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Summer 2013
MASTER OF BUSINESS ADMINISTRATION (MBA) - PROJECT MANAGEMENT
SEMESTER 3
PM 0012 – PROJECT FINANCE AND BUDGETING – 4 CREDITS
(BOOK ID: B1238)
ASSIGNMENT- 60 MARKS
Note: Answer all questions. Kindly note that answers for 10 marks questions should be
approximately of 400 words. Each question is followed by evaluation scheme.
Q1. There are several elements which you can take into consideration, while budgeting a project. Explain these
elements.
(4 elements X 2.5 marks =10 marks) 10 marks
Answer :Elements in budgeting a project :
Budget success depends on several different elements. Including the information provided by each of these
elements will help entrepreneurs to create a successful budget:
1. Forecast :
A budget document is a compilation of forecasts. Forecasts should represent achievable, yet motivating, goals.
Additionally, forecasts should take into consideration
Q2. Explain the different methods/sources to finance a project?
(5 methods/sources X 2 marks =10 marks) 10 marks
Answer :Methods to finance a project :
1. Tap into Your 401(k) :
If you're unemployed and thinking about starting your own business, those funds you've accumulated in your
401(k) over the years can look pretty tempting. And thanks to provisions in the tax code, you actually can tap into
them without penalty if you follow the right steps. The
Q3. Describe any 5 considerations that are crucial in the design of the financing plan for a project.
(any 5 considerations X 2 marks = 10 marks) 10 marks

2. Answer : Considerations to design a financial plan for a project :
1.Consider the big picture:
First, determine the individual’s financial goals, time horizon, and individual risk tolerance. The investment strategy
should then be based on an asset allocation that is appropriate for those parameters. Basic portfolio allocation
models are: capital preservation; income; growth and income; long-term growth; and aggressive growth.
The next step, choosing appropriate
Q4. Discuss some of the tools and techniques of Cost Management.
(Cost aggregation- 1 mark; Reserve analysis -1 mark; Expert judgment – 1 mark; Historical relationships- 1 mark;
Funding limit reconciliation – 2 marks ;Cost performance baseline – 2 marks ; Project funding baseline- 2 marks)
Answer : Tools and techniques of cost management :
1. Cost aggregation:
Individual costs are aggregated in many different ways for budgeting purposes, including at the deliverable, work
package, summary activity, or other classification levels.
Reserve analysis: Reserves are time or cost buffers in the
Q5. Explain the various key determinants of initial project cost.
(8 key determinants X1.25 marks =10 marks) 10 marks
Answer : Key determinants of initial project cost :
1. The Project Specification :
The specification defines the physical attributes of a project. With a road, for example, given levels of forecast
traffic will lead to specification of the required length, depth and width of the road pavement, the material to be
used for surfacing, the number of lanes, bridges and junctions etc.
Q6. Explain any 5 risks associated with project evaluation.
(5 risks X2 marks= 10 marks)
Answer : Risks associated with project evaluation :
1. External Risks :
External events are mainly outside the control of the project manager and, in most cases, the corporation.
Examples include:
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