Use of Dummy Activities Each activity must be identified by two distinct events & No two or more activities can

have the same tail and head events. Dummy activity is a hypothetical activity which takes no resource or time to complete. It is represented by broken arrowed line & is used for either distinguishing activities having common starting & finishing events or to identify & maintain proper precedence relationship between activities that are not connected by events. Distinguishing activities having common starting & finishing events Following figure shows how a dummy activity can be used to represent two concurrent activities, A & B. By definition, a dummy activity, which normally is depicted by a dashed arrow, consumes no time or resources.

Inserting dummy activity in one four ways in the figure, we maintain the concurrence of A & B, and provide unique end events for the two activities To maintain correct precedence relationship, the following questions must be answered as each activity is added to the network: (a) What activities must be immediately precede the current activity? (b) What activities must follow the current activity? (c) What activities must occur concurrently with the current activity?

The answers to these questions may require the use of dummy activities to ensure correct precedence among the activities. For example, consider the following segment of a project:

1. Activity C starts immediately after A and B have been completed. 2. Activity E starts only after B has been completed. Part (a) of the figure above, shows the incorrect representation of the precedence relationship because it requires both A & B to be completed before E can start. In part (b) the use of dummy rectifies situation. Write short notes on resource smoothing and resource leveling. Resource smoothing is a resource scheduling technique used for smoothing peak resource requirement during different periods of project network. Under this technique, the constraint may be the total project duration. It helps to estimate the resource requirements for various projects. In resource smoothing, time scaled diagram of various activities of project and their floats along with their resource requirements are used. Floats on non critical activities are utilized & these activities are rescheduled or shifted (while the project duration remains unchanged) so that a uniform demand on resources is achieved. Resource Levelling (a.k.a. resource allocation) is an operation of resource scheduling wherein constraint may be availability of certain resources. Here project time is varied for maximum utilization of resources i.e. project duration is not treated as an invariant, but the demand on certain specified resources should not go beyond a specified level. The maximum demand of a resource should not exceed the available limit at any point of time. Non critical activities are rescheduled by utilizing their floats.

PROJECT APPRAISAL Project appraisal is a generic term that refers to the process of assessing, in a structured way, the case for proceeding with a project or proposal. In short, project appraisal is the effort of calculating a project's viability. It often involves comparing various options, using economic appraisal or some other decision analysis technique 1. Market Analysis Assessing as to what would be aggregate demand of proposed product/services in the future? What would be the market share of the product under appraisal? Main aspects of Market Analysis while working out the project feasibility Main aspects to be considered under market analysis while working out the project feasibility are (a) Product Features Major uses, scope of market, possible competition from substitute products, special features resulting in consumer preference. (b) Product Demand Past & present demand, forecast of future trends, market segmentation by nature of product, consumer groups, geographical division etc, other demographic, sociological, economical, technological factors affecting demand. (c) Market Share Expected market share and its growth from the projected demand (d) Product Pricing Price trends in the past, income and price elasticity of demand (e) Export Possibilities Nature of competition in foreign markets, competitive pricing & costing (f) Distribution & Sales Promotion Methods Distributors, selling agents, selling organization for direct selling (g) Government Controls Government controls on pricing, distribution, imports, exports if any. The main outputs of market analysis useful for financial analysis are (a) Forecast of sales quantities based on demand projections, expected market share and their growth

(b) Projected selling prices (c) Factors affecting demand / prices and their possible ranges of variation. 2. Technical Analysis Technical analysis of the project is concerned primarily with the following 1. Manufacturing Process & Technology Appropriateness of the chosen technology and manufacturing process among various alternatives is ascertained. What is the level of automation and flexibility for changing process/product at a later date? 2. Material Inputs Availability and cost of raw materials, power, and other facilities like utilities, etc is assessed. 3. Plant Capacity and Product Mix Plant Capacity has a bearing on cost of product and outlay. Can the capacity be cross deployed for changing product mix to be able to respond to changed market conditions. 4. Machinery & Equipments It is dependant on production technology, process and plant capacity. Whether new machines to be installed or second hand machines to be fitted? A proper balance has to be obtained between capacities of individual sections or production departments. 5. Production System and Plant Layout Plant Layout is guided by Production System to be followed. Whether flow process, batch process, cellular process or project process are being used. 6. Location and Site Choice of location is decided by factors such as proximity to raw materials and markets, availability of skilled labour and infrastructure, government incentives etc. Specific site or plot to be selected on the basis of its suitability and cost to develop the same for the particular industry. 7. Buildings and Structures Any special requirements for structures to be considered. Areas for manufacturing, services, utilities, administration, welfare etc. to be planned. 3. Financial Analysis Financial appraisal is meant to assess the financial viability of project. In case of Infrastructure Projects like highways, dams, power projects, bridges, etc, economic appraisal is the decisive factor and financial appraisal takes the back seat. But in case of commercial projects, financial viability is paramount justification for undertaking the project. A project should be able to generate adequate ROI to cover the opportunity cost of capital. Unless this requirement is met, a commercial project is a non starter. (a) Initial Investment outlay (b) Subsequent investment outlay (c) Economic life of project (d) Operating cash flows (e) Cost of funds (f) Opportunity cost of funds (g) Rate of taxes (h) Depreciation (i) Salvage value

(a) Cost of project / Investment Outlay (progressive requirement of funds) (b) Means of financing (c) Cost of capital (d) Cash flows assessment (e) Break-even point assessment (f) Profitability assessment (g) Risk assessment (h) Investment worthiness (i) Projected balance sheets. 4. Economic Analysis It is judging the project from social point of view, the analysis of social costs and benefits, like, jobs it will generate, effect on pollution, convenience of masses, environmental effects, etc. (A bridge, besides earning revenue for builders, generates jobs for people (directly for people employed in construction and indirectly for people employed in cement and steel industry), gives convenience to people, saves precious fuel and time for people, saves foreign currency for govt (through savings in fuel), improves environment due to reduced fuel consumption, and so on). Some of the special questions that are analysed are (a) What is the social cost-benefit equation in terms of shadow pricing and not market prices (Shadow price is the price which would prevail in a perfect market). (b) How will it affect the market price of the product? Will it make the product more affordable? Additional capacities may bring down the prices in the market. (c) Will it affect any other segment of industries? Many small scale industries are adversely affected by the larger projects due to economies of scale enjoyed by bigger projects. (d) Will it trigger further investments? Bigger projects kick start lot of supporting economic activities in the vicinity, starting from the tea vendors and hutment grocery stores to schools and so on. 5. Ecological Analysis (a) What are the likely damages caused by the project to the environment? (b) What is the cost of minimising the damages to bring them down to acceptable limits? 6. Managerial Appraisal Good execution can make a bad idea profitable but an excellent idea can not survive bad implementation. Success of any project eventually rests in the hand of the managers of that project. Managerial capability of promoters is judged by their resourcefulness, their understanding of the project details and their commitment to the project. 7. Environmental Analysis The growing concern of environment, resource depletion and pollution have forced the planners, policy makers to take care of impacts of the project on environment : The appraisal therefore evaluates project impact on : (1) Air (2) Water (3) Monumental resources (4) Land (5) Sound

(6) Human inhabitation nearby (7) Animals and Birds The appraisal often relies upon environmental impact assessment (EIA) conducted by independent body Such studies are conducted to reveal whether there is any impact of project in a long run on environment If it is revealed that there will be no harmful change in various social economic and physical attributes of environment of the project then the project will be considered favourably.

Various methods that financial institutions use to calculate cost of capital. The cost of capital is a central concept in financial management. It is used for evaluating investment projects, for determining the capital structure, for assessing leasing proposals, for setting the rates that regulated organizations like electric utilities can charged to their customers, so on and so forth. A firms cost of capital is the weighted average cost of various sources of finance used by it, viz, equity, preference and debt. 1. Cost of Debt The cost of debt instrument is the yield to maturity of that instrument The cost of debt (kd) can be calculated as the weighted average of the effective cost of the various loan facilities used by the company on which interest is explicitly charged (net-off after tax rate t). 2. Cost of Preference capital Preference capital carries a fixed rate of dividend and is redeemable in nature. 3. Cost of Equity capital a. CAPM We assume that the cost of equity can be estimated using the standard CAPM (capital asset pricing model): In the equation, the excess return for the stock market is measured by the expression , in which rm is the return for a general stock exchange index calculated over a long period and rf is the risk-free rate for government securities. represents the stock risk.

b. Dividend Growth Model Approach A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. Given a dividend per share that is payable in one year, and the assumption that the dividend grows at a constant rate in perpetuity, the model solves for the present value of the infinite series of future dividends.

Where: D = Expected dividend per share one year from now k = Required rate of return for equity investor G = Growth rate in dividends (in perpetuity) c. Bond Yield Plus Risk Premium Approach This is subjective procedure to estimate the cost of equity whereby the judgmental risk premium is added to the observed yield on the long therm bonds of the firm to get the cost of equity: Cost of equity = Yield on long term bonds + Risk Premium What it means is that firms that have risky and consequently high cost debt will also have risky and consequently high cost equity. d. Earning Price Ration Approach According to this approach, the cost of equity is equal to E 1 / P0 where E1 is the expected earnings per share for the next year, and P0 is the current market price per share 4. Weighted Average Cost of Capital Given the cost of specific sources of finance and the scheme of weighting, the WACC, the WACC can be readily calculated. WACC = WE rE + Wp rp + WD rD (1 tc) Where WE, Wp and WD are the proportion of equity, preference and debtr and rE, rp and rD are the component costs of equity, preference and debt and tc is the corporate tax rate

What is Sensitivity Analysis? Discuss the relevance of Risk Analysis for a Comprehensive Project Evaluation. Sensitivity Analysis Sensitivity analysis seeks to place a value on the effect of change of a single variable within a project by analyzing that effect on the project plan. It is the simplest form of risk analysis. Uncertainty and risk are reflected by defining a likely range of variation for each component of the original base case estimate. In practice such an analysis is only done for those variables which have a high impact on cost, time or economic return, and to which the project is most sensitive. Some of the advantages of sensitivity analysis include impressing management that there is a range of possible outcomes, decision making is more realistic, though perhaps more complex. And the relative importance of each variable examined is readily apparent. Some weaknesses are that variables are treated individually, limiting the extent to which combinations of variables can be assessed, and a sensitivity diagram gives no indication of anticipated probability of occurrence. It is a technique that measures the change in the profitability of a project caused by changes in the factors that affect the cash inflows of a project. If a small change in one factor leads to a major change in the profitability of tile proposed investment, the project is considered more sensitive to that factor, in other words, the project is more risky. Other things being equal, a project that is less sensitive is preferable to projects that are more sensitive. Sensitivity analysis needs to be carried out in a systematic manner. To meet the above purposes, the following steps are suggested: (i) identify key variables to which the project decision may be sensitive; (ii) calculate the effect of likely changes in these variables on the base-case IRR or NPV, and calculate a sensitivity indicator and/or switching value; (iii) consider possible combinations of variables that may change simultaneously in an adverse direction; (iv) analyze the direction and scale of likely changes for the key variables identified, involving identification of the sources of change.

S Curve and Earned Value Concept -Tools for project monitoring and control

Earned Value Management

Earned Value Management - Basics

Earned Value Management is a methodology used to measure and communicate the real physical progress of a project taking into account the work complete, the time taken and the costs incurred to complete that work. Earned Value helps evaluate and control project risk by measuring project progress in monetary terms. We spend time and materials in completing a task. If we are efficient we complete the task with time to spare and with minimum wasted materials. If we are inefficient we take longer and waste materials. We also plan how we will accomplish the task. How long it will take, the resources we need and the estimated costs. By taking a snap-shot of the project and calculating the Earned Value metrics we can compare the planned with the actual and make a subjective assessment of the project progress. By extrapolating the curves and further calculation we can also estimate the costs to project completion and the probable completion date. The basics of Earned Value can best be shown on the ubiquitous 'S-Curve'. The S-curve in its simplest form is a graph showing how project budget is planned to be spent over time. We can complicate the graph by showing the actual costs of doing the work over the same period. And also on the same graph we can show how the value of the product of the project increases over the same period.

The three curves on the graph represent:

Budgeted Cost for Work Scheduled (BCWS) - the budgets for all activities planned to be completed. Actual Cost of Work Performed (ACWP) - the real costs of the work charged against the completed activities. Budgeted Cost of Work Performed (BCWP) - the planned costs of the work allocated to the completed activities. This is the Earned Value.

The BCWS curve is derived from the Work Breakdown Structure, the project budget and the Project Master Schedule. The cost of each Work Package is calculated and the cumulative cost of completed Works Packages is shown based on the planned completion dates shown in the Master Schedule. The ACWP curve is found by actual measurement of the work completed. Actual costs recorded from invoices and workmen's time sheets. This appears a daunting task but it can be very simple with sufficient planning and organising.

The BCWP is calculated from the measured work complete and the budgeted costs for that work. Earned Value = Percentage project complete X Project Budget Variances Schedule and cost variances can both be calculated in monetary terms from the data needed to produce the S-curves. Schedule variance is the difference between the Earned Value and the planned budget. SV = BCWP - BCWS Cost Variance is the difference between the Earned Value and the actual costs of the works. CV = BCWP - ACWP Performance Indices Schedule Performance Index and Cost Performance Index give indications of the health of the project. Is the project on time, in budget or what? Schedule Performance Index is a ratio of Earned Value and the planned value of completed works. A SPI < spi =" BCWP"> Cost Performance Index is a ratio of Earned Value and the actual costs of completed works. A CPI < cpi =" BCWP">

Constant monitoring and controlling of a project under implementation is one of the key functions of the Project Manager. This is because, once it gets underway, a project may or may not perform as planned. Variations in time and cost can take place. Where the project managing contracts are on a 'cost-plus' basis, the adherence to time and cost is important, but not critical. In recent times, projectmanaging companies have to enter into time bound contracts and any slippage will attract penalty. For this reason it is necessary for the senior team members to have a periodic progress report. Also, the top management and stakeholders constantly want to know the progress. They ask crucial questions: * How much work is actually done? * How much work was planned? * Will the project be completed as scheduled? * Is it delayed? * What is the expected date of completion as at present rate? * How much cost is incurred as on date? * What is the budgeted cost for the work done? * Is the incurred cost as per the budget?

* Is there a cost over-run? * What will be the total cost on completion at present rate? There are other reasons that a project is monitored and controlled. These are: * Progressive payments to contractors * Project manager's billing to the customer * Decisions of project completion and job closure So progress monitoring and controlling is vital. And you must measure what you wish to control. Progress measuring is a crucial part of project management. It is here that the "S" curve and the earned values concept are used. What is an "S" Curve? For "S" curve, let us understand WBS. WBS (Work Breakdown Structure) is the breakdown of the work into systematic and logical component packages. Each package is further sub divided. This process is continued up to manageable suitable component packages are decided. Each final component is called an activity. When all activities are complete, the project is complete. Each activity is then assigned the following parameters. 1. Start date 2. End date 3. Cost 4. Weightage (Its contribution to the project progress. The sum of wieghtages of all activities is 100%) 5. Responsible agency 6. Resources After WBS, draw the "S" curve for the project. The curve shows the time duration on the horizontal axis and the cumulative per cent progress of the project on the vertical axis. The curve begins at 'Project start date, 0%' point and completes on 'Project end date, 100%' point. It is observed that, in a project, the work progresses slowly in the beginning, picks up speed somewhere 1/3 the duration and then slows down again creeping to 100%. The curve looks like an "S" and is popularly known as Project "S" Curve. How to use the "S" curve Select a day for the report. This date is generally month end. Measure the work actually preformed on each activity. Then calculate the progress achieved on each activity. Calculate the contribution of each activity to the project progress, using the weightage value. Sum up activity contributions and find the total project progress. Read from the "S" curve the work scheduled as on the report day. So you know the work performed versus work scheduled. That tells whether the project is on the schedule, early or delayed. You may plot the actual work done

curve along side the "S" curve. That will be Actual curve. Then plot the remaining work along the actual curve and you have the forecast.

1.1 Venture capital Venture capital is long-term capital provided to small and medium-sized businesses wishing to grow but which do not have ready access to stock markets. The supply of venture capital (or private equity capital as it is sometimes called) has increased rapidly over recent years since both government and corporate financiers have shown greater commitment to entrepreneurial activity. The main types of investments those are likely to be of interest to venture capitalists and the process by which investments are undertaken are considered below. Venture capital (VC) is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as biotechnology, IT, software, etc. The typical venture capital investment occurs after the seed funding round as growth funding round (also referred to as Series A round) in the interest of generating a return through an eventual realization event, such as an IPO or trade sale of the company. Venture capital is a subset of private equity. Therefore, all venture capital is private equity, but not all private equity is venture capital

Venture capitalists provide share capital and loan finance for different types of business situations, including the following:

Start-up capital: This is available to businesses that are still at the concept stage of development through to those businesses that are ready to commence trading. The finance provided is usually to help design, develop or market new products and services. Other early stage capital: This is available to businesses that have undertaken their development work and are ready to begin operations. Expansion (development) capital: This aims to provide funding for growing businesses for additional working capital, new equipment, and so on. It may also include rescue finance, which is used to turn around a business after a period of poor performance. Refinancing bank borrowings: This is aimed at reducing the level of gearing. Secondary purchases: This refers to finance used to purchase shares in order to buy out part of the ownership of a business or to buy out another venture capitalist. Buy-out capital: This is capital available to acquire an existing business. A management buy-out (MBO) is where the funds are used to help the existing management team to acquire the business, and an institutional buy-out (IBO) is where the venture capitalist acquires the business and installs a management team of its choice. Buy-in capital: This is capital available to acquire an existing business by an external management team. This kind of acquisition is known as a management buy-in (MBI). Buy-outs/buy-ins often occur when a large business wishes to divest itself of one of its operating units or when a family business wishes to sell out because of succession problems.

Project Management and its scope Project management is the application of knowledge, skills, tools, and techniques to project activities to meet project requirements. Project management is accomplished through the appropriate application and integration of the forty-two logically grouped project management processes comprising the five process groups. These five process groups are: Initiating, Planning, Executing, Monitoring and Controlling, and Closing.

SCOPE OF PROJECT MANAGEMENT The project management covers: (i) Idea generation, analysis & finalization of one or more ideas for implementation, (ii) Preparation of feasibility reports for various projects ( ideas), working out facilities & finance requirements, benefits & long-term viability as well as profitability. (iii) Identification of partners needed. (iv) Technology requirements.

(v) Organisational requirements. (vi) Probable sites & building requirements. (vii) Commercial aspects. (viii) Environmental effects & action required. (ix) Govt. concessions available etc.

Define a Project. What are the characteristics of a Project?

A project is a temporary endeavour undertaken to create a unique product, service, or result. The temporary nature of projects indicates a definite beginning and end. The end is reached when the projects objectives have been achieved or when the project is terminated because its objectives will not or cannot be met, or when the need for the project no longer exists. Temporary does not necessarily mean short in duration. Temporary does not generally apply to the product, service, or result created by the project; most projects are undertaken to create a lasting outcome. For example, a project to build a national monument will create a result expected to last centuries. A project is a temporary endeavour with a defined beginning and end (usually timeconstrained, and often constrained by funding or deliverables),undertaken to meet unique goals and objectives,typically to bring about beneficial change or added value.

Human Aspect of Project Management It is an old saying that man behind the machine is more important than the machine. This saying is even more valid in an unstructured set up like projects. All the project planning and control tools can only assist the Project Manager in planning and forecasting. But eventually those plans have to be executed by people. How effectively is the execution is largely a function of performance of people on ground executing various activities Interpersonal conflicts are inevitable part of projects but minimising them is the key to successful completion of projects. It is, therefore, very important to understand human nature and to achieve satisfactory human relations among the project team. Project manager has to handle problems and challenges relating to following issues (a) Authority Project managers very often have to be content with split authority and dual subordination in their set-up (with the exception of Divisional form of Organisation). In addition, with all the criss-cross and overlap of responsibilities and paucity of resources and its sharing, assigning blame is rather difficult. In such a difficult situation, a project manager has to rely on the informal authority, ie, his rapport with project personnel. His skills in resolution of conflicts, skills of communication and persuasion ability and ability to act as a link between technical, engineering, financial and commercial personnel is what gives him the real authority over his people. (b) Personnel Orientation Most of the project managers are engineers who have science background. In scientific world, most of the things are well defined, structured and with a degree of certainty. Thus, they are accustomed to those well structured and defined forms. Human psychology plays very minor role in such setup.

Projects are almost diagrammatically opposite world to a typical engineers world. It is an unstructured world where little is defined and full of uncertainties. And half the uncertainties emanate from peoples mood. An ego hassle over a total non-issue between two key personnel can hold up the project for days despite availability of all the resources. Thus, personnel management is the key to successful execution of projects. Therefore, project manager has to transform the technical orientation of his managers to personnel orientation. (c) Motivation Performance of people is dependent on their motivation. In an unstructured set-up, where standards of performance are hard to define, motivation assumes further importance. But with split authority and dual subordination, as in case of Matrix Organisational structure, keeping people motivated becomes very difficult. In a dual subordination set-up, rewarding people is little difficult and handing punishment is even more difficult. His other superior under whom he works on permanent basis is always there to provide an alibi to cover up his failures. Projects give people a chance to perform tasks which are clearly defined and visible. If the project manager is appreciative and gives public applause to performance/contribution, it motivates the personnel greatly. Participative style of management gives a sense of authority and ownership to personnel, which keeps them further motivated. (d) Team Building Most of the project activities are inter-related and interdependent and most of the problems need inter-disciplinary solutions. Successful management of project therefore is not possible without proper teamwork. Development of mutual trust and respect for each other, open communication and mutual cooperation have to be achieved at whatever cost. Work Break Down Structure Once you have defined the scope of the project, you can start looking at the individual tasks that must be accomplished in order to complete the project. The Work Breakdown Structure (WBS) is a diagrammatic approach to defining the work to be undertaken by breaking the project down into a number of tasks and sub-tasks in a hierarchical fashion. The resulting tree structure can be used as a framework for estimating costs and developing a work schedule. The work is decomposed into successively smaller logical units, until it becomes impractical to break the work down any further. Each "work package" produced as a result of this process will be accompanied by a description of the activity to be undertaken and the specific deliverable to be produced as a result of that activity. The work package should provide the basis for a realistic estimation of the time and cost involved in carrying out the work, and should result in a specific and measurable deliverable.

Task A task is a further subdivision of a project Usually not longer than several months in duration and is performed by one group or organisation Subtask A subtask may be used if needed to further subdivide the project into more meaningful pieces. Task may contain several subtasks. Work Package A work package is a group of activities combined to be assigned to a single organisational unit. It still falls into the format of all project management Work Breakdown Structure (WBDS) Defines the hierarchy of projects tasks, subtasks, and work packages Completion of one or more work packages results in the completion of a subtask Completion of one or more subtasks results in the completion of a task Finally the completion of all tasks is required to complete the project

Keys to good work breakdown structure are Allow the elements to be worked on independently Make them manageable in size Give authority to carry out the program Monitor and measure the program Provide the required resources

Phases of Project Management

Project Management Institute, Inc. (PMI) defines project management as "the application of knowledge, skills, tools and techniques to a broad range of activities in order to meet the requirements of a particular project." The process of directing and controlling a project from start to finish may be further divided into 5 basic phases:

1.21. Project conception and initiation

An idea for a project will be carefully examined to determine whether or not it benefits the organization. During this phase, a decision making team will identify if the project can realistically be completed.

1.32. Project definition and planning

A project plan, project charter and/or project scope may be put in writing, outlining the work to be performed. During this phase, a team should prioritize the project, calculate a budget and schedule, and determine what resources are needed.

1.43. Project launch or execution

Resources' tasks are distributed and teams are informed of responsibilities. This is a good time to bring up important project related information.

1.54. Project performance and control

Project managers will compare project status and progress to the actual plan, as resources perform the scheduled work. During this phase, project managers may need to adjust schedules or do what is necessary to keep the project on track.

1.65. Project close

After project tasks are completed and the client has approved the outcome, an evaluation is necessary to highlight project success and/or learn from project history. Projects and project management processes vary from industry to industry; however, these are more traditional elements of a project. The overarching goal is typically to offer a product, change a process or to solve a problem in order to benefit the organization. Detailed Project Report (DPR) A Detailed Project Report (DPR) is a document containing detailed description of important aspects of a Project. This is prepared after initial hurdles in the process of getting the Project cleared, have been crossed and the need for Project has been established. A detailed Project Report generally contains the following details:

1. Background of the Project : The background of the project is described interms of its basis. This generally include the type of project, the sector of economy it belongs to, its location, gestation period, brief description, technical details such as scope, process, scale, maps and designs, target beneficiaries, etc. 2. Objectives of the Projects : The objectives are specified in terms of general objectives, specific objectives, physical targets to be achieved etc. 3. Justification for the Project : The justification for the Project is based on technical organizational, marketing, financial, economic and environmental appraisal of the project. 4. Cost of Project and Sources of Funding : The cost of Project is determined by considering and including all the items of capital outlay. The arrangement made for meeting the requirement of funds for the project is specified in terms of capital structure, sources of funds and amount proposed to be raised from each source. 5. Salient Features of the Project : The salient features descried included, foreign exchange requirement and contribution, estimated sales revenue, estimated production cost, expected return on investment, social cost and benefits, extent of public participation, role of government, participation of non-governmental organizations, etc. 6. Project Organization : Regarding the project organization and its personnel, the details regarding organization chart, line of control, authority-responsibility structure, extent of delegation, mechanism for monitoring and follow up, project control mechanism, etc. are given. 7. Implementation Details : The implementation details for a project are given in terms of sequence of tasks and activities, resource requirement, precautions, safety requirement, etc. The programme of activities is also given under it. This includes details regarding the activities covered, such as implementation requirement, time schedule, activities and events, critical activities, activity-wise resource requirement management control system, budgeting and budgetary control system, management information system, etc.

ROLE OF CONSULTANT IN PROJECT.

Introduction Most of the project owners use the services of a consultant - An individual consultant

or a consulting firm or a captive consulting organization throughout the project duration. Even when the owner has a competent project team, a consultant may be appointed for the following reasons. a) The functional experts of various departments who are also the members of the project team will have many other parallel responsibilities which are bound to divert their attention from the project. b) A multi-disciplinary consultant's deep knowledge, rich experience and concentrated attention to all important aspects of a project will, no doubt, boost its efficiency, justifying the consultancy cost. c) An independent consultant will view all matters in an unbiased manner. Consultant's Role A consultant can be used either in an "Advisory Role or in a Participatory Role". In the advisory role, after accomplishing the task of the study phase, he might continue as an advisor, without involving himself in the implementation. His assignments in this role will be : Pre-Investment investigation Preparation of feasibility report Preparation of detailed project report Preparation of project specifications & tender documents Giving advice on problems. He shall play the roles of a planner, an organizer, and effective co-ordinator, an advisor in decision making, a counselor in overcoming the usual resistance to change and a multidisciplinary management guide, committed to the client's success and profitability.

His role can further be increased to macro and micro- level planning of various activities such as defining project scope, organizing project team, assisting in procurement of critical equipments, scheduling & process chasing. Supply of technology or design is optional. Types of Consultants (i) Technical specialists. (ii) Functional experts. (iii) Multi-Disciplinary generalists

PROJECT RISK What is Risk? A risk is any uncertain event, if it occurs, could prevent the project realizing the expectations of the stakeholders as stated in the agreed business case, project brief or agreed definition. A risk that becomes reality is trended as an "Issue". A Risk always has a cause and, if it occurs, a consequence, Risk can have negative or positive consequences; success is dependent on maintaining a high commitment to risk management procedures throughout the project. Two fundamental types of risks are always present. :a) Project Risk Associated with the technical aspects of the work to achieve the required outcomes and b) Process Risk: Associated with the project process, procedures, tools & technique employed, controls, communication, stakeholders and team performance, Risk V/s Uncertainty "Risk" can be defined as the variability of return from an investment & the possibilities of the effect are known, but in uncertainty, the outcome cannot be predicted. Kinds of Risks 1. Project Completion Risk:

Completing a project in time and within the estimated cost itself is a major achievement. A project that is delayed will result in time over run which will consequently result in cost overrun. If the promoters are not able to fund the cost over-run, project gets delayed. There can be technology failures or consultants non availability may cause delay. 2. Resource Risk: Manpower, raw materials, power, fuel, P & M etc. form resources. Delay in receipt of raw materials or P & M etc. will cause delay in project completion. 3. Price Risk: Price fluctuations of both inputs and outputs will affect the project. 4. Competitors Risk: The competitors may try to disturb the project by increasing or decreasing prices which will force us to review the project for calculation of ROI. 5. Technology Risk: The collaborator may supply us old technology or during the project time, new technology may have been developed, which may affect the profitability. We have to have a good consultant to guard against old technology supply. 6. Political Risk: Suddenly the govt. may impose some new tax or withdraw some facility earlier extended , such as lesser excise or octroi or no sales tax for 2 yrs or cheaper power etc. Also import duly changes may affect project. 7. Interest Rate Risk: Fluctuations in interest rate year after year may bring in adverse effect. Say project is funded by way of long -term borrowings at a particular rate of interest and if the interest rate fails down subsequently, there will be bad effect on project. If the interest rate increases in future, the working capital will be available at higher cost & will lower the profit. 8. Exchange Rate Risk: There are currency fluctuations & international currency rate may vary, resultinginto more projects cost. 9. Open Policy Risk or Risk from Global Competitors:

The new risk emerged with the 'open door' policy of GOI, has thrown out number of industries as they cannot sustain the price-war. The project envisaged today may face such risks in coming days and the project will suffer 10 Risk Due to Trading Activities: Numbers of entrepreneurs are finding it easy to "assemble" products in producing in India rather than producing components & making the products ( e.g .computers, DVDS etc. ) such risks in The project runs future times. 11 Risk of Elimination of Product Due to fast changing technology & varying customer demand, some of the products (Now envisaged for project) may not be required, resulting into termination of the project. (example- TV screen for computer monitor, or plasma monitor in place of tube - technology) Techniques of Risk Analysis Though there are many mathematical techniques available for risk analysis, the following are the simple tools that come handy for analyzing small & medium sized Projects: (1) Break - Even analysis (2) Sensitivity analysis (3) Decision - Tree analysis (4) Monte - carlo technique etc.

Difference Between NPV & IRR

Tradable non tradable commodity Tradable commodities are those goods and services for which there exist international markets. Nontradable commodities are those for which there are only domestic markets. The distinction of goods and services into tradable and nontradable is a distinguishing feature of models of international trade. Certain commodities may be nontradable either intrinsically (because they do not travel well; land, for example) or because they are unprofitable to trade, given the costs of transportation or the imposition of tariffs and quotas.

Success of project and entrepreneurship Impact of interest rate