Project managment - Coursework Example

Project Management Project management PROJECT SELECTION We live in a world of finite resources and therefore cannot carry out all the projects we need. We therefore have to rank all the proposed projects and then select the most beneficial. Below are the three selected projects. The project sponsor is specific on the kind of project he is willing to finance; they should be between500, 000 and 1 million and should have a payback period of between 6months and 2 years. Project 1:Oil pipeline costDirect cost Wages & salaries 188440Employee benefit 8000Consultants travel 9000Cost of raw material 250000supplies 50000Depreciation 40000taxes 120000Fees 40000Motor expense 46000insurance 50000Machinery at cost 250000Indirect cost Repair& maintenance 130000Total 1,181,440Project 2:Health centreDirect cost Wages & salaries 300000Social expenditure 10000Employee benefit 8000Travel 12000supplies 50000Depreciation 40000taxes 110000Building rent 40000Motor expense 46000insurance 50000Machinery 250000Light 5000Indirect cost Repair& maintenance 200000Total 1,220,000Project 3: RENEWABLE ENERGY RESEARCHDirect cost Wages & salaries 150,000Social expenditure 35000Consultants and researcher’s travel 105000Cost of raw material 35000supplies 30000Depreciation 25000taxes 120000Fees 20000Motor expense 35000Building rent 40000insurance 60000Machinery at cost 100000Employee benefit 107000Light 5000Indirect cost Repair& maintenance 130000Total 997000Additional informationPayback periodCash flow per year1.

Oil pipeline cost3 years450,0002. Health centre2 years560,0003. Renewable energy research2 years540,000From the above information on the proposed projects, one project is to be selected. In order to achieve this, information on total cost, ROI and payback period will be used. Total cost-the proposed budget should be between 500,000 and 1 million. This means that the first two projects on Oil pipeline and a Health centre do not qualify since their total costs exceed the available budget. Therefore, using costs I will select the project on renewable energy research since it meets this requirement.

Payback period- a smaller payback period is recommended since it shows that the company is able to recover its costs of investment in a short period. It shows that the project is generating high income. Therefore, the second and third projects will be selected since they have lower payback period (Kinney & Raiborn 2008)Return on investment-this is the returns of investment divided by the cost of investment (George & Franklin 1996). The proposed project’s ROI for a 4 year period:Project 1 ROI=1800000-1,181,440 / 1,181,440=0.

52PROJECT 2 ROI=2240000-1,220,000 / 1,220,000=0.83PROJECT 3 ROI= 2,160,000-997,000 / 997,000=1.17In connection to this, project 3 will be selected since it has a higher ROI despite it having a lower cash flow as compared to Project 2.In conclusion, from the following analysis it is evident that project three is most favourable; it has achieved the recommended initial investment requirement, has a high ROI and its payback period is also low. I would therefore select it for implementation. ReferencesKinney, M & Raiborn, C. 2008. Cost Accounting: Foundations and Evolutions.

Thomson North West: Boulevard. George, T &Franklin, J. 1996. Understanding Return on Investment. New York: John Wiley & Sons.