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Project Status updates

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nazrulq
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Project Status updates

Postby nazrulq Wed Jul 05, 2017 8:49 pm

Question :Your project is in the execution stage. NPV of your project is -$150,000 and IRR is 4%. CPI is 1.3 and SPI is 0.7
What is the recommended action?

1 Cancel the project since NPV is negative
2 Cancel the project since IRR is very low
3 Crash your project
4 Try to improve the NPV

Answer : Option 3

Different opinions will be much appreciated.
manishpn
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Re: Project Status updates

Postby manishpn Thu Jul 06, 2017 5:53 pm

nazrulq wrote:Question :Your project is in the execution stage. NPV of your project is -$150,000 and IRR is 4%. CPI is 1.3 and SPI is 0.7
What is the recommended action?

1 Cancel the project since NPV is negative
2 Cancel the project since IRR is very low
3 Crash your project
4 Try to improve the NPV

as far as my knowledge goes, NPV and IRR are used by organization used to make investment decisions for projects initiation.
Once the project is initiated (budget allocated) we do not calculate NPV or IRR during execution phase. once project starts we need to focus on SPI and CPI.
Hence if CPI is higher which means that we are under cost, but since SPI is below 1, we need to work on schedule compression, Crashing is expensive because we are adding more resources to the project, but since CPI is healthy we can possibly afford it.

Answer : Option 3

Different opinions will be much appreciated.
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Manish P
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VCAB
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Re: Project Status updates

Postby VCAB Sun Jul 09, 2017 9:18 am

NPV and IRR are investment decision making calculations....

The question suggested that the project is in execution (CPI and SPI) is the clue on that. Since CPI is greater than 1 this means that the project is below budget and SPI is below 1 which means that the project is behind schedule. Since the project has the resources, it needs to crash to maintain its schedule (deadline)

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