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PRINCE2® Qualifications (Levels Explained)

Competition brings out the best in us; we strive to become the best and outperform our peers and fellow colleagues and prove that we are better than them. This drive and need to excel is a good trait to have, especially in this competitive corporate world where standards keep getting higher and quality and excellence are rewarded. So what is it that will distinguish you from the countless others? What is that X factor that will push your resume to the top of the heap? Experience is one thing but a major factor is the qualifications you possess.With several project management methods, tools and techniques being introduced in the market for streamlining businesses, a qualification that reflects your knowledge of these methods and tools is what endears you to employers. Because at the end of the day, businesses thrive on these methodologies.A qualification also shows your knowledge, skills, and dedication towards the profession. It suggests that you have more refined experience in the profession, making you an optimal choice for recruiters.What is PRINCE2®? What qualifications does it provide?PRINCE2® is a structured project management methodology, recognized as the common standard for project management across the world. Its an acronym for - ( Projects IN Controlled Environment ). It is a flexible and user-friendly project management methodology that eases out the process of selecting optimal resources and minimizes the risks involved while handling a project. Its versatility makes it easier to apply in various projects from different sectors, such as engineering, construction, IT, business and even finance. While it was initially designed for IT projects, its scope has now expanded to other sectors.PRINCE2® facilitates three qualifications, these qualifications are:PRINCE2® FoundationPRINCE2® PractitionerPRINCE2® AgileBoth the PRINCE2® Foundation and PRINCE2® Practitioner are process-driven approaches that generally emphasize on fragmenting projects into manageable and controllable stages and portions. This fragmentation of the project does not depend on the type or size of the project.PRINCE2® Agile focuses on teaching the fundamentals and the purpose of combining PRINCE2® with the agile methodology which is another form of project management.Benefits of PRINCE2®Acquiring a qualification is a tedious and costly process, and you must ensure that the qualification you are investing in is beneficial and caters to your needs. The qualification you hope to achieve should also be relevant to the demands of current times. An individual spends a great sum of money and time on qualifications, that include tuition, resource materials, questionnaires, and examinations, thus a qualification is not a joke and requires serious research and investment. Hence, you must be aware of the benefits offered by the PRINCE2® methodology before deciding upon pursuing it. Here are some benefits offered by PRINCE2®:It is very flexible and versatile and can be applied in various kinds of projects irrespective of their sizes.It is the most used and identified project management methodology across the globe.It offers segregation of projects and efficiently fragments the work thus further improving the process by simplifying it.PRINCE2® is known for providing customer satisfaction, as the practitioners are well-versed and skillful because of the training provided during the course and they are also kept informed and up-to-date regarding the improvements and progress made in their respective fields.The benefits mentioned above shows that the PRINCE2® methodology provides the best project management techniques that are globally recognized. Hence, PRINCE2® has become a prominent certification recruiters look for while hiring a professional for managing a project.The PRINCE2® Certification or Qualification ExplainedSo, you have finally decided that the PRINCE2® methodology is great and it could be really useful to you. You have decided to expand your field of expertise and want to pave the way for several lucrative job opportunities by opting for the PRINCE2® qualifications. But there are certain prerequisites that are required before taking up this qualification.As mentioned above PRINCE2® Certification is offered in three different levels:PRINCE2® FoundationPRINCE2® PractitionerPRINCE2® Agile/ProfessionalThree Levels of PRINCE2® Qualification or CertificationPRINCE2® FoundationIt is the basic level of certification. It is the first of the two PRINCE2® qualifications that are required to successfully become a Registered PRINCE2® Practitioner. The PRINCE2® Foundation certification or qualification is designed to teach you the must-know PRINCE2® principles, themes and terminology/jargon. It is developed in a way to make sure that once qualified you will be able to act as a well-informed member of a project management team that is operating within an environment based on the foundation of the PRINCE2® methodology. PRINCE2® Foundation is a training program that can be studied on its own or as a prerequisite for the upcoming PRINCE2® Practitioner course.SYLLABUSThis qualification aims at developing the candidate as a well-informed member of the project management team in a PRINCE2® environment. To obtain this goal, the candidate should be able to understand the principles and terminology of this methodology. Especially, the candidate must be capable of:Describing the purpose and major content of all the roles, the seven principles, the seven themes and finally the seven processes.Stating which management products would be an input to, output from the seven processes.Explaining the major purpose, and the key contents of the major management products.Describing the relationships between processes, deliverables, roles and the management dimensions associated with a project.  WHO SHOULD ATTEND THIS QUALIFICATION?This qualification is suitable for both new and experienced project staffIt is also good for Consultants / Contract staff that is operating under a PRINCE2® environment.Project ManagersProgramme ManagersSupport Staff and Team Managers associated with PRINCE2® based projectsFor staff that will have a defined role within a project team responsible for operating under a PRINCE2® environment.REQUIREMENTSThe candidate should have some understanding of Project Management, other than that there is no such formal pre-requisite for the Foundation Certification or Qualification.EXAMINATION FORMATThe exam will be held for an hourThere will be 60 questionsIt will be a closed book examinationYou would have to correctly answer 33 out of 60 questions to pass (55% is the passing score)PRINCE2® PractitionerIt is the second of the two PRINCE2® examinations you are required to clear to become a registered PRINCE2® Practitioner. The PRINCE2® Practitioner qualification aims at teaching you the basics of applying the PRINCE2® for running and managing a project within the environment supporting PRINCE2®. After the successful completion of this qualification, you will be able to apply and tune PRINCE2® for undertaking the requirements and problems of a specific project scenario. You will gain a comprehensive understanding of the relationship between the PRINCE2® principles, themes,  processes, and the PRINCE2® products and will understand these elements in great detail.SYLLABUSThe curriculum designed for the PRINCE2® Practitioner enables the candidate to:Produce in-depth explanations of all the principles, themes, processes and the worked examples of all PRINCE2® products as it is possible to apply them to address the specific circumstances of a given project scenario.Present their understanding of the relationships between principles, themes, processes, and the PRINCE2® products and must be able to apply this understanding.Demonstrate their expertise of the reasons behind the principles, themes, and processes of PRINCE2®, and are also that they understand the principles underpinning these elements of PRINCE2®.Showcase their ability to tune PRINCE2® according to different project circumstances.WHO SHOULD ATTEND THIS QUALIFICATION?This qualification is suitable for:Project ManagersGeneral ManagersProgramme ManagersTeam Managers and the Support StaffStaff that have a defined role in a projectProject Management ConsultantsREQUIREMENTSYou would be required to possess one of the following qualifications before appearing for the PRINCE2® Practitioner exam:PRINCE2® FoundationProject Management Professional (PMP)®Certified Associate in Project Management (CAPM)®IPMA Level A (Certified Projects Director)IPMA Level B (Certified Senior Project Manager)IPMA Level C (Certified Project Manager)IPMA Level D (Certified Project Management Associate)EXAMINATION FORMATThe examination will be for a duration of 150 minutesThe exam will contain 68 questionsYou would be required to correctly answer 38 out of 68 questions (55 % is the passing score)Open book. Only the official printed hard copy of the Managing Successful Projects with PRINCE2®2017 Edition is allowed.PRINCE2® AgileThe PRINCE2® Agile qualification consists of Foundation and Practitioner levels. PRINCE2® Agile primarily focuses on teaching you the fundamentals and the purpose of merging PRINCE2® with the Agile methodology. It provides extensibility along with the capability of working together with the corporate management processes.PRINCE2® Agile FoundationSimilar to the PRINCE2® Foundation, this Agile Foundation course and certification can be taken by anyone without any prior qualification. This qualification course introduces PRINCE2® governance and offers a wide range of Agile concepts and techniques. Once you are qualified, you would be able to act as a well-informed member of an Agile project team and understand how the PRINCE2® operates with Agile concepts.PRINCE2® Agile PractitionerThis qualification is focused on teaching the certified Project Managers the method of mixing the structure, governance and control of PRINCE2® with the Agile methodology, techniques and approaches. Additionally, it has the same prerequisites as the PRINCE2® Practitioner, so for appearing in the exam you must possess the following qualifications:PRINCE2® FoundationProject Management Professional (PMP)®Certified Associate in Project Management (CAPM)®IPMA Level A (Certified Projects Director)IPMA Level B (Certified Senior Project Manager)IPMA Level C (Certified Project Manager)IPMA Level D (Certified Project Management Associate)Who manages the PRINCE2® Certification or Qualification?All the major certifications and qualifications are managed by a sponsor, that develops, manages and operates qualifications. PRINCE2® also has a sponsor. It is owned and managed by AXELOS - AXELOS is a joint venture that was set up in 2014 by the government of the United Kingdom and Capita, it is responsible for developing, managing and operating qualifications in best practices, using the methodologies formerly owned by the Office of Government Commerce (OGC). It is Axelos that supervises the entire process of the PRINCE2® Certification or Qualification.Importance of PRINCE2® Certification or QualificationThe PRINCE2® ensures that the candidate has the following capabilities:The PRINCE2® Certification or Qualification primarily aims at ensuring that a candidate has sufficient knowledge and expertise of the PRINCE2® methodology so that the candidate can effectively work with, or as a member of a project management team that is working within an environment that supports PRINCE2®.The PRINCE2® Professional Certification or Qualification is also aimed to test the candidate's capability of managing a non-complex PRINCE2® project across all aspects of the entirety of the project.  The PRINCE2® re-registration?Like every other certification or qualification, PRINCE2® qualification is also required to be renewed after a certain period of time. Henceforth, any PRINCE2® Practitioner would be required to register within a time period of three to five calendar years based on the original certification. This re-registration includes an hour-long test that the candidate must pass to retain the certification or qualification. The examination is based on similar standards as the original Practitioner examination.
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PRINCE2® Qualifications (Levels Explained)

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PRINCE2® Qualifications (Levels Explained)

Competition brings out the best in us; we strive to become the best and outperform our peers and fellow colleagues and prove that we are better than them. This drive and need to excel is a good trait to have, especially in this competitive corporate world where standards keep getting higher and quality and excellence are rewarded. So what is it that will distinguish you from the countless others? What is that X factor that will push your resume to the top of the heap? Experience is one thing but a major factor is the qualifications you possess.

With several project management methods, tools and techniques being introduced in the market for streamlining businesses, a qualification that reflects your knowledge of these methods and tools is what endears you to employers. Because at the end of the day, businesses thrive on these methodologies.

A qualification also shows your knowledge, skills, and dedication towards the profession. It suggests that you have more refined experience in the profession, making you an optimal choice for recruiters.

What is PRINCE2®? What qualifications does it provide?

PRINCE2® is a structured project management methodology, recognized as the common standard for project management across the world. Its an acronym for - ( Projects IN Controlled Environment ). It is a flexible and user-friendly project management methodology that eases out the process of selecting optimal resources and minimizes the risks involved while handling a project. Its versatility makes it easier to apply in various projects from different sectors, such as engineering, construction, IT, business and even finance. While it was initially designed for IT projects, its scope has now expanded to other sectors.

PRINCE2® facilitates three qualifications, these qualifications are:

  • PRINCE2® Foundation
  • PRINCE2® Practitioner
  • PRINCE2® Agile

Both the PRINCE2® Foundation and PRINCE2® Practitioner are process-driven approaches that generally emphasize on fragmenting projects into manageable and controllable stages and portions. This fragmentation of the project does not depend on the type or size of the project.

PRINCE2® Agile focuses on teaching the fundamentals and the purpose of combining PRINCE2® with the agile methodology which is another form of project management.

Benefits of PRINCE2®Benefits of PRINCE2

Acquiring a qualification is a tedious and costly process, and you must ensure that the qualification you are investing in is beneficial and caters to your needs. The qualification you hope to achieve should also be relevant to the demands of current times. An individual spends a great sum of money and time on qualifications, that include tuition, resource materials, questionnaires, and examinations, thus a qualification is not a joke and requires serious research and investment. Hence, you must be aware of the benefits offered by the PRINCE2® methodology before deciding upon pursuing it. Here are some benefits offered by PRINCE2®:

  • It is very flexible and versatile and can be applied in various kinds of projects irrespective of their sizes.
  • It is the most used and identified project management methodology across the globe.
  • It offers segregation of projects and efficiently fragments the work thus further improving the process by simplifying it.
  • PRINCE2® is known for providing customer satisfaction, as the practitioners are well-versed and skillful because of the training provided during the course and they are also kept informed and up-to-date regarding the improvements and progress made in their respective fields.

The benefits mentioned above shows that the PRINCE2® methodology provides the best project management techniques that are globally recognized. Hence, PRINCE2® has become a prominent certification recruiters look for while hiring a professional for managing a project.

The PRINCE2® Certification or Qualification Explained

So, you have finally decided that the PRINCE2® methodology is great and it could be really useful to you. You have decided to expand your field of expertise and want to pave the way for several lucrative job opportunities by opting for the PRINCE2® qualifications. But there are certain prerequisites that are required before taking up this qualification.

As mentioned above PRINCE2® Certification is offered in three different levels:

Three Levels of PRINCE2® Qualification or Certification

Three Levels of PRINCE2® Qualification or Certification

PRINCE2® Foundation

It is the basic level of certification. It is the first of the two PRINCE2® qualifications that are required to successfully become a Registered PRINCE2® Practitioner. The PRINCE2® Foundation certification or qualification is designed to teach you the must-know PRINCE2® principles, themes and terminology/jargon. It is developed in a way to make sure that once qualified you will be able to act as a well-informed member of a project management team that is operating within an environment based on the foundation of the PRINCE2® methodology. PRINCE2® Foundation is a training program that can be studied on its own or as a prerequisite for the upcoming PRINCE2® Practitioner course.

SYLLABUS

This qualification aims at developing the candidate as a well-informed member of the project management team in a PRINCE2® environment. To obtain this goal, the candidate should be able to understand the principles and terminology of this methodology. Especially, the candidate must be capable of:

  • Describing the purpose and major content of all the roles, the seven principles, the seven themes and finally the seven processes.
  • Stating which management products would be an input to, output from the seven processes.
  • Explaining the major purpose, and the key contents of the major management products.
  • Describing the relationships between processes, deliverables, roles and the management dimensions associated with a project.  

WHO SHOULD ATTEND THIS QUALIFICATION?

  • This qualification is suitable for both new and experienced project staff
  • It is also good for Consultants / Contract staff that is operating under a PRINCE2® environment.
  • Project Managers
  • Programme Managers
  • Support Staff and Team Managers associated with PRINCE2® based projects
  • For staff that will have a defined role within a project team responsible for operating under a PRINCE2® environment.

REQUIREMENTS

The candidate should have some understanding of Project Management, other than that there is no such formal pre-requisite for the Foundation Certification or Qualification.

EXAMINATION FORMAT

  • The exam will be held for an hour
  • There will be 60 questions
  • It will be a closed book examination
  • You would have to correctly answer 33 out of 60 questions to pass (55% is the passing score)

PRINCE2® Practitioner

It is the second of the two PRINCE2® examinations you are required to clear to become a registered PRINCE2® Practitioner. The PRINCE2® Practitioner qualification aims at teaching you the basics of applying the PRINCE2® for running and managing a project within the environment supporting PRINCE2®. After the successful completion of this qualification, you will be able to apply and tune PRINCE2® for undertaking the requirements and problems of a specific project scenario. You will gain a comprehensive understanding of the relationship between the PRINCE2® principles, themes,  processes, and the PRINCE2® products and will understand these elements in great detail.

SYLLABUS

The curriculum designed for the PRINCE2® Practitioner enables the candidate to:

  • Produce in-depth explanations of all the principles, themes, processes and the worked examples of all PRINCE2® products as it is possible to apply them to address the specific circumstances of a given project scenario.
  • Present their understanding of the relationships between principles, themes, processes, and the PRINCE2® products and must be able to apply this understanding.
  • Demonstrate their expertise of the reasons behind the principles, themes, and processes of PRINCE2®, and are also that they understand the principles underpinning these elements of PRINCE2®.
  • Showcase their ability to tune PRINCE2® according to different project circumstances.

WHO SHOULD ATTEND THIS QUALIFICATION?

This qualification is suitable for:

  • Project Managers
  • General Managers
  • Programme Managers
  • Team Managers and the Support Staff
  • Staff that have a defined role in a project
  • Project Management Consultants

REQUIREMENTS

You would be required to possess one of the following qualifications before appearing for the PRINCE2® Practitioner exam:

  • PRINCE2® Foundation
  • Project Management Professional (PMP)®
  • Certified Associate in Project Management (CAPM)®
  • IPMA Level A (Certified Projects Director)
  • IPMA Level B (Certified Senior Project Manager)
  • IPMA Level C (Certified Project Manager)
  • IPMA Level D (Certified Project Management Associate)

EXAMINATION FORMAT

  • The examination will be for a duration of 150 minutes
  • The exam will contain 68 questions
  • You would be required to correctly answer 38 out of 68 questions (55 % is the passing score)
  • Open book. Only the official printed hard copy of the Managing Successful Projects with PRINCE2®2017 Edition is allowed.

PRINCE2® Agile

The PRINCE2® Agile qualification consists of Foundation and Practitioner levels. PRINCE2® Agile primarily focuses on teaching you the fundamentals and the purpose of merging PRINCE2® with the Agile methodology. It provides extensibility along with the capability of working together with the corporate management processes.

PRINCE2® Agile Foundation

Similar to the PRINCE2® Foundation, this Agile Foundation course and certification can be taken by anyone without any prior qualification. This qualification course introduces PRINCE2® governance and offers a wide range of Agile concepts and techniques. Once you are qualified, you would be able to act as a well-informed member of an Agile project team and understand how the PRINCE2® operates with Agile concepts.

PRINCE2® Agile Practitioner

This qualification is focused on teaching the certified Project Managers the method of mixing the structure, governance and control of PRINCE2® with the Agile methodology, techniques and approaches. Additionally, it has the same prerequisites as the PRINCE2® Practitioner, so for appearing in the exam you must possess the following qualifications:

  • PRINCE2® Foundation
  • Project Management Professional (PMP)®
  • Certified Associate in Project Management (CAPM)®
  • IPMA Level A (Certified Projects Director)
  • IPMA Level B (Certified Senior Project Manager)
  • IPMA Level C (Certified Project Manager)
  • IPMA Level D (Certified Project Management Associate)

Who manages the PRINCE2® Certification or Qualification?

All the major certifications and qualifications are managed by a sponsor, that develops, manages and operates qualifications. PRINCE2® also has a sponsor. It is owned and managed by AXELOS - AXELOS is a joint venture that was set up in 2014 by the government of the United Kingdom and Capita, it is responsible for developing, managing and operating qualifications in best practices, using the methodologies formerly owned by the Office of Government Commerce (OGC). It is Axelos that supervises the entire process of the PRINCE2® Certification or Qualification.

Importance of PRINCE2® Certification or Qualification

The PRINCE2® ensures that the candidate has the following capabilities:

  • The PRINCE2® Certification or Qualification primarily aims at ensuring that a candidate has sufficient knowledge and expertise of the PRINCE2® methodology so that the candidate can effectively work with, or as a member of a project management team that is working within an environment that supports PRINCE2®.
  • The PRINCE2® Professional Certification or Qualification is also aimed to test the candidate's capability of managing a non-complex PRINCE2® project across all aspects of the entirety of the project.  

The PRINCE2® re-registration?

Like every other certification or qualification, PRINCE2® qualification is also required to be renewed after a certain period of time. Henceforth, any PRINCE2® Practitioner would be required to register within a time period of three to five calendar years based on the original certification. This re-registration includes an hour-long test that the candidate must pass to retain the certification or qualification. The examination is based on similar standards as the original Practitioner examination.

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KnowledgeHut

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KnowledgeHut is an outcome-focused global ed-tech company. We help organizations and professionals unlock excellence through skills development. We offer training solutions under the people and process, data science, full-stack development, cybersecurity, future technologies and digital transformation verticals.
Website : https://www.knowledgehut.com

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Cost Benefit Analysis for Projects: A step by step approach

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Organizations will need to make such decisions prudently by creating a clear justification.  Cost Benefit Analysis (CBA): What is it? Understanding Cost Benefit Analysis Conducting a cost benefit analysis (CBA) or a Benefit-Cost analysis (as may be referred alternatively) is one of the most fundamental methods used to compare the financial cost to be incurred for such new initiatives and benefits to be generated from them.  Origins of Cost Benefit Analysis To undertake new initiatives is an integral part of the evolution of mankind, at a personal level, at a social level or at a business level. On the social front, it may involve initiatives like developing new townships, new buildings, new schools, new hospitals, new monuments, new social infrastructures, and new offices. On the business front, it may involve developing new products, new services or new production capabilities. There has always been a need to make sound and clear decisions. As the accountability of leaders on financial matters continues to rise, the need for doing a cost-benefit-analysis also becomes inevitable. CBA as a practice becomes part of policy matters in government projects in the US dating back in 1936, when Corps of Engineers started doing CBA for Federal Waterway Infrastructure projects. Approach to Cost Benefit Analysis A fundamental approach to do CBA includes estimating all the costs to be incurred in doing the project and carefully evaluating and estimating all the benefits to be garnered from the project. Benefits can include both quantifiable financial benefits and non-quantifiable benefits such improvement in quality of life, ease of living, ease of doing business etc. The purpose of Cost Benefit Analysis We already discussed that every new project needs investments to be made with the expectation of returns from the investments. There are two main applications of conducting a CBA: To determine if an investment decision is sound, calculating if its benefits outweigh its costs and by how much. To provide a basis for comparing alternative investment options, comparing the total expected cost of each option with its total expected benefits, thereby creating a basis for selecting the most desirable/viable option. Costs and Benefits Estimating costs Estimating all costs to be incurred in doing a project is the first important part of CBA. It will involve carefully estimating and listing the required quantity, quality and duration of material, labor, equipment and facilities to be used for completing all the activities of project work. Then we can estimate the costs for each of the above categories of resources. There will also be a need to include cost for contingency, inflation, cost of financing (if needed) and cost of any other services (such as training, liaison etc.) which may be required to complete the project activities. Cost estimation can be done with a considerable amount of accuracy level if all the activities of the project can be identified and all resource quantities can be estimated as stated above.  Estimating benefits Estimating all benefits to be garnered is the second important part of CBA. Every project or investment done is expected to deliver benefits in future. Benefits can include financial benefits by means of increase in profit margins and increase in efficiency of doing things. Benefits can also include non-financial benefits such as increased comfort and ease of doing things, improved moral of people, increased satisfaction levels, more peace, social benefits etc. Financial benefits can be estimated with considerable amount of accuracy, while it will be somewhat challenging to estimate and quantify the non-financial benefits. Comparing costs and benefits After careful and diligent estimation of costs and benefits as stated above, we need to compare the costs to be incurred with benefits to be garnered. If the benefits outweigh the costs considerably, such proposals will be taken up for further consideration by the organizations. Organizations may lay down clear guidelines regarding minimum expected difference between benefits to cost for the projects to be selected for implementation. Organizations may also lay down clear guidelines for evaluating the social benefits (mostly non-financial as explained above) for clear decision-making after doing a CBA. How to do a Cost Benefit Analysis  To conduct cost benefit analysis, we need to estimate and enumerate all costs to be incurred and all benefits to be generated. Then one needs to compare the costs with benefits for arriving at suitable decisions and recommendation about whether the project is worthy of taking up or not. There are two broad methods for doing cost benefit analysis: Non-discounted method (does not consider the effects of interest and time period). Discounted method (considers the time period, interest, inflation etc. while calculating the costs and benefits) We can take a simple example below to illustrate some of these methods.  Analyzing using non-discounted method These are very simple methods without considering the effects of interest and time period.The below illustration shows the costs incurred and benefits over a period of six years.  Yr. 0Yr. 1Yr. 2Yr. 3Yr. 4Yr. 5Yr. 6Discount rate at 10% (0.1)Cost100000000000Benefits250002500025000250002500025000Example of CBA using Non-Discounted MethodTotal Cost = 100000; Total Benefits = 150000 Benefit Cost Ration (BCR) = Total Benefits / Total Costs = 150000/100000 = 1.5 (> than 1) Profit = Total Benefits (Revenue) – Total Costs = 150000 – 100000 = 50000 Payback Period = Time taken to recover the total cost (investments) = 4 years ROI = Return on Investment = Profit/Investment = 50000/100000 = 50%  Using the above simple non-discounted methods we can see that this project looks good with benefits being more than the cost, with positive profits and lower payback period.  But these calculations are too simplistic, and do not account for the time-value of money based on interest rates, inflation. Analyzing using discounted method In the above example, the costs are incurred in the present time, while the benefits will be received in future. These values of money are in different timelines and hence their values cannot be compared directly as it is. We need to bring down all the future values of benefits and costs to their corresponding present values and then we can do a comparison of present values of benefits and costs. The below formula can be used to understand the relationship between present value (PV) and future value (FV) of money. PV = FV/(1+r)n(where r stands for rate of discount of money, n stands for time period) In the below example, the cost and benefits value mentioned are in specific period in time. We need to bring all costs as well as all benefits to their corresponding present values (PV) using the above equation and assuming an interest (discount) rate of 10% for ease of calculation.   Yr. 0Yr. 1Yr. 2Yr. 3Yr. 4Yr. 5Yr. 6Discount rate at 10% (0.1)Cost (FV)100000000000Benefits(FV)250002500025000250002500025000Cost (PV100000000000Benefits(PV)0227272066118782170751552714112Example of CBA using Discounted MethodPV of all costs = 100000 (as it is happening in year 0 only) PV of all revenue = 25000/(1.1) + 25000/(1.1)2 + 25000/(1.1)3+ 25000/(1.1)4+ 25000/(1.1)5 +  25000/(1.1)6 = 22727+20661+18782+17075+15527+14112 =108884 Net Present Value (NPV) = Sum of PV of all benefits – Sum of PV of all costs = 108884 – 100000 = 8884 (> 0)  Hence this project investment will lead to a profit after discounting the effect of interest and any other inflationary factors which are taken as 10%) If NPV is > 0, then the project investments will lead to profit. NPV is one of the most practical methods for doing cost benefit analysis by considering the time-value of money.  IRR (Internal Rate of Return) – IRR is the rate of discount at which the sums of PV of all benefits equals sums of PV of all costs. Or in other words IRR is the rate of discount at which NPV equals 0.  Calculating IRR is a more complex affair. In simpler term IRR denotes expected rate of return from the investments. According to a general guideline, higher the IRR from an investment, the better the opportunity.  How to establish a framework As we discussed above, there are various methods for undertaking cost benefit analysis. Different financial parameters such as Benefit Cost Ratio (BCR), ROI, Payback Period, NPV, IRR etc. need to be calculated for arriving at decisions and making necessary recommendations on whether a specific project should be taken up or not. Every organization is unique in their capabilities to invest and take risk. Organizations can define their specific guidelines or framework for project selection taking into account the above financial parameters, the risks involved in doing the project and most importantly specific nature of the investors. A framework for project selection will include all above factors.  Below are some basic guidelines which are used for decision making during cost benefit analysis (CBA) NPV should more than 0. Higher the NPV, the better is the project. BCR should be more than 1. Higher the BCR, the benefits outweigh the cost more. ROI should be high. Higher the ROI, the better is the investment opportunity. IRR should be high. Higher the IRR, the better is the opportunity. Payback period should be lower. Lower the payback period, the better seems the opportunity. Challenges and considerations while doing CBA How accurate is Cost Benefit Analysis? Cost benefit analysis can be reasonably accurate if these are done by technical and financial experts. Experience and availability of real data about costs and benefits of similar projects from past can greatly enhance the accuracy of cost benefit analysis.  Are there limitations to Cost Benefit Analysis? Since cost benefit analysis requires estimating costs and quantifying future benefits accurately, it requires solid maturity in terms of knowledge and availability of past data. In the absence of experience and data availability, CBA may fall short in its accuracy.  The risks and uncertainties in Cost Benefit Analysis While doing cost and benefit analysis, it will be important to understand risks and uncertainties involved in doing the project. It will also be equally important to understand the uncertainties involved in realizing the benefits once the project is done. Cost benefits analysis need to consider the implications of uncertainties to make it realistic. It may require doing statistical simulations and modeling as well.  Cost Benefit Analysis in the real world We saw that CBA became a formal and mandatory practice as early as 1930s in the US government departments, for numerically evaluating if the benefits will outweigh (and by how much) the costs of doing the project.  Organizations have become highly knowledgeable, experienced, and matured. Availability of past data coupled with ability to process the data using modern mathematical and statistical techniques and computerized tools exists in abundance within organizations.  In today’s world the need for doing CBA has become necessary. Businesses and governments are held more and more responsible and accountable to their citizens and investors for justifying their investment decisions. They can do this only by conducting a thorough cost benefit analysis.  
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Cost Benefit Analysis for Projects: A step by step...

Organizations, both for-profit and not-for-profit ... Read More

How to Fill Project Management Application Form

It’s one of the most complicated application forms which I have filled so far.:) If you need to apply for PMP exam online you need to prove that you have 4500 hours of PM experience within last 5 years. So I selected 2 projects, One, the duration was 2 years and the other, the duration was 3 years. Then I calculated the number of hours based on following processes Initiating Process Planning Process Executing Process Controlling Process And Closing Process How I did the calculation is as follows: If I have a Project X which Started on 01/01/2001 and ended on 30/12/2004, Number of month experience of Pming = 4 x 12 = 48 Number of days = 48 x20 (Average 20 working days per month ) = 960 So the PM experience gained from Project X is 960 x 8 (assume that we work 8 hours per working day) = 7680 So with Project X I have already covered the required number of PM hours for the PMP exam I distributed my total hours of PM experience in 5 areas as follows: Initiation 10% Planning 30% Executing 25% Controlling 30% Closing 5% But this might vary based on nature of your project management course. The PMP course exam fee is $405.00 Its bad that members cannot get the discounted rate at the first time itself. Why do we have to send email and inform them to give us the discounted rate, when the system already knows that you are a PMI member?? I don’t understand that.
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How to Fill Project Management Application Form

It’s one of the most complicated application f... Read More