• Scenario 1 – NPV, Business as Usual Eliminate the Negative Projects The team h
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Question
• Scenario 1 – NPV, Business as Usual Eliminate the Negative Projects The team has been working throughout the Pre-development stage in order to get an understanding of the present value of each of the (9) projects by understanding market pricing and the position within the market of each of the prospective projects, among other things. This analysis has given the team accurate information surrounding the overall development costs and costs to commercialize for each project as well. As a part of your normal business strategy, prepare a report analyzing the net present value of each project, rank those projects, and provide a Go/Kill recommendation for each. • Scenario 2 – NPV PI, A New Ranking Strategy with a Budget $25M Budget As your company looks to manage resources, your director wants to understand how you can maximize your Bang-for-buck on the work your team is doing, and has asked you to add a NPV productivity analysis to your Go/Kill decision process. Additionally, he has capped you at $25M. Prepare a report analyzing the NPV PI of each project, rank those projects, and provide a Go/Kill recommendation for each, maintaining your $25M development budget. Maximize the NPV of your portfolio using this method. • Scenario 3 – ECV PI, Understanding The Expected Commercial Value $25M Budget Your director is interested in understanding the expected commercial value method and how it might impact investment decisions. He also wants to maximize the bang for buck so he has asked you to add the expected commercial value and ECV PI to your analysis. You are able to do this because your team has worked hard to understand the likelihood of commercial and technical success in each project. Prepare a report analyzing the ECV PI of each project, rank those projects, and provide a Go/Kill recommendation for each, maintaining your $25M development budget. Maximize the ECV of your portfolio using this method. • Scenario 4 – ECV PI, A Trimmed Budget, and Modified Risk $17.5M Budget, Minimize Risk Your director, given the ability to implement risk into the decision process, wants to evaluate one additional scenario. The VP mention in his staff meeting last week that the market is changing and he may be implementing a 30% reduction in budgets across the company. Assuming this information to be true, your team has created a scenario based on the changing market that has updated rick assessments for both the probability of commercial and technical success. Using this information, prepare a report analyzing the ECV PI of each project, rank those projects, and provide a Go/Kill recommendation for each, maintaining your $25M development budget. Maximize the ECV of your portfolio using this method and new data. • Compare and contrast each of the scenarios and provide a final suggestion on the type of analysis that should be completed AND what the decision is for each project
scenario-1
scenario-2
scenario-3
scenario-4
Points Breakdown
Worth 30 points
2 pts for well flowing outline
4 pts for plan of attack
12 pts for discussion over relevance of four (4) scenarios
3 pts for discussion over likely outcomes
4 pts for discussion over relevant sections from the text
5 pts proper format
BONUS: 5 pts maximum for discussion over what is missing from this “Go to Development” Gate analysis
Explanation / Answer
Finantial criteria are performed to evalulate projects .NPV model uses Management 's minimum desired rate of returns to compute the present value of all net cash inflows .it the result is positive , it is eligible for further consideration if negative , project is rejected .
scenario 1 .
for all 9 projects ..
1. Required outflow
2. inflow
3. Net inflows
NPV =
NPV comparision ( all positive NPV accpted and Negative Rejected )
the other strategic reasons ..
1. To capture market share
2. to make difficult for competitors to enter in market
3.increase in slae due to more profitable product
4. to delvelop core tecnhology that will be used in next generation product
The folllowing qusetions for plan of attack
topic question
strategy / alignment what specific organization strategy does this project align with
driver what business problem does the project slove
sucess metrics how will we measure success
Risk what is impact of not doing project ?
what is project risk to organization?
where does the project risk fit in our risk profile
benifits , value , ROI What is the value of project to business?
when will project show result ?
Finance what is estimated cost of projects ?
schedule how long will this project take ?
over likely outcomes
criteria for all the scenario
4. in all of above the 4 scenario , team should keep budget for development and technical and commecial success with in limit by exploring the alternative thinking and and in schedule so that risk for market changing environment could be compensated .
5. ' Go to development ' gate analysis , budget is allocated to manage resources . But it si not mentioned here that how much skill level of each memeber of team so that budget could be planned accordingly .
project 1 stay with core competncies strategic fit urgency 25 m$ for development commercial and technical success ROI after 30 % reduction in Budget commercial and technical success weighted total 2 3 4 5 6 7 8 9Related Questions
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