Project Evaluation Techniques

The assignment focuses on project evaluation techniques employed by businesses. It highlights the importance of using multiple methods to select the best projects, avoiding reliance on a single parameter which can lead to incorrect choices and financial losses. The document includes references to books, journals, and online resources for further exploration.

BUSINESS DECISION MAKING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
TASK 1............................................................................................................................................3
1.1 Creation of plan for collection of primary and secondary data ............................................3
1.2 Survey methodology for sampling frame used ....................................................................3
1.3 Questionnaire for research....................................................................................................4
TASK 2............................................................................................................................................5
2.1 Representative values of statistical tools...............................................................................5
2.2 Analysis of results of mean median and mode......................................................................7
2.3 Measures of dispersion..........................................................................................................7
2.4 Calculation of quartile, percentile and correlation................................................................8
TASK 3............................................................................................................................................9
3.1 Graphic representation of collected data...............................................................................9
3.2 Creation of trend line for prediction....................................................................................14
3.4 Formal business report........................................................................................................14
TASK 4..........................................................................................................................................15
4.1 Information processing tools...............................................................................................15
4.2 Project plan for business project ........................................................................................16
4.3 Project evaluation techniques..............................................................................................18
CONCLUSION..............................................................................................................................20
REFERENCES..............................................................................................................................21
INDEX OF TABLES
Table 1: Calculation of mean, median and mode............................................................................6
Table 2: Measures of dispersion......................................................................................................8
Table 3: Calculation of quartile and percentile................................................................................9
Table 4: Calculation of correlation..................................................................................................9
Table 5: Sales, cost and profit data................................................................................................10
Table 6: Which of the below given factors you think mostly affect your purchasing decisions?. 13
Table 7: Do you think that Sygenta must launch Amistar in USA?.............................................14
Table 8: Calculation of pay back period method...........................................................................19
Table 9: Calculation of ARR.........................................................................................................19

Table 10: Calculation of NPV........................................................................................................20
Table 11: Calculation of IRR.........................................................................................................20
ILLUSTRATION INDEX
Illustration 1: Chart on sales, cost and profit data.........................................................................11
Illustration 2: People opinion on Which of the below given factors you think mostly affect your
purchasing decisions?....................................................................................................................13
Illustration 3: People opinion regarding opening of business in USA...........................................14
Illustration 4: Trend line for Sygenta.............................................................................................15
Illustration 5: GANTT chart..........................................................................................................18
Illustration 6: Network diagram.....................................................................................................18

INTRODUCTION
In today era, it is very difficult to make business decisions due to complexity of business
environment. It is facts which are used to predict future trends and in this regard various tools are
used like mean, median, mode and standard deviation. In this report a research is conducted
regard to opening of business in USA. In respect to this primary and secondary data is collected
by the researcher. In case of primary data questionnaire is distributed and response is collected.
On the secondary data statistical tools like mean, median, mode and standard deviation is
applied. On he basis of results of these tools recommendations are made in the formal business
report. Apart from this, project evaluation techniques are also applied and their results are
interpreted in proper manner. In this way entire project is prepared in systematic manner.
TASK 1
1.1 Creation of plan for collection of primary and secondary data
Sygenta is a company which wants to launch its fungicide product named Amistar for
the pest control. In study, USA is selected because it is a nation in which in large quantity crops
are produced. Also it is large in size and due to this reason; it has become easy to earn a huge
amount of revenue in USA (Groves, 2011). In order to launch business, it is necessary to conduct
market research. Hence, primary and secondary data is collected for doing market research. In
order to conduct a secondary research, data will be taken from newspapers, books and journals
etc. Secondary data is a data that is already collected by someone else and is published in the
specific source of information. Whereas, primary research is a research in which data is
collected for the first time by the researcher (Jankowicz, 2005). For conducting primary
research, sample of 50 people will be taken which reside in different villages of Texas. By
carrying out the research, Sygenta would be able to identify potential of the specific geographic
area in terms of revenue. Hence, in this way research will be conducted in a proper manner.
1.2 Survey methodology for sampling frame used
Survey methodology and sampling techniques are used to conduct research in a proper
manner and to select appropriate data collection techniques for the research. Following are
sample techniques that can be used by the Sygenta for conducting a research.

 Simple random sampling-. If this technique is applied then Sygenta will take all sample
units from population of Texas without considering any parameter for the sample
selection. Hence, it is very easy to use this method. Stratified sample units- It is a method of sampling in which entire popularity is divided
into several parts on the basis of specific parameter (Berg, 2001). Sample units are
selected from these strata to conduct a research.
 Cluster sampling- It is a method in which all sample units are taken from different
geographic area. From these different areas, all sample units are taken for the research.
It will be better for Sygenta to use stratified sampling technique for conducting a research
because in this by using several factors population is divided and data is colcted in appropriate
manner. Hence, it can be said that this method of sampling will be appropriate for the firm.
1.3 Questionnaire for research
Name:
Age:
Gender:
1. Do you use Sygenta's products?
 Yes
 No
2. Do you think that Sygenta's products help in controlling pests?
 Yes
 No
3. Which of the below given factors affect your purchasing decisions?
 Good quality
 Cheaper price
 Discount rates
 Any other ________
4. Do you think that Sygenta’s pricing policy is good?
 Yes
 No
5. Do products of Sygenta's meet your requirement?
 Yes

 No
6. Do you think that Sygenta's marketing operations are effective in the nature?
 Yes
 No
7. Do you think that Sygenta must launch Amistar in USA?
 Yes
 No
9. Do you think that if firm will enter in the market then it will face stiff competition?
 Yes
 No
10. What kind of strategies firm can adopt to expand business sharply in USA?
 Pricing strategy
 Product USP marketing strategy
11. Small decline in prices of products will increase product market demand to a great extent for
Sygenta.
 Strongly agree
 Agree
 Somewhat agree
 Disagree
 Highly disagree
12. Any suggestion to Sygenta for making improvement in its product?
(Kindly mention)_______________________________________________________
TASK 2
2.1 Representative values of statistical tools
Table 1: Calculation of mean, median and mode
Annual expenses
No. of countries
(F) M. V. (x) CF FX
0-10 13 5 13 65
10-20 25 15 38 375

20-30 37 25 75 925
30-40 22 35 97 770
40-50 21 45 118 945
50-60 20 55 138 1100
60-70 12 65 150 780
150 4960
Mean = ∑FX/∑F = 4960/150 = 33.07
Median = L1 + (N/2-C)/F * Class Interval
= 20 + (150/2 – 38)/37*10
= 30
Mode = L1 + (F1-F0)/ [(2F1-F0-F2)*Class interval
= 24.44 Mean- It indicates the average value of the specific variable for a specific duration. This
states the average performance of specific variable. By comparing current performance
with the average value, research analyst can identify that firm give a good or poor
performance ( Mean, Median, Mode and Range. 2016). For example, if current sales are
above average sales then it can be assumed that the company gives a good performance. Median- It is a statistical tool that divides entire data into two parts. There may be
different trends in these data set. By making use of this statistical tool, research analyst
can easily identify the pattern of movement in variable and can determine that variable is
moving in the positive or negative direction (Cohen and et. al., 2013). Due to this specific
feature, this tool is widely used by the business for analyzing data.
 Mode- It is a statistical tool that reflects the value which often gets repeated in the data
set. This statistical tool is used for identifying patterns of movement in variable. If value
of mode is zero then it means that none of the value is repeated in the data set. Thus, this
tool is often used by the equity research analyst for analyzing share price pattern.

2.2 Analysis of results of mean median and mode
Below results of mean, median and mode are analyzed in a proper manner. Mean- The mean value is 33.07 and this reflects that average annual expenditure of
Amritsar is in range of 30-40 million. Hence, Sygenta is required to make expenditures in
this range in order to make sure that it produces pesticides in sufficient quantity in order
to meet demand of the people of USA on time. Even, if firm make an annual expenditure
nearby to 30 million then also there is no problem. If firm will make expenditures
equivalent to the average expenditure then its chances of expansion of the business at a
fast pace will increased in the USA. Median- It is a middle value in a data set and here the value is this statistical tool is 30.
This means that most of the counties are making investment nearby to the above given
value which is in million. If we look at the values above the value 30, then it can be seen
that frequency of counties is very low. After 30, the value of frequency is increased. This
means that 30 million is the value of the annual expense that firm needs to made in order
to grown business at rapid pace.
 Mode- Value of mode is 24 and it states that there is a specific value which is often
repeated in the data set. This means that values of the variable is repeated again and again
in the data set.
2.3 Measures of dispersion
Table 2: Measures of dispersion
Annual
expenses
No. of
countries (F) M. V. (x) FX X^2 F*X^2
0-10 13 5 65 25 325
10-20 25 15 375 225 5625
20-30 37 25 925 625 23125
30-40 22 35 770 1225 26950
40-50 21 45 945 2025 42525
50-60 20 55 1100 3025 60500

60-70 12 65 780 4225 50700
150 4960 11375 209750
Variance = ∑Fx2 – ((∑Fx) 2/n)/ n – 1 = 208649.257
Standard deviation =
= 456.7814
Interpretation
It is a statistical tool that reflects the deviation in the value of the specific variable relative
to the average value (Day, 2005). Here standard deviation is 456.78 which is positive and it
reflects that variables are moving in positive direction in comparison to actual value. This
indicates that firms are increasing their expenditures on the Amitsar. Hence, Sygenta at least
needs to make expenditures equivalent to mean value in order to expand and establish its
business strongly in USA.
2.4 Calculation of quartile, percentile and correlation
Table 3: Calculation of quartile and percentile
Quartile 1 20.2 percentile 25 20.2
Quartile 2 24.44 percentile 50 24.44
Quartile 3 47.38 percentile 75 47.38
Interpretation
Quartile and percentile- It is a statistical tool that divide entire data in to several parts. It can be
said that quartile is extension of median as a statistical tool. Median divide data set in to two
parts but quartile divide data in to four parts (Black, 2006). Hence, pattern in the specific
variable can be analyzed in proper manner and all moves will be come in light of research
analyst. Hence, it can be said that by using this tool data analysis can be done in proper manner.
Quartile and percentile both are same things and only method of calculation is different in both
cases. Here it can be seen that quartile value is continuously increasing and value in question
table is also increasing. Thus, it can be said that firm needs to increase its annual expenses on
Amitsar consistently.

Table 4: Calculation of correlation
Particular Sales Units (£’m) Profits (£’m)
Sales (Units) (£’m) 1 0.888030143
Profits (£’m) 0.888030143 1
Interpretation
Correlation indicate the relationship between two variables sales and profit. Here, value
of correlation is one and this reflects that firm is earning entire profit only through sales and
there is no other source of income for Sygenta. Value of correlation always remain in range of -
1,0 and +1 (Goldberg, Kercheval and Lee, 2005). If value of correlation is zero then it means
that there is no correlation between the values. Similarly if value is in range of -1 and 0 then it
means that two variables are inversely interrelated to each other. In case of correlation between 0
to +1 vice verse happen. Hence, it is also very important statistical tool for the firm.
TASK 3
3.1 Graphic representation of collected data
Table 5: Sales, cost and profit data
Year Sales (£’000) Cost (£'000) Profit (£’000)
2005 270 200 70
2006 310 220 90
2007 320 220 100
2008 400 250 150
2009 380 250 130
2010 350 240 110
2011 330 220 110
2012 330 230 100
2013 340 230 110
2014 480 240 140

Illustration 1: Chart on sales, cost and profit data
Interpretation
On analysis of data it can be seen that sales of the firm fluctuating continuously and due
to this reason cost and profit of the firm also changes year to year. This happens due to
fluctuation in economic trade cycle. Hence, firm needs to follow a cautious approach in its
business.

Table 6: Which of the below given factors you think mostly affect your purchasing decisions?
Good quality 10
Cheaper price 20
Discount rates 15
Any other 5
Total 50
Interpretation
In research it has been find out that most of the respondents in sample think that people
prefers to buy product at low price and at discount. Only 10 out of 50 think that people prefers to
purchase product of good quality and they give priority to same over price and discount. Hence,
it can be said that Sygenta must focus on its price policy.
10
20
15
5
Good quality
Cheaper price
Discount rates
Any other
Illustration 2: People opinion on Which of the below given factors you think mostly affect
your purchasing decisions?

Table 7: Do you think that Sygenta must launch Amistar in USA?
Yes 40
No 10
Interpretation
In research it has been seen that most of respondents think that Sygenta must launch
Amitsar in USA. Only 10 respondents think that opening of such business is not profitable for
the firm. Hence, on the basis of results it can be said that firm must open its business in USA.
Yes No
0
5
10
15
20
25
30
35
40
Column C
Illustration 3: People opinion regarding opening of business in USA

3.2 Creation of trend line for prediction
Illustration 4: Trend line for Sygenta
Interpretation
On analysis of chart it can be seen that firm sales and profit will increase consistently in
upcoming years. This prediction is made on the basis of previous year figures. In these figures an
increasing trend is observed and due to this reason for upcoming years sales and revenue are
increased in chart. But firm can not entirely rely on this chart because here prediction is made on
the basis of past figures. Estimated future scenario is not considered in this chart which is also its
major limitation. Hence, firm needs to follow a cautious approach and it needs to keep an eye on
the changes in external environment. If it will not do so then on the basis of wrong prediction it
will make wrong decisions and will earn loss instead of profit.
3.4 Formal business report
To
The Board of directors Date- 1-03-2016
Sygenta
Status: Confidential
Honorable members
Introduction
In the report data analysis is done and various statistical tools are applied in this regard. These

statistical tools are mean, median and mode. Apart from this other statistical tools like
correlation and standard deviation are also applied in the research. On the values of these tools
interpretations are done in proper manner. Apart from this, project evaluation techniques are
also applied in the report in order to select best project for the firm.
Findings
The findings of report is that firm needs to make annual expenditure at least to the mean value.
If firm will not do so then it will lag behind in competition. There are lots of opportunities in the
USA market and firm needs to prepare an accurate strategy in order to counter threat and
capitalize opportunities.
Recommendations
On the basis of above findings it is recommended that firm needs to analyze USA market in
proper manner. By doing so it can establish its business in proper manner. Firm also needs to
use forecasting techniques other then trend analysis in order to make accurate estimates of cash
flows. If this will be done then firm will be in position to establish its business in USA in proper
manner and it will also be able to take strategic business decisions.
TASK 4
4.1 Information processing tools
Following are the important information processing tools for the business firms. Management information system- It is an information system which is used by the
middle level managers. In this information system huge data is stored and processed in
single time and on the basis of processed information reports are prepared systematically
(McKenzie, 2015). Hence, this information system is widely used by the business firms
in order to make day to day business decisions. Decision support system- This is an information system that is used at the top level of
management. Under this system also huge data can be stored and processed at large scale.
This system also have a simulation facility under which managers can assume some of
the changes that may take place in the business environment. Managers can check the
chances of achievement of targets specially when business environment is changed by
using simulation facility (Borglund and Engvall, 2014). Hence, the use of this

information system help managers in following a cautious approach and taking strategic
business decisions.
 Transaction processing system- This information system is used at the lower level of
management and in this all transactions are recorded in proper manner. In this system
also data is processed and systematic report on expenses is prepared by the lower level
mangers. Hence, this information system is used in all type of organizations.
4.2 Project plan for business project
S.No
.
Activities Name of the
activities
Predecessors
Activities
Time
duration
Starting
date
Finish date
1 A Lay foundation and
building structure
80 days 02/10/16 Tue 5/31/16
2 B Building stairs 1 30 days Wed 6/1/16 Tue 7/12/16
3 C Building roofs 1 40 days Wed 6/1/16 Tue 7/26/16
4 D Building windows 1 8 days Wed 6/1/16 Fri 6/10/16
5 E Plastering 1 70 days Wed 6/1/16 Tue 9/6/16
6 F Carpenter work 2,3,4,5 70 days Wed 9/7/16 Tue
12/13/16
7 G Electrical work 2,3,4,5 84 days Wed 9/7/16 Mon 1/2/17
8 H Heating 2,3,4,5 70 days Wed 9/7/16 Tue
12/13/16
9 I Plumbing 2,3,4,5 63 days Wed 9/7/16 Fri 12/2/16
10 J Floor covering 6,7,8,9 28 days Tue 1/3/17 Thu 2/9/17
11 K Decoration 6,7,8,9,10 35 days Fri 2/10/17 Thu 3/30/17

Illustration 5: GANTT chart
Illustration 6: Network diagram
Interpretation
Network diagram is a technique that is used to determine the way in which project must
be completed (Ge, 2002). It refers to the sequence of activities that will be followed in order to
perform complete a project. If these activities will not be completed on time, project cost will

increased. According to this diagram project must be completed in 261 days. The sequence of
activities will be 1+5+7+10+11 which means that days will be 80+70+48+28+35= 261 days.
4.3 Project evaluation techniques
Table 8: Calculation of pay back period method
Project A Project B
Initial
investment -150 -150
1 30 -120 30 -120
2 40 -80 50 -70
3 60 -20 50 -20
4 30 10 40 20
5 50 60 40 60
Interpretation
Pay back period indicate the time period with in which project can recover its invested
amount (Hu, Zhang and Liang, 2009). Pay back period is same for both projects and due to this
reason none of these project can not be selected for the firm. The main benefit of this technique
is that any one can apply this method easily. The main limitation of this method is that present
value concept is not used in this method of project evaluation.
Table 9: Calculation of ARR
Project A Project B
Initial
investment 150 150
1 30 30
2 40 50
3 60 50
4 30 40
5 50 40
Total 210 210
Average 42 42
ARR 28.00 28.00

Interpretation
ARR indicate the actual return that a project can earn on the invested amount (Chen. and
Ward, 2000). ARR of both projects is same and due to this reason on the basis of this parameter
also none of the project can be considered viable for the firm. The main benefit of this method is
that even manager is not professional he can easily apply this method. The major weak point of
this method is that here also concept of present value is not considered. Due to this reason this
method is sometimes not used by the business firms.
Table 10: Calculation of NPV
Project A PV@10% Present value Project B PV @10%
Present
value
Initial
investment 150 150
1 30 0.909 27.27 30 0.909 27.27
2 40 0.826 33.04 50 0.826 41.3
3 60 0.751 45.06 50 0.751 37.6
4 30 0.683 20.49 40 0.683 27.3
5 50 0.621 31.05 40 0.621 24.84
Total 156.91 158.28
NPV 6.91 8.28
Interpretation
NPV indicate the net present value of the project that remain after deducting all initial
investment value from the present value of the cash flows. Here, NPV of project B is greater then
project A and on that basis it can be said that latter project is viable then former project. The
main benefit of this method is that it is a very complicate technique and only finance expert can
apply this method. Estimation of accurate discount rate is major problem in application of this
technique. Every one can not make accurate anticipation of interest rates (Aksoy, Ozturk and
Sucky, 2012). If wrong interest rate is used then this technique will produce false results. Thus,
there are great chances of selection of wrong project in this method.

Table 11: Calculation of IRR
Project A Project B
Initial
investment -150 -150
1 30 30
2 40 50
3 60 50
4 30 40
5 50 40
IRR 11.70% 12.09%
Interpretation
IRR indicate the actual return that a project can earn on the invested amount. IRR of
project B is greater then project A and on this basis latter project is considered viable then latter
project. The main merit of this method is that it indicate the accurate return that a project can
earn on the invested amount. The only limitation is that it is very difficult to apply this technique
in the project management by the manager who does not have good finance knowledge.
CONCLUSION
On the basis of above discussion it is concluded that firms must use statistical tools on
regular basis. By using these tools firms can evaluate particular scenario in proper manner. All
these tools whether they are mean, median and mode evaluate variables from different directions.
Hence, by using these tools business firm get a specific direction in which it needs to work. On
the other hand, there are project evaluation techniques which are used to evaluate business
proposals from different directions. Company must not select any project randomly because
merely by looking at cash flows viable project for the firm can not be identified easily. Firm may
select specific project on the basis of one parameter. But by doing so company can select wrong
business project and it may face huge loss in the business. Hence, it is necessary for the firms to
use multiple project evaluation techniques in order to select best project for the business.

REFERENCES
Books & Journals
Aksoy, A, Ozturk, N. and Sucky, E., 2012. A decision support system for demand forecasting in
the clothing industry. International Journal of Clothing Science and Technology. 24(4).
pp.221 – 236.
Berg, S., 2001. A study of sample withdrawal for lubricated systems. Part 1: influence of flow
characteristics, sampling techniques and locations. Industrial Lubrication and Tribology.
53(1), pp. 22 – 32.
Black, 2006. Business statistics for contemporary decision making. John wiley & sons.
Borglund, E. and Engvall, T., 2014. Open data: Data, information, document or record? Records
Management Journal. 24(2). pp. 163 – 180.
Chen, Y. H. and Ward, C.,2000. Evaluating investment projects: The hurdle rate. Journal of
Corporate Real Estate. 2(4).pp.295–303.
Cohen, J. and et. al., 2013. Applied Multiple Regression/ Correlation Analysis for the
Behavioral Sciences. Routledge.
Day, A., 2005. Mastering Financial Mathematics with Excel: A Practical Guide for Business
Calculations. Financial Times/Prentice Hall.
Ge, D., 2002.Value pricing in presence of network effects. Journal of Product & Brand
Management.11(3). pp.174–185.
Goldberg, R. L, Kercheval, N. A. and Lee, K., 2005. Statistics for weighted means in credit risk
modeling. The Journal of Risk Finance. 6(4). pp.349 – 365.
Groves, R. M., 2011. Survey methodology. John Wiley & Sons.
Online
Mean, Median, Mode and Range. 2016. [Online]. Available through: <
http://www.purplemath.com/modules/meanmode.htm>. [Accessed on 1st March 2016].