1. Amys project is to produce 300 widgets and is scheduled to take five weeks. Each unit isplanned to cost $90. The project is severely cost constrained. Performance data for theproject at the end of week three is presented below:190 total units were planned to be produced200 units have actually been producedThe financial manager reported that the business had actually spent $15,000 onthe project by the end of week three.Answer the following questions; show all work:a. Quantify cost variance. Is the project ahead or behind budget?b. Quantify schedule variance. Is the project ahead or behind schedule?c. Quantify cost performance efficiency. Is the project performing better or worsethan planned?d. Quantify schedule performance efficiency. Is the project performing better orworse than planned?e. What is the forecast of project cost at completion assuming current costperformance efficiency remains the same? How much budget variance is expectedat completion?f.What is the forecast of funding needed to complete the project (from this pointforward)?g. What cost performance efficiency would be required for the remainder of theproject to complete the project within the original budget?h. As the project financial manager, what recommendations would you make?2. David Co. produces all-terrain vehicles (ATVs). The once successful line is no longerselling well, so the company is considering production of a new improved 4 passengerATV. This can be done by buying needed production equipment. The after tax cash flowfor buying this equipment is $900,000, at the beginning of Year 0. The alternative toproduce the same output, is to lease that same equipment through four equal payments of$238,000 each year paid at the beginning of the year. The required rate of return (hurdlerate) for this business is 12 percent. Assume no taxes. Revenue from sales of the new 4passenger ATV is expected to be:Year 1 – $425,000Year 2 $300,000Year 3 $170,000Year 4 $90,000Calculate the net present value of both the new purchase option and the lease option. Show allwork. Determine the best option for David and justify your answer.MY Answer:The purchase Option is better because it has the lesser NPV Value.
