QUESTION TWO: (20 MARKS)

1. What are the main benefits of identifying the stakeholders of a project at the planning stage? (4 marks)

2. Kenya Power ltd. are in the process of introducing a new service in line with the Nyumba kumi initiative. The technical services manager has listed the following activities, their predecessors and associated costs:

Activity	Predecessor	(Weeks)	Standard deviation	Cost (Sh.)
		Expected time
A	-	8	1.0	41,600
B	-	3	0.25	15,600
C	A	7	0.69	36,400
D	A	5	1.0	26,000
E	A	3	0.22	16,000
F	C	3	0.11	15,000
G	D	4	0.18	20,800
H	B,D,E	8	0.85	40,800
I	H	3	0.25	14,000
J	F,G	4	0.11	23,800

Required:

1. The project network, critical path and expected project duration (6 marks)
2. If activity B is delayed by 3 weeks, activity E by 7 weeks and activity F by 2 weeks, by how many weeks will the project time be delayed (4 marks)
3. If there are no delays, how many weeks should be targeted to finish the project with a 98%confidence (3 marks)
4. Kenya Power ltd. has an expected revenue of Sh. 4 million projected if the project is completed within 28 weeks but if the deadline is not met, the expected revenue is only Sh. 1,000,000 with a penalty of Sh. 750,000 being imposed. Compute the expected profit. (3 marks)

(Total: 20 marks)

QUESTION THREE: (10 MARKS)

1. Discuss three reasons for ineffective project control. (3 marks)

2. The director of Apocalypto ltd. has asked you to analyze a proposed capital investments with an initial capital outlay of Sh. 10 million. The required rate of return for the project is 15%. He expects the project to yield the following net cash flows after tax over its useful life of 5 years.

Expected Net Cash Flows (Sh000)

Year 1 2 3 4 5

Net cash flows (sh.000) 3,000 4,000 5,000 4,000 2,000

Required:

1. Calculate the projects Accounting Rate of Return (ARR). (2 marks)
2. Calculate the projects Payback Period (PBP). (2 marks)
3. Calculate the projects Net present value (NPV) (3 marks)

(Total 10 marks)