Initiation

For more information, refer to the Deeply Practical Project Management (DPPM) reference book
Amazon.com/dp/1548650463 or online course at DeeplyPracticalPM.com

In particular see the section: "Initiation: The Business Case".

The entire Magical Devices Version 3 project is available from available from
DeeplyPracticalPM.com
or with the online course.

© 2020-10-10 William Stewart

Initiation Stage Business Case Calculations (see Planning Stage on next tab)

Benefits

Year 1 2 3 4
1. Current Manufacturing Facility
Production (M) @ growth of 20% 0.7 0.84 1.01 1.01
Cost (M) @ $60 / unit $42 $50 $60 $60
Marketing costs (M) @ $20 / unit $14 $17 $20 $20
Revenue @ $100 / unit $70 $84 $101 $101
Profit (M) $14 $17 $20 $20
2. New manufacturing facility
Production (M) @ growth of 40% 1 1.4 1.96 2.74
Cost (M) @ $42 / unit $42 $59 $82 $115
Marketing costs (M) @ $20 / unit $20 $28 $39 $55
Revenue @ $100 / unit $100 $140 $196 $274
Profit (M) $38 $53 $74 $104
3. Difference
Production (M) 0.3 0.56 0.95 1.74
Cost (M) $0 $8 $22 $55
Marketing costs (M) $6 $11 $19 $35
Revenue $30 $56 $95 $174
Profit (M) $24 $36 $54 $84

Costs

1. Facility Procurement
Number of square meters of factory space 5000
Cost per square meter of factory space $1,984
Total $9,918,750
2. Building Material
All facility internal materials $665,000
Total $665,000
3. Hardware Procurement
Number of production lines 3

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 Initiation
Hardware cost per production line $3,325,000
Management station $106,400
Control station $199,500
Magic dust $665,000
Total $11,344,900
4. Software Procurement
Number of production lines 3
Cost per production line $1,064,000
Management station $199,500
Control station $332,500
Total $4,389,000
5. Project Personnel
Project leads $3,990,000
Project team $10,640,000
Total $14,630,000
6. Project Management
Project management team $1,862,000
Risk budget $4,655,000
Total $6,517,000
Total Project Costs $47,464,650

Benefit / Cost Ratio and Return On Investment

Year 1 2 3 4
Cumulative additional profit (M) $24 $60 $115 $199
Benefit / Cost Ratio (BCR) 0.51 1.27 2.42 4.19
Return on investment (ROI) -49% 27% 142% 319%

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 Initiation

5 Total

1.01 4.56 <- At capacity after 36 months.

3.84 10.95
$161 $460
$77 $219
$384 $1,095
$146 $416

2.83 6.38
$101 $186
$57 $128
$283 $638
$126 $325

Page 3
 Initiation

5
$325
6.84
584%

Page 4
 Planning

For more information, refer to the Deeply Practical Project Management (DPPM) reference book
Amazon.com/dp/1548650463 or online course at DeeplyPracticalPM.com

In particular see the section: "Initiation: The Business Case".

The entire Magical Devices Version 3 project is available from available from
DeeplyPracticalPM.com
or with the online course.

© 2020-10-10 William Stewart

Planning Stage Business Case Calculations (see Initiation Stage on previous tab)

Benefits

Year 1 2 3 4
1. Current Manufacturing Facility
Production (M) @ growth of 20% 0.7 0.84 1.01 1.01
Cost (M) @ $60 / unit $42 $50 $60 $60
Marketing costs (M) @ $20 / unit $14 $17 $20 $20
Revenue @ $100 / unit $70 $84 $101 $101
Profit (M) $14 $17 $20 $20
2. New manufacturing facility
Production (M) @ growth of 40% 1 1.4 1.96 2.74
Cost (M) @ $42 / unit $42 $59 $82 $115
Marketing costs (M) @ $20 / unit $20 $28 $39 $55
Revenue @ $100 / unit $100 $140 $196 $274
Profit (M) $38 $53 $74 $104
3. Difference
Production (M) 0.3 0.56 0.95 1.74
Cost (M) $0 $8 $22 $55
Marketing costs (M) $6 $11 $19 $35
Revenue $30 $56 $95 $174
Profit (M) $24 $36 $54 $84

Costs

1. Facility Procurement
Number of square meters of factory space 5000
Cost per square meter of factory space $1,850
Total $9,250,000
2. Building Material
All facility internal materials $565,000
Total $565,000
3. Hardware Procurement
Number of production lines 3

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 Planning
Hardware cost per production line $3,000,000
Management station $100,000
Control station $200,000
Magic dust $777,000
Total $10,477,000
4. Software Procurement
Number of production lines 3
Cost per production line $1,100,000
Management station $200,000
Control station $300,000
Total $4,400,000
5. Project Personnel
Project leads $3,283,000
Project team $9,680,000
Security consultant $66,400 <-- New from Initiation stage.
Total $13,029,400
6. Project Management
Project management team $1,695,960
Risk budget $5,050,000
Total $6,745,960
Total Project Costs $44,467,360

Benefit / Cost Ratio and Return On Investment

Year 1 2 3 4
Cumulative additional profit (M) $24 $60 $115 $199
Benefit / Cost Ratio (BCR) 0.54 1.36 2.58 4.47
Return on investment (ROI) -46% 36% 158% 347%

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 Planning

5 Total

1.01 4.56 <- At capacity after 36 months.

3.84 10.95
$161 $460
$77 $219
$384 $1,095
$146 $416

2.83 6.38
$101 $186
$57 $128
$283 $638
$126 $325

Page 3
 Planning

5
$325
7.3
630%

Page 4