PM0012-Project Finance and Budgeting

Winter-2015
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Master of Business Administration - MBA Semester 3
PM0012-Project Finance and Budgeting
(Book ID: B1938)
Assignment (60 Marks)
Note: Answers for 10 marks questions should be approximately of 400 words. Each question is
followed by evaluation scheme. Each Question carries 10 marks 6 X 10=60.
Q1. Write short notes on:
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Key project resources
Three main requirements of funding a project through project finance
Medium term financing for projects
Bottom up estimation for creating project budget.
Answer. Key Projects resources:
Manpower: It refers to a set of individuals (employees) having specified skills, knowledge, and
expertise to carry out different project activities. Manpower is one of the most precious assets of
any organisation without which not a single project can be carried out.
Q2. What is off take contract? Explain the various types of off take contracts.
Answer. 'Off take Agreement'
An agreement between a producer of a resource and a buyer of a resource to purchase/sell
portions of the producer's future production. An off take agreement is normally negotiated prior
to the construction of a facility such as a mine in order to secure a market for the future output of
the facility. If lenders can see the company will have a purchaser of its production, it makes it
easier to obtain financing to construct a facility.
Q3. Explain the different key project documents.
Answer. Project management can create a lot of paperwork, and it’s not always the stuff you
want or need. Let’s talk about the essentials. Here are nine documents that no self-respecting
project should be without.
1. The business case
This is the document that kicks off the whole project. It’s written to explain why the project
should happen and it summarizes the problem that the project is going to solve. It should be
comprehensive and persuasive with enough detail to justify the investment required for the
project.
Q4. Write short notes on:
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Project parties in a construction project
Types of working capital
Project cash flows
Payback period method used to evaluate an investment on a project
Answer. Project parties in a construction project
Project parties refer to individuals or entities that are directly or indirectly involved in a project.
Turner (1931), author of “The handbook of Project- Based Management”, identified and
underlined certain characteristics of people or organisations that can act as project parties. These
Q5. What are the problems associated with BOOT projects.
Answer. Build, Own, Operate, Transfer (BOOT)
A BOOT funding model involves a single organisation, or consortium (BOOT provider) designing,
building, funding, owning and operating the scheme for a defined period of time and then
transferring this ownership across to an agreed party.
Customers enter into long term supply contracts with the BOOT operator and are charged
accordingly for the service delivered. The service charge includes capital and operating cost
recovery and project profit.
Q6. Explain the different types of management contracts (a type of PPP).
Answer. PPPs broadly refer to long term, contractual partnerships between the public and private
sector agencies, specially targeted towards financing, designing, implementing, and operating
infrastructure facilities and services that were traditionally provided by the Government and/or its
agencies. These collaborative ventures are built around the expertise and capacity of the project
partners and are based on a contractual agreement, which ensures appropriate and mutually
agreed allocation of resources, risks, and returns. This approach of developing and operating
public utilities and infrastructure by the private sector under terms and conditions agreeable to
both the government and the private sector is called PPP.
Types of PPP:
Winter-2015
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