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Cost-benefitanalysis2.docx
PMG654Unit3Assignment.pdf
PMG654 – Portfolio Management
Project Portfolio Management Planning
Due Date: 11:59 pm EST, Sunday of Unit 3
Points: 100
Overview:
The Portfolio Management Plan is a key document for Project Portfolio Management
(PPM). Throughout this course, you will be developing a Portfolio Management Plan for
your portfolio, which consists of the projects provided to you in Unit 2 of this course.
In this assignment, you will start your Portfolio Management Plan making sure that you
are following the primary goals of the planning stage and aligning to your organization’s
strategic goals. (This is very similar to a Project Management Plan; however, the focus
is on managing a Portfolio, not a Project.)
Instructions:
• Provide a description of the Portfolio, detailing its strategic objectives, business
purpose, and which programs or projects are included in the Portfolio.
• Outline the Table of Contents for the Portfolio Management Plan.
• High-level Portfolio Overview for a Project Portfolio Management document for
your organization.
o Please make sure that the goals for the Portfolio Management Plan, as
detailed in The Standard for Portfolio Management are provided.
Requirements:
• Use MS Word.
• Use APA formatting.
• Resources to use for this assignment:
o This week’s reading and videos.
o PMI (2017) The Standard for Portfolio Management, Fourth Edition,
Section 2.3.2. Planning
• Also include, 2 resources beyond course required reading.
Be sure to read the criteria by which your work will be evaluated before you write and again after you write.
Evaluation Rubric for Project Portfolio Management Planning Assignment
CRITERIA Deficient Needs Improvement
Proficient Exemplary
0-20 points 21-27 points 28-31 points 32-35 points
Description of the Portfolio
Description is missing or inadequate.
Description includes some aspects of the strategic objectives of this Portfolio.
Description includes most aspects of the strategic objectives of this Portfolio.
Description includes all aspects of the strategic objectives of this Portfolio.
Use of PPM process
Demonstrated use is missing or inadequate.
Demonstrated use is minimally shown for the portfolio.
Demonstrated use is shown for the portfolio.
Demonstrated use is exceeded for the portfolio.
0-5 points 6-7 points 8-9 points 10 points
Resources No resources. 1 resource beyond course readings.
2 resources beyond course readings.
More than 2 resources beyond course readings.
0-11 points 12-15 points 16-19 points 20 points
Clear and Professional Writing and APA Format
Errors impede professional presentation; guidelines not followed.
Significant errors that do not impede professional presentation.
Few errors that do not impede professional presentation.
Writing and format are clear, professional, APA compliant, and error-free.
Copyright Statement
Post University’s courses contain copyrighted resources created by the University, licensed from various
third parties, or unless otherwise noted. In compliance with U.S. Copyright Law, these resources may
not be reproduced, revised, or distributed without the written permission of Post University. Students
found to be in violation of this policy are subject to civil and criminal liabilities associated with the
Federal Copyright Act and risk dismissal from the university under the Academic Dishonesty
policy. Unless otherwise noted, access to these materials is limited to the duration of the
course. Students should contact the library ([email protected]) for information on which resources can
be printed.
Cost-benefitanalysis2.docx
1
Cost-Benefit Analysis for Project Selection
Student Name
Institution
Cost-Benefit Analysis for Project Selection
Introduction
Sometimes it becomes really hard for an organization to identify projects which will be most proficient in providing benefits while assuming the lowest risks possible (Scandizzo, 2021). It is crucial to come up with a well-coordinated manner of handling selection since time, money, and manpower should not be wasted. In this paper, we will be employing the CBA approach so as to rank a list of projects according to their cost and potential benefits. We will also consider the portfolio budget to determine which projects to include.
Description of Cost-Benefit Analysis
The Cost-Benefit Analysis is a method used in business to determine the advantages and the disadvantages of a project in terms of its costs. The overall aim is to know how much more the gains are than the losses and possibly the extent of the difference. CBA involves the following steps:
Identify Costs and Benefits
The initial stage of Cost-Benefit analysis fully defines all the cost and benefits of each project under consideration. Depending on the level of details, costs can be distinguished as fixed costs, running costs, and overhead costs. Fixed costs present at the start of the production process consist of costs that are incurred in purchasing capital assets, technological tools as well as other essential requisites for the production process (Scandizzo, 2021). Everyday costs include sustaining costs like repair, workforce, and energy cost known as operational costs. It could include for instance administrative expenses to name but a few or potential costs of downtime. On the other hand, benefits are those positive consequences anticipated following the completion of the project. They can be of financial kind including revenue, cost, or productivity gains or of non-financial type including customer satisfaction, brand equity, strategic position and others. When you have been keen to note these costs and benefits, you can be sure to have all the right and appropriate analysis of the worth of the project, both financially and strategically.
Quantify Costs and Benefits
The second process that is vital in CBA is the putting of monetary values on the costs and the benefits. Escalation of cost is the process of determining the approximate amount for each of the cost categories which are recognized (Stobierski, 2019). This may involve manipulating information from financial statements or records, market surveys, or seeking advice from specialists. Likewise, benefits have to be quantified in monetary terms and hence it poses a greater challenge in respect of non-financial benefits (Koopmans & Mouter, 2020). It is possible to assess non-financial benefits using tools like customer questionnaires or statistical models, as well as focusing on such concepts as market analysis and brand value assessment. Moreover, the future cash flows must be reduced to present value due to the time value of money. It involves using the appropriate discount rate to discount future benefits and costs for a present value.
Calculate Net Benefit
Compare Projects
As with the LCA, the last step in CBA is to sort the projects according to their net value added (Stobierski, 2019). Whereas those with a higher net benefits are worked on most since they are likely to yield more returns as compared to the costs incurred. By making such a comparison, it is easier to choose the projects that will likely add the most value to the organization. Another factor considered in this step involves analyzing the portfolio budget by estimating the amount of capital required for each of the selected projects (Stobierski, 2019). It further prepares decision-makers with a ranking list that fits well with the strategic direction of the organization as well as the available funding. It also aids in making decision making to be transparent and objective as it clearly shows why one project was accepted while the other one was rejected.
Application of Cost-Benefit Analysis
Given a list of projects, we will apply CBA to prioritize them. Here is a hypothetical example:
|
Project Name |
Cost ($) |
Benefit ($) |
Net Benefit ($) |
Priority |
|
Project A |
100,000 |
150,000 |
50,000 |
1 |
|
Project B |
200,000 |
250,000 |
50,000 |
2 |
|
Project C |
150,000 |
180,000 |
30,000 |
3 |
|
Project D |
120,000 |
140,000 |
20,000 |
4 |
Portfolio Budget and Project Selection
Assuming the portfolio budget for this assignment is $300,000, we will select the highest priority projects that fit within this budget.
1. Project A: Cost $100,000, Net Benefit $50,000
2. Project B: Cost $200,000, Net Benefit $50,000
Total cost: $300,000
Therefore, Projects A and B will be included in the portfolio.
Conclusion
The Cost-Benefit Analysis is efficient in the process of the projects’ selection because it offers a unique and tangible way to measure their efficiency and profitability. When prioritizing projects based on the net benefits, it means organizations can have a shot at planning for their projects depending on the budget they have available and at the same time improve on their returns while reducing risk.
References
Koopmans, C., & Mouter, N. (2020). Cost-benefit analysis. In Standard Transport Appraisal Methods (September 2020). https://doi.org/10.1016/bs.atpp.2020.07.005
Scandizzo, P. L. (2021). Impact and cost–benefit analysis: A unifying approach. Economic Structures, 10(10). https://doi.org/10.1186/s40008-021-00240-w
Stobierski, T. (2019, September 5). How to do a cost-benefit analysis & why it’s important. Harvard Business School Online. https://online.hbs.edu/blog/post/cost-benefit-analysis
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