MGMT627 Project Management Assignment No 01 Spring 2019 Solution & Discussion Due Date: 24-05-2019
High Class Plastic Industry is a large manufacturer of plastic bathroom sanitary and accessories in the local market. The management has decided to install two new Injection Molding Machines (IM-350 Tons) for the manufacturing of new products (Bathroom Cabinet and Water Tank), which
will increase the overall production of the organization by 35 percent.
The production department has submitted the project proposal that estimates the investment
requirements as follow:
Initial Investment required for the new IM-350 Machine is Rs. 350,000 each which will be paid in the first year to the importer. Furthermore, an amount of Rs. 285,750 is required for the installation of the machines. Delivery and installation of the machine is estimated to take almost one year. The
production manager also estimated that an amount of Rs. 28,000 annually required for the repairand maintenance of these machines. The total useful life of the machines is five years with an estimated salvage value of Rs. 225,000 each. The project schedule calls for the benefits to begin
in the second year and a project profit is estimated to be Rs. 500,000, Rs. 520,000, Rs. 530,000
and Rs.435,000 in the 2nd, 3rd, 4th and 5th years respectively. The project manager has an
estimated hurdle rate of 14% for this investment and the expected rate of inflation is 3.25 percent
over the life of the project.
The management has hired you as a consultant and given the task to evaluate the proposal using
the following format and provide working where required:
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any idea or solution?
any hint please........
MGMT627 Assignment No 1 Solution Spring 2019
please tell me about the discount factor