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Assignment
DRIVE FALL 2015
PROGRAM MBADS (SEM 3/SEM 5) MBAFLEX/ MBA (SEM3) PGDPMN(SEM 1)
SUBJECT CODE & NAME PM 0012 – PROJECT FINANCEAND BUDGETING
BK ID B1938
CREDIT & MARKS 4 CREDITS & 60 MARKS
1 Write short noteson:
(a) Key project resources: Committing to resources, both financially and contractually, means looking
closely at your budget and the needs of the project. The tighter the budget, the more important it is that
you run a streamlined project, and the more efficiently you'll have to utilize your resources. Your overall
projectresourceswill include:
 How many people you need for the project: This is not necessarily the number of people who
will be involved at any level, but the number of people you will need to get the project
accomplished.
(b)Three mainrequirementsoffundinga project through projectfinance:
 Applicants should have South African citizenship and should be 18 years and above. Applicants
shouldhave a legal statusasadults.There will notbe fundingforadhoc groups.
 The NAC is unlikely to fund the entire budget of the project. Applicants are advised to raise
otherfunding.
 Funding generally granted for mainly the artistic program and applicants must declare all
sourcesof funding.


(c) Medium term financing for projects: Medium Term finance are sources of finance available for the
mid-term of between 3 – 5 years typically used to finance an expansion of a business or to purchase

2. large fixed assets. It is usually the larger amounts of borrowing or the use of the funds that
differentiates medium sources of finance from short term, although a number of the short term options
are available forthe mid-term.
The annual cost of mediumterm
(d) Bottom up estimation for creating project budget: Bottom up approach is used for creating projects.
By using this approach project management system works properly and this approach is also beneficial
for projectmanagersalso.
These five stepswillsend
2 What isoff take contract? Explainthe various typesof off take contracts.
Answer: An agreement entered between a producer and a buyer to buy/sell a certain amount of the
future production. It is generally negotiated long before the construction of a facility to guarantee a
market for the facility's future production and improve chances of getting financing for the installation
concerned.
These agreements are fairly common in the natural resource sector, where capital costs to extract the
resources are important. They usually include several protective clauses and can take months to
negotiate.
3 Explainthe differentkeyprojectdocuments.
Answer: In Project Management, one of the major responsibilities of the project manager is to keep
proper documentation for the project and to keep the documents up to date. At any point in time
during the life of the project, these documents can be really useful consulting about the various aspects
related to the project. When it comes to managing the project effectively, there are certain
documentation standards that the manager should adhere with. So, for a manager to know which
documents these are and then keeping them and maintaining standards for these holds a lot of
significance.
4 Write short noteson:
(a)Project parties in a construction project: A project cannot proceed without adequate financing, and
the cost of providing adequate financing can be quite large. For these reasons, attention to project
finance is an important aspect of project management. Finance is also a concern to the other
organizations involved in a project such as the general contractor and material suppliers. Unless an
ownerimmediatelyand

3. (b)Types of working capital: Working capital is classified into different types and the classification is
basedon the followingviews:
 Balance SheetView
 OperatingCycle

(c) Project cash flows: When beginning capital-budgeting analysis, it is important to determine a
project'scash flows.These cashflowscanbe segmentedasfollows:
 Initial Investment Outlay: These are the costs that are needed to start the project, such as new
equipment,installation,etc.
 Operating Cash Flow over a Project's Life: This is the additional cash flow a new project
generates.
 Terminal-Year Cash Flow: This is the final cash flow, both the inflows and outflows, at the end
of the project's life; for example, potential salvage value at the end of a machine's life. Example:
ExpansionProject
(d)Payback period method used to evaluate an investment on a project: Payback method does not
consider the present value of cash flows. Under this method, an investment project is accepted or
rejected on the basis of payback period. Payback period means the period of time that a project requires
recovering the money invested in it. The payback period of a project is expressed in years and is
computedusingthe followingformula:
5 What are the problemsassociated with BOOT projects.
Answer: A BOOT funding model involves a single organisation, or consortium (BOOT provider) designing,
building, funding, owning and operating the scheme for a defined period of time and then transferring
thisownershipacrosstoan agreedparty.
Customers enter into long term supply contracts with the BOOT operator and are charged accordingly
for the service delivered.The service
6 Explainthe differenttypesofmanagementcontracts (a type of PPP).
Answer: PPPs can be categorized into two types: a PPP of a purely contractual nature and a PPP of an
institutional nature.Thiscategorizationisadoptedbythe EuropeanUnionandbymanyothercountries.
In a PPP of a purely contractual nature, the partnership between the public and the private sector is
basedsolelyoncontractual links,
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