the project are known and hence one can work or plan according to achieve desired result in time

Limitations:

1. Participation of Management and staff is lower at in some activity
2. If delegation of authority is not clear then it is difficult to achieve project targets
3. Cost to benefit of the activity are major issue to complete the activity.
4. More experienced people involved in project then there is high cost involved