Premium Essay

Cost Modeling

In: Business and Management

Submitted By Carlitag67
Words 993
Pages 4
Determining Project Coast, Budgeting, and Earned Value
Cost Modeling
For
Professor Douglass Smith
By

Integrated Project Process Management (MSPM - 6120 - 2)
Week 2 Application
Spring Session Section B
March 12, 2012

Abstract
Theoretically, cost modeling is a set of assumptions about future project conditions that guide the projects for organizations of cash flows (Sanghera, 2010). Financial models that are utilized in project finance oft-times are troubled with diverse array problems. The reason for failure in projects is mainly due to not clearly defining and segregating various elements of the model; as well as the failure to include crucial information pertaining to the project. It is good practice to have the person who will be responsible for performing a specific activity to estimate the costs associated with the activity (Gido and Clements, 2010). In this paper we were asked to utilize quantitative analysis to perform 5 year and 10 year cash flow calculations utilizing internal rate of return IRR and Net present value to strategically determine which analysis yields the best fit for the project at hand.

Keywords: cost modeling, cash flows, projects, quantitative, analysis, IRR, Internal rate of return, NPV, Net Present Value

Developing a baseline schedule for a project is important; in addition the aforementioned it’s also necessary to develop a baseline budget. Baseline cost components of a project depend on the nature, size and location of the project as well as the management organization, are just a few of the considerations. The project manager PM, customer, and stakeholders are interested in achieving the lowest possible overall project cost that is consistent with its investment objectives (Sanghera, 2010). Determining cost, budget, and earned value should be performed within the initiating stage of a project. Cost related…...

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