A Project That Consists of Six Consecutive Tasks That Have

question 46

Essay

A project that consists of six consecutive tasks that have average duration and worst-case duration estimates (in days)as shown in the table.Use Newbold's method to determine the aggregated two sigma buffer for this project.How does the project buffer computed this way compare with the estimation for project buffer offered by Goldratt?
$$\begin{array} { | l | l | l |} \hline\text { Activity } & \text { Average } & \text { Worst-Case } \\\hline \text { A } & 14 & 21 \\\hline B & 20 & 28 \\\hline\mathrm {C } & 16 & 23 \\\hline \mathrm { D } & 8 & 15 \\ \hline E & 9 & 19 \\\hline \end{array}$$

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Definitions:

Net Present Value

A method of evaluating the profitability of an investment, which calculates the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Financial Calculator

A specialized calculator designed specifically to perform financial functions, including interest rate calculations, investments, and amortizations.

Net Present Value

Net present value is the difference between the present value of cash inflows and outflows over a period, used to assess the profitability of an investment.

Discount Rate

The interest rate charged to commercial banks and other financial institutions for the loans they take from the Federal Reserve's discount window.