Net Present Value

Page 2 of 11

I. PROJECT SELECTION

Consider the following information in choosing among the four project alternatives below. Each

has been evaluated according to six criteria:

1. Supports key business objectives.

2. Has a strong internal sponsor.

3. Has strong customer demand.

4. Use of existing technology.

5. Has a higher NPV (A negative NPV gets zero).

6. Has low risk in meeting scope, schedule, and cost goals.

All six criteria have been assessed on a 100-point scale. Possible scores are 0, 20, 40, 60, 80, and

100. The table below illustrates how evaluation is made for each criterion.

0 20 40 60 80 100

Business

objectives

Minimally

aligned.

Supports

some

objectives.

Supports

almost half

of the

objectives.

Supports more

than half of the

objectives.

Supports

most of the

objectives.

Aligns

totally.

Internal

sponsor

Inadequate

support.

Low

support. Fair support. Moderate support.

High

support.

Very high

support.

Customer

demand

Inadequate

demand.

Low

demand.

Fair

demand.

Moderate

demand.

High

demand.

Very high

demand.

Technology Brand-new

technology.

Used for a

while,

downtime is high.

Used for a

while, needs

frequent

maintenance .

Used for a while, needs less

maintenance.

Works most

of the time

with normal downtime.

Employees

are highly

skilled in

using the

tech.

NPV Negative. 0<NPV30

K

30K<NPV 60K

60K<NPV90K 90K<NPV

120K 120K<NPV8

0

Triple

constraint risk Very high. High Moderate Fair Low Very low

Page 3 of 11

Business

objectives

Internal

sponsor

Customer

demand Technology NPV

Triple

constraint

Project

Alpha

Supports

some

objectives.

High

support.

Moderate

demand.

Employees are highly

skilled in using the

tech.

Moderate

Project

Beta

Supports

more than

half of the objectives.

High

support. High demand.

Used for a while,

needs frequent

maintenance. Moderate

Project

Gamma

Supports

most of

the

objectives.

Very high

support. High demand.

Brand-new

technology. Very low

Project

Delta

Aligns

totally. Fair support.

Moderate

demand.

Used for a while,

needs less

maintenance.

Low

All the projects have cash outflows to invest in project activities. When projects generate their

outcomes (products/services), they start to have cash inflows each year. All project outcomes have

a lifetime of four years. The hurdle rate is 10%. The inflation rate is 4%. You should calculate

NPVs for all projects. Then, you should fill in the scores after you calculate NPVs for each project.

Cash flows are indicated for each project during four years in the table below:

Time Alpha Beta Gamma Delta

0 -300 -200 -250 -400

1 +100 +100 +50 +200

2 +100 +200 +50 +200

3 +100 +50 +100 +100

4 +150 +50 +50 +150

The weights of each criterion are as below:

Criteria Weights

Business objectives 25%

Internal sponsor 10%

Customer demand 15%

Technology 10%

NPV 15%

Triple constraint risk 25%

Page 4 of 11

QUESTIONS:

1. Calculate NPV for each project. (10 points)

 Show how you made all calculations (e.g., discount factor for each year, and discounted

cash flows for each year).

2. Which project do you select based on the weighted scoring model? (10 points)

 If you use Excel to compute the weighted scores, copy and paste it on this document in

your answer. You can have a screenshot with high resolution, too.

3. CEO and CFO of the company decided to change the weights. The new weights are as follows.

Have you changed your decisions based on new weighted total scores? If so, explain why you

changed it. (5 points)

Criteria Weights

Business objectives 25%

Internal sponsor 20%

Customer demand 20%

Technology 10%

NPV 5%

Triple constraint risk 20%

4. As a CTO, you think that Project Alpha is crucial in terms of improving the company’s IT

infrastructure. How can you play with the weights to change the total score in favor of this

project? Explain your reasoning thoroughly. Do you think that you can persuade the CEO, CFO,

and other senior managers? (10 points)

Page 6 of 11

II. ORGANIZATIONAL STRUCTURES

You are a member of the senior management staff at ABC Corporation which is designing,

developing, and selling business analytics software and services. Your company has been using a

functional structure since it was founded in 1975. It is set up with five departments which are

production, research and development, finance, human resources, and marketing.

You prepared a report detailing the current problems your company is facing. In this study, you

highlighted the points as follows:

 Many innovations have passed right by ABC Corporation because the company was slow

to pick up signs from the marketplace that they were coming.

 Internal communication among the departments has problems. Some of the emails were not

replied, and some of the functional managers and their employees did not attend some

meetings at which their opinions and feedback were considered essential.

 There are new companies in the market, and there is a strong indication that new companies

are planning to enter the market with new software programs and services with lower prices

and better features.

In the board of directors meeting, it was decided to move to a project-oriented structure in line with

the corporate’s strategic objective to increase the competitive position in the global market. The

president wanted you to prepare a report which discusses different organizational structures your

company can proceed with.

ABC Corporation offers data integration, storage, analytics, and business intelligence applications.

The company’s solutions portfolio includes advanced analytics, AI solutions, business intelligence

and analytics, cloud analytics, customer intelligence, fraud and security intelligence, IoT

solutions, personal data protection, risk management, and supply chain intelligence. It caters to

industries including automotive, communications, education, financial services, government,

health insurance, healthcare providers, hospitality and entertainment, insurance, manufacturing,

media, retail, and utilities. It operates across the Americas, Europe, the Middle East, Africa, and

Asia- Pacific.

Its major strengths are a strong customer base across diversified industries, partnerships with major

technology firms, and a strong market position. The areas of concern are patent infringement and

private ownership (not publicly held). In the future, rapid technological changes, risk due to

increasing IT complexity, and competitive pressures could affect its business operations. However,

a positive outlook for the global machine-to-machine market, rising healthcare expenditure,

demand for cloud computing, and new product launches are likely to offer growth opportunities to

the company.

Page 7 of 11

QUESTIONS:

1. What might be some of the internal and external pressures that would contribute to your report

that it is necessary to alter the organizational structure? (15 points)

 You should consider enterprise environmental factors and organizational process assets

and consider SWOT analysis.

 You should discuss at least two internal and two external pressures.

2. In your report, you advocated a transition from the functional structure, first to weak matrix

structure in one year, then to a strong matrix structure in three years. Based on the company’s

products and services, re-create the structural design to show how both matrices would look.

You need to draw two organizational charts, one for a weak matrix, another for a strong matrix.

(10 points)

 You can draw it on paper, take a picture, and paste it on this document.

 You can use Microsoft Visio, PowerPoint, another drawing app, and paste it on this

document.

3. What behavioral problems could you begin to anticipate through this design? That is, do you

see any potential points of friction in the new dual hierarchy setup? Discuss it first for the weak

matrix structure, then for the strong matrix structure. Consider the pros and cons of these

structures. (10 points)

Page 9 of 11

III. IDENTIFYING STAKEHOLDERS

A mobile communications company’s organic and successful growth led to the need for an

enterprise-wide supply chain IT system. The company decided on hardware and software that had

been successfully used at a large number of other similar companies. The Supply Chain Director

was put in the position of the sponsor. After the system go-live, customers were not receiving

products they had ordered, invoices were delayed or lost, sales employees were resisting the

changes and, as a result, the company was losing credibility fast.

The project manager organized a stakeholder mapping exercise, which had not previously been

undertaken. This soon highlighted the core issues. The Supply Chain Director, relatively new to

the organization, lacked influence and credibility with the recipients in areas of the organization

most impacted by the change—most notably, sales. The stakeholder map also allowed the

leadership team to understand that the leads originally assigned to the project were not able to

persuade the front-line sales force to attend training—never mind even consider using the new

solution!

As a result of the insight gained from this activity, the decision was made to strengthen sustaining

sponsorship in the sales function. In particular, the sales director was characterized as someone

with high influence but low commitment. It was also decided to substitute some of the less credible

leads with more influential people, particularly in the sales function. These two actions helped

rescue a failing project.

Page 10 of 11

QUESTIONS:

1. Based on this case study, develop a power/interest grid.

a. Include all stakeholders mentioned in the case study above. (5 points)

b. Besides, you should include at least two more stakeholders that were not discussed

in the case study. Think about other functional units in the company as well as

external stakeholders. (5 points)

c. You can draw the grid on a paper, take a picture, and paste it on this document.

d. You can use Microsoft Visio, PowerPoint, another drawing app, and paste it on this

document.

2. Explain and substantiate why you placed each stakeholder in their relevant quadrant. (10

points)

3. Finally, develop strategies to manage these stakeholders more effectively based on the mistakes

the sponsor, project manager, and project team did. (10 points)