Project Management Test 1.2

Front 1

Which of the following is true for project selection models?

Back 1

The qualities of a project can be represented by numbers.

Front 2

The two basic types of project selection models are __________.

Back 2

numeric and nonnumeric

Front 3

If a system is being updated due to operating necessity, the project was selected because __________.

Back 3

the system is worth saving at the estimated cost of the project

Front 4

The payback period model fails to consider __________.

Back 4

any cashflows beyond those required to recover the initial project investment

Front 5

If the NPV for a project is > 0, it indicates that the project will __________.

Back 5

cover its hurdle rate

Front 6

Identify the numeric model that usually does NOT account for all cashflows.

Back 6

payback period

Front 7

Using this nonnumeric model, a project to develop and distribute new projects would be judged on the degree to which it fits the firm’s existing product line, fills a gap, strengthens a weak link, or extends an existing line.

Back 7

product line extension

Front 8

Using the __________, the relative importance of individual selection criteria are given weights.

Back 8

weighted factor scoring model

Front 9

A project selection model which attempts to determine the cost, timing, and performance specifications of a new technology to understand whether it qualifies as useful and economic is referred to as __________.

Back 9

window of opportunity analysis

Front 10

When considering a project, the set of documents submitted for evaluation is called the __________.

Back 10

project proposal

Front 11

Which of the following is the least important point in an RFP for a non-technical project?

Back 11

implementation plan

Front 12

The process of modeling a problem seeks to carve away the __________ from the bones of a problem.

Back 12

unwanted reality

Front 13

A numeric model for project selection that chooses investments that may not be profitable or beneficial in the near future, but will lead to options for the future with a great promise is referred to as __________.

Back 13

real options

Front 14

According to Wheelwright et al, __________ projects have objectives or deliverables that are only incrementally different in both product and process from existing offerings.

Back 14

derivative

Front 15

All models, no matter how complex, are only partial representations of the reality they hope to reflect.

Back 15

True

Front 16

For a project selected using nonnumeric models, operating necessity projects have priority over competitive necessity projects.

Back 16

True

Front 17

In order to compute the internal rate of return for a project, the value for NPV must be greater than inflation in order to have a return on investment.

Back 17

False

Front 18

Scoring models are used to overcome the inability of profitability models to take into account multiple decision criteria.

Back 18

True

Front 19

Projects should always be selected primarily based on cost considerations.

Back 19

False

Front 20

Uncertainty plagues all aspects of the work on projects and is present in all stages of project life cycles.

Back 20

True

Front 21

All of the following are common problems in organizations trying to manage multiple projects except ________.

Back 21

It is impossible for organizations to manage a common resource pool effectively

Front 22

Important criteria for selecting a model would include all of the following except

Back 22

Rigidity

Front 23

The two basic types of project selection models identified in the text are ________.

Back 23

Numeric and nonnumeric

Front 24

A project selected using the sacred cow model will be maintained until successfully completed or until

Back 24

The boss recognizes the project as a failure and terminates it

Front 25

If a system is being updated due to operating necessity, the project was selected because

Back 25

The system is worth saving at the estimated cost of the project

Front 26

For a project selected using nonnumeric models, identify the true statement regarding relative priorities for project selection.

Back 26

Operating necessity projects have priority over competitive necessity projects

Front 27

The drawback of the ________ model is that it fails to consider cash flows obtained once the initial investment has been recovered.

Back 27

Payback period

Front 28

The average rate of return can use any of the following values for average annual profit except ________.

Back 28

Net cash flow from operations

Front 29

If the NPV for a project is < 0, it indicates that the project will ________.

Back 29

Fail to cover its hurdle rate

Front 30

In order to compute the internal rate of return for project, the value for NPV must be ________.

Back 30

Equal to zero in order to solve for the interest rate value

Front 31

Identify the example of a non-cash expense that would be added to accounting income to determine cash flow from operations.

Back 31

Depreciation

Front 32

Identify the numeric model that does not account for the time value of money.

Back 32

Payback period

Front 33

Scoring models are used to overcome this disadvantage of profitability models

Back 33

Inability to account for multiple decision criteria

Front 34

. All of the following are advantages that favor use of weighted scoring models except ________.

Back 34

Decision makers are compelled to stick with the decision once it has been made

Front 35

. The distinction between subjective and objective refers to ________.

Back 35

The difference between an internal reference and an external standard

Front 36

The mastery of skills required to manage projects competently is referred to in the literature as ________.

Back 36

project management maturity

Front 37

________ is the process of evaluating individual projects or groups of projects, and then choosing to implement some set of them so that the objectives of the parent organization will be achieved.

Back 37

Project selection

Front 38

The process of carving away the unwanted reality of a problem is called ________.

Back 38

modeling the problem

Front 39

A measurement that is taken by reference to an external standard is said to be an ________ measurement.

Back 39

objective

Front 40

The ________ is applied to discriminate between a quantitative measure and a qualitative measure.

Back 40

: rule of addition

Front 41

A data source is said to be ________ if repetitions of a measurement produce results that vary from one another by less than a pre-specified amount.

Back 41

reliable

Front 42

________ is the extent to which a piece of information actually means what we believe it to mean.

Back 42

Validity

Front 43

Measurements used in project selection models must be ________, reliable, and valid.

Back 43

numeric

Front 44

In a project portfolio process, the main purpose of the ________ is to establish and articulate a strategic direction for those projects spanning the internal or external boundaries of the organization

Back 44

project council

Front 45

In a project portfolio, ________ projects have objectives or deliverables that are only incrementally different in both product and process from existing offerings.

Back 45

derivative

Front 46

In a project portfolio, a disruptive technology that is known to the industry would serve as an example of a ________ project.

Back 46

breakthrough

Front 47

The ________ solicitation document requests information about price and methodology.

Back 47

Request for Proposal (RFP)

Front 48

The sophistication and experience of an organization in managing multiple projects is called ________.

Back 48

project management maturity, or maturity

Front 49

Project Typhoon has a net present value of $10,000 and a profitability index of 1.01. Project Cyclone has a net present value of $10,000 and a profitability index of 1.10. If only one project could be done, the organization should select project ________.

Back 49

Cyclone

Front 50

A probability distribution is an example of a ________ model.

Back 50

stochastic

Front 51

If the NPV for Project Hurricane is ($10,000), the cashflow from this project was insufficient to cover the required ________.

Back 51

hurdle rate

Front 52

If the initial project investment is $100,000 and the average net cash flow is $40,000 per year into the foreseeable future, the payback period is ________.

Back 52

2.5 years

Front 53

If the average rate of return equals 15 percent and the average investment in the project was $200,000, compute the average annual profit is ________.

Back 53

$30,000

Front 54

A ________ scenario is one with no possibility of an alternate outcome.

Back 54

deterministic

Front 55

Financial forecasts are reported as ________ financial statements.

Back 55

pro forma

Front 56

Explain why it is necessary for the project manager to understand the reasons leading to the selection of a project.

Back 56

If the project manager does not understand what a given project is expected to contribute to the parent organization, the project manager lacks critical information needed to manage the project successfully. It is important for the project manager to make sound business decisions regarding the work that will be done as part of the authorized project scope. The criteria used to select a project should provide the project manager with important insights about what the organization is trying to accomplish. The project manager should use these insights to align the project's work with the organization’s objectives.

Front 57

Project Boulder has a payback period of 2.4 years, NPV of $10,000, and a profitability index of 1.10. Project Flintstone has a payback period of 3.0 years, NPV of $10,000 and a profitability index of 1.05. If only one project can be executed, which project should be selected? Explain your reasoning.

Back 57

Based on the available data, project Boulder appears to be more favorable. In addition to recovering the initial investment more quickly, the same net present value is generated using fewer resources.

Front 58

Explain the difference between risk and uncertainty.

Back 58

Uncertainty means that it is possible to have alternate outcomes. Risk is uncertainty that affects the project for better or for worse. If the risk is favorable, it presents the project team with an opportunity to capture. If the risk is unfavorable, it represents a threat that may require a response from the project team.

Front 59

Project Nebulous has an estimated average rate of return at 12 percent. Nevertheless, the required hurdle rate for corporate projects is 15 percent. What actions should the project manager consider the feasibility of in order to increase the profitability of this project?

Back 59

Since the project is profitable in terms of accounting income, the project manager should look at the timing of net cash flows generated by the project. It may be possible for the project manager to accelerate the revenue stream. Doing so would improve other profitability measures such as the payback period and the internal rate of return. The project manager should also evaluate options for delaying cash outflows. For example, a housing development might be completed in stages to reduce the upfront investment.

Front 60

Suppose that you have been assigned as the project manager to execute a project that was selected using the sacred cow method of project selection. The project sponsor is an executive who has been with the company for three years. Based on past employment history, the average tenure of a senior executive at your company is 5 years. After reviewing the project’s expectations and requirements, the project team has determined that the payback period will be 3.5 years. What are the implications for you and the project team?

Back 60

Many projects are terminated before they can be successfully completed. One potential source of uncertainty in a project that was selected using the sacred cow method would be the continuity of executive leadership. Therefore, it would be important for the project manager to understand the project-related factors that would support the overall corporate strategy for business success. Otherwise, should the sponsoring executive depart the company prior to completion of the project, the project will lack a sponsor. Given the selection method used, the scope of the project is likely to be unstable.