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INDIAN SCHOOL OF BUSINESS MANAGEMENT AND

ADMINISTRATION

 


AN ISO 9001:2015 CERTIFIED INTERNATIONAL B-SCHOOL

 


Name:                                                                                                                                 Marks: 80

Course: Masters in Business Administration (MBA 4 Sem)

Subject: Project Management A

 

 


Answer the following question.

 

Q1. Discuss the guidelines to be borne in mind while estimating the incremental cash flows of a project? (10marks)

 

Answer: Estimating incremental cash flows is a critical step in evaluating the feasibility of a project. Here are some guidelines to consider while estimating incremental cash flows:

 

1.       Focus on relevant cash flows: When estimating incremental cash flows, it is important to focus on cash flows that are relevant to the project. This means considering only the incremental cash flows that are directly attributable to the project, and not including any cash flows that would occur regardless of the project.

 

2.       Include all cash flows: While focusing on relevant cash flows, it is also important to include all cash flows associated with

 

 

 

Q2. What is the rationale for net present value method? (10marks)

Answer: The net present value (NPV) method is a widely used financial appraisal technique that helps businesses and investors evaluate the potential profitability of an investment. The rationale for using the NPV method is as follows:

 

1.       Time Value of Money: The NPV method takes into account the time value of money, which means that a dollar received today is worth more than a dollar received in the future due to the opportunity cost of capital. By discounting future cash flows back to their present value using a discount rate, the NPV method reflects the time value of money and provides a more accurate picture of the profitability of an investment.

 

 

 

 

Q3. Explain the following (any two) a) Social Cost Benefit Analysis b) The Time Value of Money c) Venture Capital and Private Equity(10marks)

Answer:

a) Social Cost Benefit Analysis (SCBA): Social cost-benefit analysis is a technique used to evaluate public investments or policies that affect society as a whole. SCBA aims to identify the social costs and benefits associated with a project or policy and to determine whether the benefits outweigh the costs. The process involves identifying and quantifying the costs and benefits, including both monetary and non-monetary factors, and comparing them over the lifetime of the project. By conducting an SCBA, policymakers can make informed decisions about whether to pursue a particular project or policy and how to allocate public resources.

 

b) The Time Value of Money: The time value of money is a concept that recognizes that money has a different value over time due to inflation, interest rates, and opportunity cost. The basic idea is that a dollar received today is worth

 

 

 

 

Q4. Discuss the common mistakes characterizing real option valuation in practice? (10marks)

 

Answer: Real option valuation is a technique used to value investment opportunities that have embedded options, such as the option to expand, delay, or abandon a project. While real option valuation can provide a more accurate assessment of the value of an investment opportunity than traditional discounted cash flow methods, there are several common mistakes that can occur when using this technique.

 

  1. Failure to identify all options: One common mistake in real option valuation is failing to identify all of the options that are embedded in the investment opportunity. This can lead to an undervaluation of the opportunity, as valuable options may be overlooked.
  2. Overly optimistic assumptions: Another mistake is using overly optimistic assumptions about the

 

 

 

 

Q5. What are two ways of defining the benefit – cost ratio? (10marks)

Answer: The benefit-cost ratio (BCR) is a commonly used metric to evaluate the economic viability of a project. It represents the ratio of the present value of the project's benefits to the present value of its costs. There are two ways to define the BCR:

 

 

 

 

 

Q6. Define a Venture Capital Investment? (10marks)

Answer: Venture capital (VC) investment is a form of private equity investment made in early-stage companies with high growth potential. Venture capitalists provide financing to startups or companies that are in the early stages of development and have not yet generated significant revenue or profits. VC investors

 

 

Q7. What factors contribute to group errors? (10marks)

Answer: Group errors can occur in various contexts, such as decision-making, problem-solving, and performance evaluation. The following factors can contribute to group errors:

  1. Groupthink: Groupthink occurs when group members prioritize consensus and harmony over critical thinking and decision-making. Groupthink can result in flawed decision-making, overconfidence, and a lack of consideration for alternative viewpoints.
  2. Social conformity: Group members may conform to the opinions and behaviors of the majority to avoid conflict or gain acceptance. Social conformity can lead to a lack of diversity of thought and a

 

 

 

Q8. Define a Venture Capital Investment? (10marks)

Answer : Venture capital (VC) investment is a form of private equity investment made in early-stage companies with high growth potential. VC investors provide financing to startups or companies that are in the early stages of development and have not yet generated significant revenue or profits. VC investors provide capital in exchange for an equity stake in the company, which means they become part owners of the

 

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