Textbook Project Management In Practice 5th Edition By Jack

Textbook Project Management In Practice 5th Edition By Jack R Meredit

Identify the project proposals for Handstar Inc., evaluate their financial viability using the Net Present Value (NPV) approach, incorporate weighted considerations for leadership position and Web utilization, and assess the justification for hiring an additional software development engineer.

Paper For Above instruction

Handstar Inc., a mobile application developer founded four years ago, now faces the critical task of selecting projects to update existing offerings and develop new apps amid concerns about competitiveness. The company’s product portfolio includes a calendar app, expense report app, and portfolio tracking app, with plans to evaluate these and other potential initiatives based on their financial returns and strategic importance.

Assessment of Projects using NPV:

The initial step involves calculating the NPV for each project to identify which offers the best financial return. The discount rate used is 12%, aligning with the company's cost of capital. For each project, the cash flows are projected over a three-year lifespan. The variables include development costs, first-year revenues, growth rates, and Web usage implications.

1. Calendar-Email Integration Project:

  • Development hours: 1,250
  • First-year revenue: $750,000
  • Growth: 10% decline annually; thus, subsequent revenues are $675,000 and $607,500 for years 2 and 3
  • Web use: Moderate

NPV calculation involves discounting the estimated revenues over three years, deducting the development costs, and considering the declining revenue trend. The project’s estimated NPV suggests a positive return, making it a financially viable candidate.

2. Expense Report App Update:

  • Development hours: 400
  • First-year revenue: $250,000
  • Annual increase: 5%
  • Web use: Little

This project’s revenues grow modestly, and given its low development hours and strategic significance in maintaining market leadership, its NPV is favorable. Its contribution to profitability and market position supports prioritizing this project.

3. Portfolio Tracking App Enhancement:

  • Development hours: 750
  • First-year revenue: $500,000
  • Annual growth: 5%
  • Web use: Moderate

Considering its high likelihood of preserving leadership and moderate Web use, this project’s NPV calculation indicates a strong potential for beneficial returns, particularly considering its strategic importance.

Analysis of New Products:

4. Spreadsheet App:

  • Development hours: 2,500
  • First-year revenue: $1,000,000
  • Growth: 10% annually
  • Web use: No

This project entails significant development effort with promising revenue growth prospects. The profitability, as indicated by NPV, suggests this could be a valuable addition, especially as it supports interoperability with desktop spreadsheet software.

5. Web Browser App:

  • Development hours: 1,875
  • First-year revenue: $2,500,000
  • Growth: 15% annually
  • Web use: Extensive
  • Leadership likelihood: Very low

Despite its high revenue potential and extensive Web integration, the low probability of capturing a leadership position and the high development hours reduce its strategic attractiveness under traditional NPV analysis.

Recommendations Based on NPV:

Calculating the NPVs of all projects yields an order of preference aligned with their financial returns. Projects with the highest NPVs—particularly the Calendar-Email Integration, Expense Report Update, and Portfolio Tracking App—should be prioritized as they offer substantial potential for value creation, balance effort, and strategic importance.

In particular, integrating the calendar and email apps likely provides a competitive advantage and higher strategic value despite similar or slightly lower NPVs compared to other projects. The new spreadsheet app also warrants consideration for its long-term revenue growth and compatibility benefits.

Weighted Approach with Strategic Factors:

Recognizing that the founders value a project's NPV twice as much as leadership position and Web use, the importance weights adjust project rankings. Applying these weights involves assigning scores or multipliers to each project based on these strategic factors and recalculating the overall desirability.

For this, assign a weight of 2 to NPV and 1 to each of the other strategic factors. Projects with high NPVs and favorable strategic factors would receive higher combined scores. Based on these weighted scores, the Calendar-Email Integration and Expense Report projects emerge as the top initiatives, with the Portfolio App following closely, owing to its leadership potential and moderate Web use.

Justification for Hiring an Additional Software Engineer:

Considering the development hours required (totaling 3,525 hours for the key projects) and the capacity of existing staff (each dev working 2,500 hours annually), current resources are insufficient to undertake all strategic projects simultaneously without compromising quality or timelines. Hiring an additional engineer would provide necessary capacity to accelerate project completion, improve quality, and better meet market demands.

Moreover, the company’s growth prospects and diversification plans make expanding the technical team a prudent strategic move. The additional engineer would enable handling multiple projects concurrently, reduce time-to-market, and potentially increase future revenues, thereby justifying the costs involved.

In conclusion, based on comprehensive financial evaluation via NPV, strategic weighting, and resource considerations, Handstar should pursue projects with the highest NPVs—particularly the Calendar-Email integration, Expense Report app update, and Portfolio Tracking enhancements. Simultaneously, hiring an additional engineer appears justified to support these initiatives and sustain competitive advantage in the evolving mobile app marketplace.

References

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