Overview of project management Introduction SAIL wants to modernise all its existing plants, and TATA wants to divest

its old businesses to enter into new economy ventures. Such situations require a sound capital expenditure (budgeting) decision. The basic feature of capital expenditure is that it involves a current outlay of funds in the expectation of a stream of future benefits. This section provides a broad overview of capital budgeting. Phases of capital budgeting Capital budgeting is a complex process and there are five broad phases. These are planning, analysis, selection, implementation and overview. Planning The planning phase involves investment strategy and the generation and preliminary screening of project proposals. The investment strategy provides the framework that shapes, guides and circumscribes the identification of individual project opportunities. Capital Budgeting Process

Analysis If the preliminary screening suggests that the project is worth investing, a detailed analysis of the marketing, technical, financial, economic, and ecological aspects is conducted. Selection The selection process addresses the questionis the project worth investing? A wide range of appraisal criteria has been suggested to judge the worth of a project. There are two broad categories. Non-Discounting criteria and Discounting criteria. Some selection rules for both methods are listed below: Non-discounting criteria Pay Back Period (PBP) Accounting Rate of Return (ARR)

Accept PBP < target period ARR > target rate

Reject PBP >target period ARR < target rate

Discounting criteria Net Present Value (NPV) NPV > 0 Internal Rate of Return (IRR) Benefit- Cost Ratio (BCR) Implementation

Accept NPV < 0

Reject

IRR > cost of capital BCR >1

IRR < cost of capital BCR < 1

The implementation phase for an industrial project, which involves the setting up of manufacturing facilities, consists of several stages: I. II. III. IV. V. Review Once the project is commissioned, a review phase has to be set in motion. Performance review should be done periodically to compare the actual performance with the projected performance. In this stage, feedback is useful in several ways: It focuses on realistic assumptions It provides experience, which will be valuable in future decision making It suggests corrective action It helps to uncover judgmental biases It advocates the need for caution among project sponsors Project and engineering designs Negotiations and contracting Construction Training Plant commissioning

Definition of 'Venture Capital'

Wealthy investors like to invest their capital in such businesses with a long-term growth perspective. This capital is known as venture capital. Definition: Start up companies with a potential to grow need a certain amount of investment. Wealthy investors like to invest their capital in such businesses with a long-term growth perspective. This capital is known as venture capital and the investors are called venture capitalists. Description: Such investments are risky as they are illiquid, but are capable of giving impressive returns if invested in the right venture. The returns to the venture capitalists depend upon the growth of the company. Venture capitalists have the power to influence major decisions of the companies they are investing in as it is their money at stake.

A venture capitalist is a person who invests in a business venture, providing capital for start-up or expansion. Venture capitalists are looking for a higher rate of return than would be given by more traditional investments. Generally, venture capitalists are looking for returns of 25 percent and up. What's the difference between a venture capitalist and an angel investor? A venture capitalist is a professional investor. He or she manages a fund and is looking for suitable investments for that fund. An angel investor is an individual who, while also looking for a suitable investment, is also looking for a personal opportunity. In other words, the venture capitalist may have no business experience applicable to the industry your company is involved in, and is focused on the potential rate of return your company can provide. An angel investor often has business experience relevant to your company and is interested in adding value to your company, as well as making a return on his or her investment.