ASRB NET and ARS / SMS / STO recruitment Project Management, Appraisal & Agri-Entrepreneurship: practice questions

C. 6.67%

Fisher relation: real = (1 + nominal)/(1 + inflation) − 1 = 1.12/1.05 − 1 = 6.67%. 7.00% is the simple-subtraction approximation; 17.60% multiplies the two factors instead of dividing; 5% is the inflation rate itself. Real cash flows must be discounted at the real rate.

Further reading: Brealey, Myers and Allen, Principles of Corporate Finance

D. A, because its NPV at 10% (about 127) exceeds B's (about 63)

For mutually exclusive projects rank by NPV at the opportunity cost of capital (or by the IRR of the incremental flows). NPV(A) = 1,500 × 0.7513 − 1,000 = 127; NPV(B) = 63. The NPV curves cross at about 13.8% (the Fisher rate); below that A is better. Ranking by IRR is the classic error because IRR ignores scale and timing differences.

Further reading: Gittinger, Economic Analysis of Agricultural Projects (1982)

A. 15.0%

Benefits can fall by the NPV before it reaches zero: 60,000/400,000 = 15.0%. 85% is the remaining share of benefits; 17.6% divides by PV of costs (60,000/340,000), which is the switching value for costs, not benefits. 6.7% inverts the ratio (400,000/60,000 = 6.67).

Further reading: Gittinger, Economic Analysis of Agricultural Projects (1982)

A. 42,500

Expected NPV = Σ p × NPV = 0.25(−20,000) + 0.5(50,000) + 0.25(90,000) = −5,000 + 25,000 + 22,500 = 42,500 currency units. 40,000 currency units is the unweighted mean; 50,000 currency units is the most likely value; 120,000 currency units is the unweighted sum. (Its standard deviation is about 39,607 currency units.)

Further reading: Prasanna Chandra, Projects

B. Beta distribution

The three-point estimate te = (a + 4m + b)/6 derives from the beta distribution, which is bounded and can be skewed. The normal distribution is applied to the total project duration through the central limit theorem, not to each activity.

Further reading: Taha, Operations Research: An Introduction

B. CPM uses single, known activity times; PERT uses three time estimates to handle uncertainty

CPM, developed for plant construction and maintenance with DuPont, assumes deterministic times and adds time-cost trade-offs; PERT, developed for the US Navy's Polaris programme, treats durations as random. Both model precedence.

Further reading: Taha, Operations Research: An Introduction

C. Political

Gittinger's six aspects are technical; institutional-organisational-managerial; social; commercial; financial; and economic. Political considerations matter in practice but are not one of his analytical aspects.

Further reading: Gittinger, Economic Analysis of Agricultural Projects (1982)

C. Narrative summary, objectively verifiable indicators, means of verification, assumptions

Goal, purpose, outputs and activities are the rows (the hierarchy of objectives). The columns describe each level, how its achievement will be measured, where the evidence comes from, and what external conditions must hold.

Further reading: USAID logical framework; Gittinger (1982)

D. Reducing wages to lower production cost

The five are: a new good or quality; a new method of production; a new market; a new source of raw material or half-manufactured goods; and a new organisation of an industry (creating or breaking a monopoly). Cutting wages is not innovation.

Further reading: Schumpeter, The Theory of Economic Development

A. Achievement, planning, power

Achievement covers opportunity-seeking and initiative, persistence, fulfilling commitments, demand for quality and efficiency, and calculated risk-taking; planning covers goal-setting, information-seeking and systematic planning and monitoring; power covers persuasion and networking and independence and self-confidence. Motivation-hygiene is Herzberg's job-satisfaction theory.

Further reading: UNCTAD Empretec programme materials