Chapter 2 Homework Assignment

Chapter 2

Questions

1. A medical research firm is planning to re-locate to one of four cities within the United States. Review the table below and develop a weighted project selection model with a minimum of 5 criteria (one criteria has been provided to get you started) to aid in the selection of the correct city. Assign fictional scores to each criterion for each of the 4 cities, provide a legend, and total the score. Make a recommendation based upon the score. Complete the assignment using Microsoft Excel.

2. Two new Internet site projects are proposed to a young start-up company. Project A will cost $100,000 to implement and is expected to have an annual net cash flow of $20,000. Project B will cost $400,000 to implement and should generate annual net cash flows of $90,000. The company is very concerned about their cash flow. Using the payback period, which project will return their money the soonest?

3. A four-year financial project has net cash flows of $50,000, $40,000, $30,000, and $10,000 in the next four years. It will cost $175,000 to implement the project. If the required rate of return is 20%, conduct a discounted cash flow calculation to determine the NPV.

4. List the 8 steps of the Project Portfolio Process. Which step do you believe is the most difficult to complete and why?