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Simulation Financial Analysis 1

The project has a cost variance of -$5,000, a schedule variance of -$2,000, a cost performance index (CPI) of 1.25, and a schedule performance index (SPI) of 0.91, indicating it is behind schedule but under budget. The estimate at completion (EAC) suggests the project is performing worse than planned. Best Buy should invest in Project A, which has a net present value (NPV) of $1,895,393.38, compared to Project B's NPV of $691,122.69.

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Jad Zoghaib
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9 views4 pages

Simulation Financial Analysis 1

The project has a cost variance of -$5,000, a schedule variance of -$2,000, a cost performance index (CPI) of 1.25, and a schedule performance index (SPI) of 0.91, indicating it is behind schedule but under budget. The estimate at completion (EAC) suggests the project is performing worse than planned. Best Buy should invest in Project A, which has a net present value (NPV) of $1,895,393.38, compared to Project B's NPV of $691,122.69.

Uploaded by

Jad Zoghaib
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as XLSX, PDF, TXT or read online on Scribd
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Simulation:

Given the following information for one-year project, answer the following questions.
Recall that PV is the planned value, EV is the earned value, AC is the actual cost, and BAC is the budget at completion.

PV 22,000
EV 20,000
AC 25,000
BAC 120,000

Questions:
What is the cost variance, schedule variance, cost performance index (CPI), and schedule performance index (SPI) for the proje
How is the project doing? Is it ahead of schedule or behind schedule? Is it under budget or over budget?
Use the CPI to calcuate the estimate at completion (EAC) for this project. Is the project performing better or worse than plann
Use the SPI to estimate how long it will take to finish this project?
Sketch the earned value chart for the project.
et at completion.

Response
ce index (SPI) for the project? 5000,-2,000,1.25,0.9090909091
Behind schedule, Under budget
etter or worse than planned? worse than planned

Place sketch below


Best Buy has the opportunity to invest in 2 projects. Project A requires an investment of $2M which will give a return of $500,
$750,000 which will give a return of $100,000, $150,000, $200,000, $250,000 and $ 250,000 for the next 5 years. Then Calcula
opportunity is better and should be invested in.

Project A
Discount Rate 10%
Initial Investment $ 2,000,000

Year Cash Flows Discounting Factor


1 $ 500,000
2 $ 500,000
3 $ 500,000
4 $ 500,000
5 $ 500,000

Net Present Value Formula NPV(B7,B11:B15)

Net Present Value $1,895,393.38

Which project should Best Buy Invest in? Project A


of $2M which will give a return of $500,000 each year for 5 years. Project B requires an investment of
50,000 for the next 5 years. Then Calculate the Net Present Value which can be used to decide which

Project B
Discount Rate 10%
Initial Investment $ 750,000

Year Cash Flows Discounting Factor


1 $ 100,000
2 $ 150,000
3 $ 200,000
4 $ 250,000
5 $ 250,000

Net Present Value Formula NPV(H7,H11:H15)

Net Present Value $691,122.69

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