TM 582 University of Idaho Management Questions

Problem 1 (65points)

The problem uses the spreadsheet titled )versified Healthcare Data&ound in Articles and Other Tools
folder, within Modules on Canvas. Diversified Healthcare is a healthcare company that is comprised of 4
business units: Consumer Goods (CG), Diagnostics (DIA), Medical Devices (MD), and Prescription Drugs
(Rx). Each business unit has 5 projects, so the company has a total of 20 projects at different stages of
development across its portfolio. The challenge for management is to decide on which projects to
continue investing in since it is constrained by the size of its budget, as well as the current number of
engineering resources on board. We will look at the prioritization problem in different ways to illustrate
how these different approaches can yield different results. There is a goal to have at least one project
from each business unit.

a) Calculate the Aggregate Score for each project assuming you are ranking on Strategic Value, Top
Line Sales, NPV, and Risk Be sure to apply the weighting factor given in the spreadsheet.
Because there is such a range of values among the criteria, it is helpful to normalize all the data,
so I did that for you in the spreadsheet provided. Rank the projects based on their Aggregate
Score using the normalized data. If management wanted to cap R&D resources at 450 and the
budget at $625 million, what are aggregate sales for that scenario? (10 points)
b) Create an efficient frontier curve, like Figure 12-1 in our text. You will need to calculate the
Benefit-to-cost (BCR) ratio for each project (NPV/total R&D cost). Can you identify any low
value projects from your curve? Look where you curve begins to flatten out and draw your
investment cut line. What are aggregate sales for this scenario and how many R&D resources
and a 2023 R&D budget are required? (15 points)
c) Use Excel Solver (or you can do it manually) to identify the optimal portfolio if only 450
Resources will be available in 2023 with a budget that does not exceed $625 million. Assume you are
maximizing the total NPV. Are all business units represented? What if instead you maximize 2023
sales, does it change, and which projects get funded? (30 points)
d) Compare the results from the 3 approaches. What comments can you make? (10 points)

Problem 2 (65 points)
Read the case study, !naka Corporation: Healthcare Solutions Portfolio Management available
through the HBR Course Pack. You will also use a spreadsheet called !naka Spreadsheet4hat is in
the Articles and Other Tools folder, within Modules on Canvas. This case study poses a typical issue
where new projects are needed to deliver on revenue goals, but no additional funding is available. This
meaning R&D funding needs to be freed up to invest in new projects. You can see how the concept of
categorization is used in this case to analyze the portfolio and you will want to consider the categories as
You work to free up project funding.

Specific questions for this case:

a)Create a simple weighted decision matrix for the current portfolio which uses 3 criteria and

associated weighting: Project NPV (33%), Business Criteria Ranking (33%), and Predicted 2012
Revenue (34%). Rank order the results. What if the weights were changed to: Project NPV
(30%), business criteria ranking (25%), and predicted 2012 revenue (45%)? Comment on your
results. (10 points)
b) Assuming you need to free up $300M in 2007 Project Funding, while delivering at least $5B in
From existing projects in 2012 revenue, which projects would you elect not to fund? You will
need to use the information on page 8 of the case. For example, a Share Growth project that is
Unfunded projects will still see revenue, though it will decline by 10% year over year. You can do this
manually or use the Excel Solver to help identify the optimal portfolio. I used a combination of Excel
Solver and some manual effort to identify a portfolio. For example, in my Excel Solver
In my spreadsheet, I excluded any revenue for projects that weren funded. So, although I was able
to save $300M in project funding I didn quite make $5 billion in revenue. I went back and
determined the loss in revenue for the projects not funded and added that revenue into my
Solver results and was able to get close to the required revenue. (40 points)
c) Exhibit 7 in the case shows a graphical way of representing the project portfolio based on
revenue growth. For projects in the portfolio, determine revenue growth from 2006 to 2012
(assuming all projects are funded). Create a visual like Exhibit 7 showing the projects in each
category with their growth rates. Then, take your project portfolio from part b) and create
Another visual shows the view after freeing up $300 million. Remember, projects that aren
Funded organizations still contribute revenue at a reduced rate, per the information on page 8. (15 points)

Problem 3 (20 points)
Get the task network titled Midterm Task Network available in the Articles and Other Tools folder, within
Modules on Canvas The boxes on the network represent tasks where the top item in each box is the task
name (i.e. A-1), the middle item is the resource (i.e. Magenta), and the bottom item is the task duration in
days. The task durations have already been cut by 50%.

a) Lay out the critical chain schedule for this project. You will first need to lay out the project
network. You may use Microsoft Project, Excel, PowerPoint, or any other tool that allows you to
draw the network. A hand drawn view of the project network for each step is okay if you don
have a tool you can easily use. Start the project on March 7, 2022. What is the project end date
before leveling, any resource conflicts? What is the project end date after leveling resources? (10  
points)
b) Identify the critical chain. (5 points)
c) Lastly, size and insert the project and feeding buffers. Be sure to identify the approach you used
for sizing the buffers. What is the project end date after inserting the appropriate buffers? (5
points)