INF3708 Ex
notes 2022
,Exam notes
Cost-benefit evaluation techniques
Formula for ROI
Example of using ROI
ROI for a project with net profit of R50k over a 5 year period
Average annual profit:
50 = 10 000
Annual profit = R10k and a total investment of R100k
ROI = 10 000*100 = 10%
Discount factor
t = the number of years into the future that the cash flow occurs
r = the discount rate (annual rate by which future earnings are discounted)
PV: Present value of a future cash flow
NPV: Net present value for a project
The net present value for a project with t years worth of cash flows is merely the sum of the
each year
Abbreviations
PV = planned value = budgeted cost of work scheduled BCWS
EV = earned value = budgeted cost of work performed BCWP
AC = actual cost of work performed ACWP
, The payback period is the time taken to break even or payback the initial investment. N
with the shortest payback period will be chosen on the basis that an organization will w
time that the project is in ‘debt’.
Example
Initial investment is – R195 000
So to get to break-even year, we subtract the next year(s) income until we have a nega
R 195 000 – R 15 000 – R 30 000 – R 55 000 – R 50 000 – R 55 000;
and here we then have a negative of R 10 000. Thus, the Break-even Year is 5
The profit is what is left over in the 5th year after we paid off the full debt of R195 000,
The income in the 5th year is R 55 000 Thus, the calculation is:
Payback period is 5 – 10 000/ 55 000 = 4,82 years
PERT network diagram
PERT (Program Evaluation Review Technique) network diagram is used to mode
relationships as a network.
It was developed to take account of the uncertainty surrounding estimates of task durations
The difference between the CPM and the PERT methods is that the CPM uses a single est
each task, whereas the PERT method uses 3 estimates.
These 3 estimates include
Optimistic (a)
Most likely (m)
Pessimistic (b)
These 3 estimates are combined to calculate the te values using the following formula
, PERT event labelling convention
CPM diagram ( activity on arrow )
CPM labelling
Example on how to do
notes 2022
,Exam notes
Cost-benefit evaluation techniques
Formula for ROI
Example of using ROI
ROI for a project with net profit of R50k over a 5 year period
Average annual profit:
50 = 10 000
Annual profit = R10k and a total investment of R100k
ROI = 10 000*100 = 10%
Discount factor
t = the number of years into the future that the cash flow occurs
r = the discount rate (annual rate by which future earnings are discounted)
PV: Present value of a future cash flow
NPV: Net present value for a project
The net present value for a project with t years worth of cash flows is merely the sum of the
each year
Abbreviations
PV = planned value = budgeted cost of work scheduled BCWS
EV = earned value = budgeted cost of work performed BCWP
AC = actual cost of work performed ACWP
, The payback period is the time taken to break even or payback the initial investment. N
with the shortest payback period will be chosen on the basis that an organization will w
time that the project is in ‘debt’.
Example
Initial investment is – R195 000
So to get to break-even year, we subtract the next year(s) income until we have a nega
R 195 000 – R 15 000 – R 30 000 – R 55 000 – R 50 000 – R 55 000;
and here we then have a negative of R 10 000. Thus, the Break-even Year is 5
The profit is what is left over in the 5th year after we paid off the full debt of R195 000,
The income in the 5th year is R 55 000 Thus, the calculation is:
Payback period is 5 – 10 000/ 55 000 = 4,82 years
PERT network diagram
PERT (Program Evaluation Review Technique) network diagram is used to mode
relationships as a network.
It was developed to take account of the uncertainty surrounding estimates of task durations
The difference between the CPM and the PERT methods is that the CPM uses a single est
each task, whereas the PERT method uses 3 estimates.
These 3 estimates include
Optimistic (a)
Most likely (m)
Pessimistic (b)
These 3 estimates are combined to calculate the te values using the following formula
, PERT event labelling convention
CPM diagram ( activity on arrow )
CPM labelling
Example on how to do
