Discussion and Recommendation of the Case Study

Running head: PROJECT DEVELOPMENT AND OPMIZATION
Project Development and Optimization
Name of the Student:
Name of the University:
Author’s Note:

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PROJECT DEVELOPMENT AND OPMIZATION
Discussion and Recommendation of the Case Study
The assessment is done for the concerned company named as ABC Company that is
associated with construction work. As per the case study, it is seen that the company has received
a new contract for 5 years that is 31kms away from the head office of the company. In order to
maintain effective coverage among the area where the construction would be done, a regional
office has been constructed.
However, the problem lies with the availability of the experienced employees within the
regional office within the time when the construction would be done. In order to assist the
employees to travel to the regional office, the organization is in need of an effective strategy and
plan.
The company has four options out of which the one that is effective and ideal for them
will be taken into consideration. The first option that can be selected by the company is
purchasing a new car and using the same in order to assist the employees for the travelling
purpose.
The second option constitutes of purchasing an old car and using it for the same purpose.
The company can even hire a car and use it till the time when the project is complete. The fourth
and the final option that is in hand is providing travel allowance to the employees so that they
can accommodate their own transport and travel to the spot.
The merits and the demerits have been highlighted in the case study and it is seen that all
the options have their own pros and cons. The merits and the demerits of all the four situations
have been analysed and in order to figure out the most effective option, the cash flow for all the

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PROJECT DEVELOPMENT AND OPMIZATION
options have to be calculated. Net Present Value is the most effective process to figure out the
plan that can be utilised by the company in order to gain the best value.
The calculations that have been figured out by the company have been done on the basis
of certain assumptions. It is seen that the inflation rate has been considered as 2.50% and the
depreciation of new car is 15% pa and that of an old car is 20% pa. The tax rate is considered to
be 30% and the discounted rate is 9%.
The net present value that is calculated for the purchase of a new car is $12, 263 and that
of purchasing an old car is $ 31,772. In case a rental car is considered, then the value of NPV is
$2,225.
Cash Flow & NPV for New Car Purchase:
Particulars 0 1 2 3 4 5
Cost of New Car ($36,500)
Initial Investment ($36,500)
Insurance ($1,001) ($1,026) ($1,052) ($1,078) ($1,105)
Rego ($1,150) ($1,179) ($1,208) ($1,238) ($1,269)
Maintenance ($600) ($615) ($630) ($646) ($662)
Fuel Consumption ($1,882) ($1,929) ($1,977) ($2,027) ($2,077)
Depreciation ($5,475) ($5,475) ($5,475) ($5,475) ($5,475)
Savings of Travel Allowance $19,500 $19,988 $20,487 $20,999 $21,524
Net Incremental Income/(Expenses) $9,392 $9,764 $10,145 $10,535 $10,935
Less: Income Tax ($2,818) ($2,929) ($3,043) ($3,161) ($3,281)
Net Operating Income/(Expenses) $6,574 $6,835 $7,101 $7,375 $7,655
Add: Depreciation $5,475 $5,475 $5,475 $5,475 $5,475
Net Operating Cash InFlow/(Outflow) $12,049 $12,310 $12,576 $12,850 $13,130
Net Cash Flow ($36,500) $12,049 $12,310 $12,576 $12,850 $13,130
Discounted Cash Flow ($36,500) $11,054 $10,361 $9,711 $9,103 $8,533
Net Present Value $12,263