Management and the Technology Professional – B302

Case study answer 3

If I were the Yahoo software engineer in the case study source, I would start the client project for the reasons below:

1.conduct analysis using decision tree technique:

· If deciding to start the Project, the probability of Success is high. It is considered a Success if the Project is completed and makes a Net Profit. In this case it does not matter if Microsoft acquires Yahoo or not; the profit would be £45,000 (acquired) versus £65,000 (Yahoo remaining independent)

· If the Project were started but failed to continue to completion (a Failure, in this example, a 5% probability) the loss considered by Decision Tree technique would be (5% x -£25,000) = £1,250. Considering the amounts of the other possibilities considered, this amount lacks significance.

· If deciding not to start the Project, if Microsoft did then purchase Yahoo, the Project would not have gained nor lost financially, If the Project were not started and Microsoft failed to purchase Yahoo, the Project would have ‘lost’ (in the sense of Not Gained) £90,000 (£65,000 profit). However, no matter which case is going to happen, the expected value for this summation node will always be negative.

2 Consider this case in financial risk using net present value techniques: Microsoft acquires Yahoo and the project successfully completed, and assume that the APR is 12%, so the NPV is £36058 which is a positive number. So the project is worth doing.

3.In reality however, the decisions would not be so clear-cut. If this Project were not started, the fact is that staff would be assigned to another Project. This of-course raises the interesting possibilities of whether this other Project would be more or less profitable than the original Project. But it is not in this context.