Projects are usually initiated by different parties in both private and public systems. In fact, their primary importance is to generate income, enhance skills and to facilitate the company’s capital formation process. The project proposals in Piper Industries Corporation have undergone different stages before they were finally evaluated to determine their suitability for implementation. The paper discusses the phases of project development, the key variables associated with each project and proper management recommendations.
The Stages of a Project
Project Initiation Phase
In this stage, different ideas are suggested by primary stakeholders to start the project. Further, they examine whether the project will be of benefit to the industry. According to Westland (2006), the team responsible for decision making identifies whether the project will successfully and properly completed (5).
Project Planning Phase
People responsible for further development of the project, conduct a feasibility study to ensure the actualization of the idea. The study report indicates the primary aim of the project and the resources that it requires. The planning stage provides an extensive report on issues in the market, financial projections and the total budget of the project.
Project Execution Phase
Most of the activities related to the project are realized at this stage. Further, the responsibilities should be distributed among the teams members involved in every particular project (Westland 2006). In addition, they conduct an appraisal to determine the viability of the project. The stage is critical in the cycle project examination since it covers environmental, technical, economic, financial and security analysis of the project.
Project Monitoring and Control Phase
In this stage, one can determine the progrss of the project to ensure that every activity is undertaken as described in the plan. The managers keep track of the cost and quality of the project. Moreover, during this stage, the project is evaluated to either enhance or stop it considering its validity. The problem arises due to unforeseen obstacles and range changes.
Project Closure Phase
Project closure is the last phase that indicates that all the tasks have been completed. The stakeholders approve and evaluate its outcome to indicate the project success and learn from it in the future (Young, 2013). The industry recognizes various teams involved in the project.
Key Variables Associated with each of the Project Options
Each of the projects has lifespan within which it is forecasted. For instance, the project Juniter is predicted to have an ROI of $250,000 for 2 to 3 years.
Cost is another variable that is considered in choosing the most efficient project. Juniper has a cost of $250,000; Palomino costs $655,000 and Stargazer $1,600,000 as a total of the seven years.
In this project, the quality depends on the primary aim of each of the projects. For example, Juniter aims at enhancing the current widget offered by the company, and Palomino is an entirely new line that has both improved and existing technology. Finally, Stargazer has started new widgets which will be presented as totally new product in the market. A critical examination of these variables is necessary to identify the most favorable venture.
Projects can be analyzed through a process known as Breakeven Analysis, although it is not an accurate method (Cafferky & Wentworth, 2010). The analysis technique does not incorporate the time value of money as the case in net present value.
Breakeven point = total fixed cost /total contribution..
Any return on an investment made past the break-even point that is zero is considered a milestone for the project. Based on this analysis, Jupiter project would be appropriate to undertake because the breakeven point is much higher than zero compared to other projects.
Based on the feasibility study, financial managers consider projects with few useful life after which there is a salvage value. The reason behind this is to incorporate technological advancement for other new projects to be competitive in the market.
Projects with low risk of completion are also preferred due to their certainty on the business progress. The target market is also important, and managers prefer a high number of customers based on this feasibility study. Consequently, Jupiter project would be the most appropriate to undertake.
Another preferred method is the present value of an investment project. Based on this approach, you need to have the cost. However, since no cost is provided here, this approach will be unprofitable.
In conclusion, project development involves the undertaking of project analysis which evolves five phases described above. Profit maximization is one of the financial objectives that a firm tries to achieve. The goal involves maximization of nominal income that is the difference between revenues and cost. The decision made by management will have an effect on the value of wealth of owners this is technically maximization of net present value, this is value created by undertaking the project and the projects with a positive net present value. Therefore, this means that investment activity shall increase the value of the wealth of owners.