PMAN635
Advanced Project Methods
Session 2 – Individual Assignment
Individual Assignment IA-2- Rev 2
Please do question 1 and 2. Submit your Excel workbook using the Individual Assignment link
IA2 in your Assignments Folder
1. (75%) A five-year software development project is forecast to have net cash inflows of
$15,000, $20, 000, $25,000, $30,000, and $50,000 over the next five years. It will cost
$80,000 to implement the project, payable at the beginning of the project. Once
implemented, there will be an annual cost of $5,000, payable at the end of each year.
There is an assumed inflation rate of .02 each of the five years for this project. If the
required rate of return is .05, construct a discounted cash flow model to determine the Net
Present Value (NPV). Use the concepts found in Mantel, Chapter 1, Section 1.5 and
Excel to create the formulas needed to calculate the NPV. Assume the inflows all occur
at the end of the year.
2. (25%) Assuming your initial outflow is based on a fixed price vendor bid, your inflows
based on a marketing study and your annual outflows based on your IT department’s
estimate, which of these (initial outflow, annual outflow, and annual inflows) would you
expect to be most accurate? Which least accurate? Why?
