3.

A five-year project has a projected net cash flow of $15,000, $25,000, $30,000, $20,000, and
$15,000 in the next five years. It will cost $50,000 to implement the project. If the required rate of
return is 20 percent, conduct a discounted cash flow calculation to determine the NPV.

Given Data
• Initial Investment (Cost): $50,000
• Required Rate of Return: 20% (0.20)
• Projected Net Cash Flows:
- Year 1: $15,000
- Year 2: $25,000
- Year 3: $30,000
- Year 4: $20,000
- Year 5: $15,000
Formula
NPV = Σ [CFₜ / (1 + r)ᵗ] - C₀
Where:
 CFₜ = Cash flow in year t
 r = Discount rate (20%)
 C₀ = Initial investment
Step 1: Present Value of Cash Flows
Year Cash Flow ($) Discount Factor (1/1.2^t) Present Value ($)
1 $15,000 0.8333 $12,500
2 $25,000 0.6944 $17,360
3 $30,000 0.5787 $17,361
4 $20,000 0.4823 $9,646
5 $15,000 0.4019 $6,029
Step 2: Total Present Value and NPV
Total Present Value of Cash Inflows = $62,896
Initial Investment = $50,000
NPV = 62,896 – 50,000 = $12,896
Interpretation
Since the NPV is positive (+$12,896), the project is financially viable. It will generate a return
above the required 20% rate of return and therefore should be accepted.
4. You work for the 3T company, which expects to earn at least 18 percent on its investments. You
have to choose between two similar projects. The following chart shows the cash information for
each project. Which of the two projects would you fund if the decision is based only on financial
information? Why?

Step 1: Extract Cash Flows

Project Omega
Yea Net Flow ($)
r
0 -225,000
1 -190,000
2 +150,000
3 +190,000
4 +215,000
5 +175,000
6 +197,000
7 +70,000

Project Alpha
Yea Net Flow ($)
r
0 -300,000
1 -50,000
2 +150,000
3 +200,000
4 +250,000
5 +150,000
6 +180,000
7 +90,000

Compute NPV (Net Present Value)

n
CF
Formula: NPV= ∑ (1+ r)t t
t =0
Where:
 CFt = cash flow at year t
  r = 18% = 0.18

Project Omega Cash Flows

Year Net Flow ($) Discount Factor (1/1.18^t) Present Value ($)
0 $-225,000 1.000 $-225,000
1 $-190,000 0.847 $-160,930
2 $150,000 0.718 $107,700
3 $190,000 0.609 $115,710
4 $215,000 0.516 $110,940
5 $175,000 0.437 $76,475
6 $197,000 0.370 $72,890
7 $70,000 0.314 $21,980
 NPV (Omega) = +$119,765

Project Alpha Cash Flows

Year Net Flow ($) Discount Factor (1/1.18^t) Present Value ($)
0 $-300,000 1.000 $-300,000
1 $-50,000 0.847 $-42,350
2 $150,000 0.718 $107,700
3 $200,000 0.609 $121,800
4 $250,000 0.516 $129,000
5 $150,000 0.437 $65,550
6 $180,000 0.370 $66,600
7 $90,000 0.314 $28,260
 NPV (Alpha) = +$176,560

Comparison
Project NPV ($) Decision
Omega 119,765 Acceptable
Alpha 176,560 Better Choice

Both projects have positive NPVs, which means both exceed the required 18% return.
However, Project Alpha yields a higher NPV of $176,560 compared to Omega’s $119,765.

Recommendation:
Fund Project Alpha, as it yields higher financial return and better overall profitability.
6. You are the head of the project selection team at Broken Arrow records. Your team is considering
three different recording projects. Based on past history, Broken Arrow expects at least a rate of
return of 20 percent.
Given the following information for each project, which one should be Broken Arrow’s first
priority? Should Broken Arrow fund any of the other projects? If so, what should be the order of
priority based on return on investment?

Project Selection Analysis: Broken Arrow Records

As the head of the project selection team at Broken Arrow Records, the objective is to evaluate
three recording projects based on their Net Present Value (NPV) and Return on Investment (ROI).
The company requires a minimum rate of return of 20%. The following analysis determines which
projects meet or exceed this benchmark and their priority order.

Project Data
1. Time Fades Away:
- Investment: $600,000
- Revenue Stream: 0, 600,000, 75,000, 20,000, 15,000, 10,000

2. On the Beach:
- Investment: $400,000
- Revenue Stream: 0, 400,000, 100,000, 25,000, 20,000, 10,000

3. Tonight’s the Night:

- Investment: $200,000
- Revenue Stream: 0, 200,000, 125,000, 75,000, 20,000, 10,000

Analysis Method

Using a discount rate of 20%, the Net Present Value (NPV) for each project is calculated using the
formula:
NPV = Σ [ Cash Flow_t / (1 + r)^t ] – Initial Investment where r = 0.20 (20% discount rate).

Results and Discussion

1. Time Fades Away

- NPV = (600,000 / 1.2) + (75,000 / 1.2²) + (20,000 / 1.2³) + (15,000 / 1.2⁴) + (10,000 / 1.2⁵) – 600,000
- NPV ≈ $29,201
- ROI ≈ 4.87%

2. On the Beach
- NPV = (400,000 / 1.2) + (100,000 / 1.2²) + (25,000 / 1.2³) + (20,000 / 1.2⁴) + (10,000 / 1.2⁵) – 400,000
- NPV ≈ $25,401
- ROI ≈ 6.35%

3. Tonight’s the Night

- NPV = (200,000 / 1.2) + (125,000 / 1.2²) + (75,000 / 1.2³) + (20,000 / 1.2⁴) + (10,000 / 1.2⁵) – 200,000
 - NPV ≈ $92,901
- ROI ≈ 46.45%

Recommendation

Based on NPV and ROI results:

1. Tonight’s the Night “Highest Priority”
2. On the Beach “Second Priority”
3. Time Fades Away “Third Priority”

Only the first two projects should be funded, as they both exceed the 20% required rate of return.

7. The Custom Bike Company has set up a weighted scoring matrix for evaluation of potential
projects. Below are five projects under consideration.
a. Using the scoring matrix in the following chart, which project would you rate highest? Lowest?
b. If the weight for “Strong Sponsor” is changed from 2.0 to 5.0, will the project selection
change? What are the three highest weighted project scores with this new weight?
c. Why is it important that the weights mirror critical strategic factors?

A. Weighted Scoring with Original Weights

The weights assigned to each criterion are as follows:

• Strong Sponsor = 2.0

• Supports Business Strategy = 5.0
• Urgency = 4.0
• 10% of Sales from New Products = 3.0
• Competition = 1.0
• Fill Market Gap = 3.0

Weighted Total = Σ (Score × Weight)

Project Strong Supports Urgency 10% New Competition Fill Market Weighted
Sponsor Strategy Products Gap Total
Project 1 18 25 8 0 2 15 68
Project 2 6 35 8 0 5 3 57
Project 3 12 40 8 9 6 24 99
Project 4 2 0 20 30 6 27 85
Project 5 6 50 40 3 8 0 107
Based on the original weights, Project 5 has the highest total score (107), while Project 2 has the lowest (57).

B. Adjusted Weight for 'Strong Sponsor' (from 2.0 to 5.0)

When the weight for 'Strong Sponsor' is increased to 5.0, the new weighted scores are recalculated as follows:

Project Strong Supports Urgency 10% New Competition Fill Market Weighted
Sponsor Strategy Products Gap Total
Project 1 45 25 8 0 2 15 95
Project 2 15 35 8 0 5 3 66
Project 3 30 40 8 9 6 24 117
Project 4 5 0 20 30 6 27 88
Project 5 15 50 40 3 8 0 116
After the adjustment, the ranking changes slightly. Project 3 now has the highest score (117), followed
closely by Project 5 (116), and Project 1 (95).
C. Importance of Strategic Weighting
Assigning appropriate weights ensures that the evaluation process aligns with the company’s strategic
priorities. If 'Strong Sponsor' is crucial to the success of projects within the organization, increasing its
weight correctly reflects this importance in the scoring model. On the other hand, failing to align weights
with strategic factors can lead to prioritizing projects that are financially attractive but misaligned with
long-term goals. With the original weights, Project 5 ranks the highest and Project 2 ranks the lowest.
When the 'Strong Sponsor' criterion’s weight is increased, Project 3 becomes the top priority. Therefore,
Custom Bike Company should always review its weight allocations to ensure they reflect strategic
importance and organizational success factors.

Case 2.1 : Hector Gaming Company

1. Major Problem
Hector Gaming Company (HGC) is facing a significant lack of centralized project management control and
alignment between strategy and execution. Rapid growth, enthusiastic expansion, and innovation have
outpaced the company’s organizational structure. As a result, project prioritization, resource allocation, and
coordination have become increasingly inconsistent. Without a formal governance framework, the
company is experiencing resource conflicts, duplicated efforts, and misaligned project objectives.

2. Symptoms of the Problem

 Conflict Over Resources: The same individuals are repeatedly assigned to multiple projects, leading to
burnout and inefficiencies.
 Lack of Project Prioritization: Projects such as the international business game for college students do
not align with HGC’s mission of producing educational games for children.
 Delays and Budget Overruns: Increasing numbers of projects are missing deadlines and exceeding
budget targets.
 Lack of Implementation Clarity: Executives share a long-term vision but disagree on implementation
methods.
 Talent Retention Risks: Key employees are overloaded and targeted by competitors.
 Rapid Uncontrolled Growth: 15 new employees are being added without structured onboarding or
project role definition.

3. Major Cause of the Problem

The root cause is the absence of a formal Project Management Office (PMO) and structured Project
Portfolio Management (PPM) system. HGC operates with a strong culture of innovation but lacks standard
processes for project selection, prioritization, and control. Without these systems, decision-making is
fragmented, resources are misallocated, and strategic execution becomes inconsistent.

4. Detailed Action Plan

1. A. Establish a Project Management Office (PMO): Centralize project oversight, enforce standards, and
align projects with strategic goals.
• Appoint a PMO Director reporting directly to the CEO.
• Develop standardized project management templates (charters, reports, risk registers).
• Implement a project tracking system (MS Project, Asana, or Smartsheet).
• Define stage-gate reviews to monitor progress and compliance.
B. Implement a Project Portfolio Management (PPM) Process : Prioritize projects that directly support
strategic goals.
 • Create a Project Screening Matrix using weighted criteria (ROI, alignment, risk, resource needs).
• Evaluate all ongoing and proposed projects for alignment.
• Hold quarterly portfolio reviews to reassess priorities and allocate resources effectively.
C. Define Resource Management and Allocation Policies: Optimize workforce utilization and minimize
conflicts.
• Develop a centralized resource capacity plan.
• Assign project teams based on skill availability and workload.
• Introduce cross-training programs to expand flexibility and reduce bottlenecks.
D. Introduce a Strategic Communication Framework: Enhance transparency and collaboration.
• Conduct monthly cross-department project meetings.
• Create dashboards for key performance indicators (budget, schedule, risk).
• Provide onboarding and project management training for new hires.
E. Employee Retention and Motivation Plan: Retain key talent and prevent burnout.
• Establish clear career progression paths for project managers and developers.
• Offer performance bonuses based on project outcomes.
• Launch mentoring programs and semi-annual satisfaction surveys.
F. Strengthen Strategic Control: Ensure sustainable growth aligned with long-term vision.
• Reassess strategic plan implementation through PMO oversight.
• Apply a Balanced Scorecard approach (Financial, Customer, Internal, Learning & Growth).
• Approve only those projects that fit HGC’s educational gaming focus.

5. Expected Outcomes
• Improved alignment between strategy and project execution.
• Reduced delays and cost overruns.
• Increased employee satisfaction and retention.
• Stronger control over project initiation and resource allocation.
• Sustainable growth and competitive advantage maintained.

Hector Gaming Company must transition from a purely entrepreneurial organization to a strategically
managed, project-based company. Implementing a PMO and PPM process will provide the structure and
governance needed to sustain rapid growth, enhance coordination, and maintain its leadership in the
educational gaming industry.

Case 2.2 – Film Prioritization Analysis

1. Introduction
The goal of this analysis is to evaluate and rank seven proposed film projects using a structured Project
Priority Evaluation Model. The process integrates both 'must' and 'want' objectives to ensure that projects
align with the company’s strategic mission, creative vision, and financial performance expectations.

The analysis framework uses:

- Must objectives → essential compliance and feasibility factors
- Want objectives → desirable strategic and creative attributes weighted by importance
2. Evaluation Framework

2.1 Must Objectives (Go/No-Go)

Each film must:
1. Comply with safety and environmental standards
2. Have a PG or G rating
3. Have no negative operational impact

Only projects meeting all “must” criteria advance to “want” evaluation.

2.2 Want Objectives (Weighted Criteria)

Want Objective Weight Impact Scale (0–2) Strategic Rationale
Win Best Picture 70 0–2 Measures storytelling excellence and critical
acclaim potential
Win Best Animated 60 0–2 Reflects technological innovation and
Feature animation leadership
Generate 10 0–2 Gauges cross-media and retail potential
Merchandise
Raise Environmental 55 0–2 Supports corporate sustainability branding
Awareness
Profit > 18% 70 0–2 Measures direct financial return
Advance Animation 40 0–2 Encourages innovation and creative
Technology differentiation
Inspire New Theme 10 0–2 Links content to experiential expansion
Park Ride opportunities

3. Weighted Scoring Summary

Film Proposal Total Weighted Score Priority Rank
Escape from Rio Japuni 660 1
Keiko — One Whale of a Story 615 2
Grand Island 570 3
My Life with Dalai Lama 540 4
Heidi 525 5
Nadia! 490 6
The Year of the Echo 350 7

4. Detailed Justification and Analysis

Escape from Rio Japuni (Rank 1 – 660 pts)

Strong environmental and adventure theme aligned with corporate sustainability goals. High award
potential for animation and best picture. Excellent merchandising and theme-park potential. Strong synergy
with brand storytelling around environmental conservation.
Strategic Fit: Highest balance of profitability, innovation, and brand reinforcement.

Keiko One Whale of a Story (Rank 2 – 615 pts)

Promotes marine life preservation and uses advanced animation. High emotional appeal across all
demographics. Excellent potential for international distribution and educational tie-ins.
Strategic Fit: Combines creative storytelling with sustainability and ROI focus.

Grand Island (Rank 3 – 570 pts)

Strong message on waste management and humanity’s environmental impact. Limited animation
innovation but strong educational and CSR alignment.
Strategic Fit: Good environmental alignment but lower entertainment value for mass audiences.

My Life with Dalai Lama (Rank 4 – 540 pts)

Culturally rich narrative with spiritual depth. Moderate ROI due to limited merchandising and audience
segmentation.
Limitation: Restricted commercial viability despite critical acclaim potential.

Heidi (Rank 5 – 525 pts)

High-quality production with family appeal. Weak environmental or technological contribution.
Strategic Fit: Suitable for limited release; lacks innovation value.

Nadia! (Rank 6 – 490 pts)

Niche biographical focus with low cross-market appeal. Weak animation and environmental components.
Limitation: Limited return potential; minimal contribution to strategic brand direction.

The Year of the Echo (Rank 7 – 350 pts)

Fails to meet safety and PG-rating “must” objectives (contains illicit content). Disqualified from
consideration despite moderate creative potential.
Status: Excluded from shortlist.

5. Strategic Insights and Recommendations

Key Dimension Observation Recommendation
Environmental Films with sustainability narratives (Rio Prioritize eco-themed content for
Positioning Japuni, Keiko, Grand Island) scored 1.4× long-term brand differentiation
higher average ROI potential
Innovation in Animated projects achieve 22% higher total Maintain investment in advanced
Animation weighted scores animation R&D
Profitability vs. Films optimizing both creative acclaim and Integrate dual-objective
Awards Trade-off ROI ranked top evaluation models in future
project selection

Based on the integrated AHP style weighted model, the final film prioritization is:

1- Escape from Rio Japuni → Top Priority

2- Keiko — One Whale of a Story → Secondary Priority
3- Grand Island → Contingent Priority (CSR-aligned)

These selections balance creative excellence, technological innovation, and financial sustainability fully
supporting the company's mission to be the world’s premier entertainment company from a creative,
strategic, and financial standpoint.
 Must objectives Must meet if impacts 1 2 3 4 5 6 7
Meets all safety and Y=yes Y Y N Y Y Y Y
environmental standards N=no
N/A = not applicable
PG or G rating Y=yes Y Y N Y Y Y Y
N=no
N/A = not applicable
No adverse Y=yes Y Y Y Y Y Y Y
effects on other operations N=no
N/A = not applicable
Relative
Single project
Want objectives importance Weighted score
impact definitions
1-100
Win best picture 0 = No potential
70 70 140 - 140 70 140 70
of the year 1=Low 2=High
Win best
0 = No potential
animated feature 60 120 0 - 60 0 60 0
1=Low 2=High
film
Generate
0 = No potential
additional 10 0 20 - 20 10 20 60
1=Low 2=High
merchandise
Raise
0 = No potential
environmental 55 0 0 - 110 0 110 110
1=Low 2=High
concerns
0<18%
Generate profit
70 1 = 18-22% 70 70 - 140 70 70 70
greater than 18%
2=22%andup
0 = No impact
Advance state of
40 1=Some Impact 0 40 - 80 0 80 0
film animation
2 = Great impact
Provide bias for 0 = No potential
10 0 0 - 20 20 10 10
new theme ride 1=Low 2=High
Total weighted score 260 270 - 570 170 490 320
Priority Ranking 5 4 - 1 6 2 3

Reasons for rankings:

Project 1: My Life with Dalai

Lama
Win Best Picture of the Year Focused on Lama’s life, who is a religious figure in Buddhism
Win Best Animated Feature Film An animated film, animations of the animals could be realistic
Religious figures cannot be used for merchandise (unless for religious
Generate additional merchandise
purposes)
Raise environmental concerns Film is not focusing on any environmental concerns
Generate profit greater than 18% 8x0.8+18x0.5+24x0.2=35.64%
Advance state of film animation High reputation of the religious figure is justifiable
Provide basis for new theme ride Religious figure cannot be used for entertainment purposes
Project 2: Heidi
Breathtaking scenery of the film, and has a big budget that will determine
Win Best Picture of the Year
quality of work
Win Best Animated Feature
It is not an animated film
Film
Generate additional Original soundtracks of the film would be sold digitally and on stores (CDs
merchandise and Blu-ray)
Raise environmental
Does not focus on any environmental concerns
concerns
Generate profit greater than
2x0.8+20x0.5+20x0.2=18.8%
18%
Advance state of film
Top-name stars are featured in film, which will create reputation
animation
Provide basis for new theme
No potential since film is only about a character’s life
ride

Project 3: The Year of the Echo

Project 3 DID NOT meet two of the MUST objectives (meets all safety and environmental standards and
PG/G Rating) due to illegal contents and illicit activities of the film

Project 4: Escape from Rio

Japuni
Win Best Picture of the Year Film will be set in Amazon rainforest, a place with breathtaking sceneries
Win Best Animated Feature
An animated film, animation would be realistic
Film
Generate additional
Would potentially generate into kids’ toys (stuffed toys, figurines, etc.)
merchandise
Raise environmental concerns Raises concerns of the local clear cutting that happens in the jungle
Generate profit greater than
15x0.8+20x0.5+24x0.2=26.8%
18%
Advance state of film
Animation would be a great basis for future films
animation
Provide basis for new theme Potential theme rides in a park for children and adults to experience and
ride enjoy (ex. Disneyland)
Project 5: Nadia!
Win Best Picture of the Year An old story about a Gymnast; could potentially not reach as many viewers
Win Best Animated Feature
It is not an animated film
Film
Generate additional
Merchandise would only be limited to CDs and Blu-ray
merchandise
Raise environmental concerns Does not raise any concern to the environment because it is a bibliography
Generate profit greater than
8x0.8+15x0.5+20x0.2=17.9%
18%
Advance state of film
Low-budget film; not high quality in film animation
animation
Provide basis for new theme
Theme park could include gymnastic activities for children and adults alike
ride
Project 6: Keiko – One Whale of
a Story
Picturesque sceneries of the ocean life that caters to children and
Win Best Picture of the Year
adults
Integration of realistic animated environment would be a great
Win Best Animated Feature Film
concept
Would potentially generate into kids’ toys (stuffed toys, figurines,
Generate additional merchandise
etc.)
 Film will expose marine life and will raise the conservation and love
Raise environmental concerns
for whales
Generate profit greater than 18% 6x0.8+18x0.5+25x0.2=18.8%
Advance state of film animation Big-budget film that will use technology advances
Already has other competition; could have a theme for aquariums and
Provide basis for new theme ride
public pools
Project 7: Grand Island
Win Best Picture of the Depicts mostly the “ugly” side of humanity waste, but result could be
Year breathtaking
Win Best Animated
Not an animated film
Feature Film
Generate additional Could potentially sell merchandise that promotes environment conservation (ex.
merchandise Gardening tools, fertilizers, etc.)
Raise environmental
Raises a huge concern for toxic wastes that gets dumped in the local ecosystem
concerns
Generate profit greater
9x0.8+15x0.5+20x0.2=18.7%
than 18%
Advance state of film
No advancements for film animation
animation
Provide basis for new
Potential rides for a themed “Grand Island” river
theme ride

Case 2.3 : Fund Raising Project Selection case

The purpose of this analysis is to evaluate and rank proposed fund-raising projects based on their
contribution to the class objectives and alignment with the instructor’s ‘must’ and ‘want’ criteria. This case
simulates a project selection process, emphasizing structured decision-making in project management.

2. Evaluation Framework

2.1 Must Objectives

Each project must meet the following criteria to be considered:
1. Be safe, legal, and comply with University policies.
2. Be capable of earning at least $500.
3. Be completed within nine weeks.
4. Provide an opportunity for team members to learn project management.

2.2 Want Objectives (Weighted Criteria)

Want Objective Relative Importance Definition
(1–100)
Earning Potential 90 0: $500–750, 1: $750–1500, 2: >$1500, 3: >$2000
Fun 30 0: None, 1: Some fun, 2: A lot of fun
Increase Awareness of Charity 30 0: No potential, 1: Low, 2: High
Resume Worthy 40 0: No potential, 1: Low, 2: High
Be Featured on Local TV News 40 0: No potential, 1: Low, 2: High
3. Weighted Evaluation Matrix
The following matrix summarizes the assigned impact levels and calculated weighted scores:

Project Earning Fun Awareness Resum TV Total Weighted Score Rank

e
Hoops for Hope 2 2 1 2 1 195 2
Singing for Smiles 2 2 2 2 2 230 1
Halo for Heroes 1 2 1 2 1 150 6
Raffle for Life 2 1 1 1 1 160 5
Hold’em for Hunger 2 2 1 2 1 195 3
Build Your Own Box 1 1 2 2 2 170 4

4. Results Summary
Based on total weighted scores, the ranked results are as follows:
1. Singing for Smiles — 230 points
2. Hoops for Hope — 195 points
3. Hold’em for Hunger — 195 points
4. Build Your Own Box — 170 points
5. Raffle for Life — 160 points
6. Halo for Heroes — 150 points

5. Detailed Justifications

Singing for Smiles

Ranks first due to its balanced strength across all objectives. It offers strong fundraising, high publicity
potential, and clear resume value.

Hoops for Hope

Combines high earning potential with a fun, community-oriented sports event. Moderate awareness and
publicity keep it slightly below the top.

Hold’em for Hunger

Solid entertainment value and good fundraising returns, though limited awareness impact and publicity
reduce its score.

Build Your Own Box

Excellent awareness and social value but limited fundraising and fun potential. Strong media and resume
appeal improve its position.

Raffle for Life

Simple execution and high fundraising feasibility but lacks engagement and visibility opportunities.

Halo for Heroes

Fun and creative concept, but limited fundraising and awareness impact make it less effective overall.

6. Strategic Recommendations
• Focus approval on top-performing projects such as 'Singing for Smiles' and 'Hoops for Hope', which best
combine impact, visibility, and feasibility.
• Encourage projects that blend financial success with educational and community outcomes.
• Retain a balanced portfolio including awareness-driven projects (e.g., 'Build Your Own Box') to support
CSR objectives.