CAPITAL INVESTMENT, INC.

    Capital Investment, Inc. (CI) is a small investment banking firm specializing in securing funds for small- to medium-sized technology firms. CI uses a standardized project format for each client engagement. The only items that need to be changed in the standard network of activities are the duration of activities (activity times) and to occasionally add any unusual circumstances for the client engagement. MaryBeth Simms is assigned to the XYZ Company as a project manager partner. She has compiled the following information and activity time for XYZ Company. Activity Description Immediate Predecessor(s) Time in Workdays Optimistic Likely Pessimistic A Begin draft contract using template -- 4 7 10 B Research client firm -- 2 4 8 C Create “due diligence” rough draft A, B 2 5 8 D Coordinate proposal with client needs C 16 19 28 E Estimate future demand and cash flows C 6 9 24 F Draft plans for client company future growth E 1 7 13 G Create and approve legal documents C 4 10 28 H Combine all drafts into “first-draft” client proposal D, F, G 2 5 14 I Secure potential sources of capital G, F 5 8 17 J Check and approve final legal proposal H 2 5 8 K Sign contract and transfer funds to client I, J 17 29 45 Discussion and Report to Management Simms and the other partners at CI have a policy of reviewing the plans with a project review committee. The committee checks that all details are covered, times are realistic, and resources are available. Simms asks you to generate a report that includes a planned schedule and expected project completion time in days. You will need to include a project network diagram in your report. Note that the average duration to source a capital project with 70 workdays. CI partners have agreed to a best practice of setting up projects with a 90% chance of hitting the plan. 1. How does the project for XYZ align with an average project? 2. What average would be necessary to ensure a 95% chance of completing the project in 70 days? Create a managerial report using the following format submit your report using the link in Blackboard for Chapter 3. • Title Page • Executive Summary (1-3 paragraphs summarizing conclusions and recommendations) • Introduction (include any assumptions) • Presentation (describe the process used to solve the problem) • Outcomes (include additional information like tables, graphs, charts, etc.) • Conclusions and Recommendations (address all the questions) Enrichment Case Study #1 – Project Crashing Simms wants to be proactive and ready to address any questions concerning compressing the project schedule. Often, the accounting department, the review committee, and the client ask such questions. She has assembled the additional data below in case it is necessary to crash the project. Note that the total normal costs are $103,000 for the XYZ project. Activity Normal Cost ($) Crash Cost ($ per Day) Maximum Crash Time A 3,000 500 3 B 5,000 1,000 2 C 6,000 -- 0 D 20,000 3,000 3 E 10,000 1,000 2 F 7,000 1,000 1 G 20,000 3,000 2 H 8,000 2,000 1 I 5,000 2,000 1 J 7,000 1,000 1 K 12,000 1,000 6 Discussion Using the weighted average times from the initial project analysis and the data provided, determine the activity crashing decisions and best-time cost project duration. Given this information, what suggestions would you make to Simms to ensure she is well prepared for the project review committee? Assume that the overhead costs for the project are $700 per day. Do these indirect costs cause you to change your recommendations or suggestions? Check the due date for the enrichment case study. Submit through the link in Blackboard for Chapter 3.