Business Environment Tasks 2 Flashcards
You are looking at different execution practices that can help the team deliver value in your agile project. You are considering writing the automated test before any of the project work begins this should help the team make a mistake-proof product. What is this execution practice called?
A. Write then Work Testing (WWT)
B. Kickoff and then Spike (KATS)
C. Continues Integration (CI)
D. Test-Driven Development (TDD)
Answer: D
Business Environment - Task 2 - Evaluate/ Deliver Benefits
This question clues you into the right section by the keywords “execution practices” this is discussed in the Agile Practice Guide on p 56
To develop the project charter for your new project, you will leverage business documents, including a business case and the benefits management plan. Which statement most accurately defines how these documents differ?
A. The Benefits Management Plan is based on the Business Case, and looks at how to capture and maintain project benefits.
B. The Benefits Management Plan is created by the project manager whereas the Business Case is developed by the sponsor.
C. The Benefits Management Plan will include benefit measurements such as NPV, IRR or ROI.
D. The Benefits Management Plan is a component of the Business Case.
Answer: A
Business Environment - Task 2 - Evaluate/ Deliver Benefits
The Benefits Management Plan uses information from the Business Case. What is the reason for pursuing this project - and how are we going to measure and maintain the project benefits going forward? The Benefits Management Plan is not created by the project manager. In some cases, the Business Case and Benefits Management Plan are maintained at the program level. Choice C is not correct as the Business Case will include the NPV, IRR or whatever method is being used to justify the project. Choice D is not correct because these are two different documents are considered separate documents.
Your project has had multiple changes made to the project charter. Who has the primary responsibility to decide if these changes are necessary?
A. CCB
B. Project Team
C. Project Sponsor
D. Project Manager
Answer: C
Business Environment - Task 2 - Evaluate/ Deliver Benefits
Changes to the project charter (if needed) would involve a fundamental change to the purpose/mission of the project, and the sponsor should be the one to approve such changes. Changes to the project charter should occur rarely, if ever.
You are a project manager for a software company. As part of your project you need to replace old servers with new ones, but you can’t do it on Thursdays. This is an example of what?
A. Restriction
B. Constraint
C. Assumption
D. Requirement
Answer: B
Business Environment - Task 2 - Evaluate/ Deliver Benefits
Constraints are anything that limits the options of the project team in meeting the objectives of the project.
You are a project manager for a wedding-planning company. Since every wedding is unique, your organization believes in managing each wedding as a project. You’ve come up with a great idea for a new event that you’re certain customers will love and which will also generate profit for the company. Your boss asked you to investigate the best alternative methods for implementing the new idea and come back with a suggested solution. You discover that Alternative A could yield revenues of $100,000 in two years, while Alternative B could yield revenues of $107,000 in three years. The finance manager told you to use eight percent as the cost of capital. Which project should you choose and why?
A. Alternative A, because the discounted cash flows are $85,734, while the discounted cash flows for Alternative B are $84,940.
B. Alternative A, because the discounted cash flows are $85,940, while the discounted cash flows for Alternative B are $83,352.
C. Alternative B, because the discounted cash flows are $85,700, while the discounted cash flows for Alternative A are $83,352.
D. Alternative A, because the discounted cash flows are $96,457, while the discounted cash flows for Alternative B are $84,677.
Answer: A
Business Environment - Task 2 - Evaluate/ Deliver Benefits
This question requires discounted cash flow analysis to compare the value of Alternative A to Alternative B. The present value formula for Alternative A is calculated as follows: $100,000 / (1 + .08)^2 = $85,734. Alternative B is calculated this way: $107,000 / (1 + .08)^3 = $84,940. The present value formula is being used, as opposed to NPV, because the question didn’t state revenue was being received each year. Instead it states the revenue in two and three years, so assuming at the end of year 2 for Alternate A and year 3 for Alternate B.
Due to flux in the economy overseas, your executives are particularly concerned about market conditions that might influence inflation and other implications that affect the time value of money. As such, you have been asked to assess the time value of money for your new project. What is the present value if the organization expects to make $100,000 four years from now and the annual interest rate is 6 percent?
A. $100,000
B. $79,209
C. $70,000
D. $94,000
Answer: B
Business Environment - Task 2 - Evaluate/ Deliver Benefits
The present value of $100,000 four years from now can be calculated as follows: PV = FV / (1+r)^n ; PV = $100,000 / 1.06^4 ; PV = $100,000 / (1.06 x 1.06 x 1.06 x 1.06) ; PV = $100,000 / 1.26247 ; PV = $79,209 ; PV is the present value, FV is the future value, r is the interest rate, and n is the number of time periods.
A company is considering an investment of $110,000. There is a 50% probability that the investment will perform well, and a 50% probability it will perform poorly. If it performs well, the payoff will be $150,000 one year from now. If it performs poorly, the payoff will be $70,000 one year from now. Assuming a 10% discount rate, should the company make this investment?
A. Yes, since 150,000 > 110,000
B. Yes, since (150,000 + 70,000) > 110,000
C. No, since there is no probability of a loss
D. No, since NPV is negative
Answer: D
Business Environment - Task 2 - Evaluate/ Deliver Benefits
First we need to compute the PV for both poor and good performance: PV = FV / (1 + i) ^n (where i is the discount rate and n is the number of years); PV for poor performance = 70,000 / 1.10 = 63,636; PV for good performance = 150,000 / 1.10 = 136,363; Next we take the net impact and multiply by the probability: Poor performance: NPV = (63,636 - 110,000) * 50% = $-23,182; Good performance: NPV = (136,363 - 110,000) * 50% = $13,181; Then we net the two numbers: $13,181 + (23,182) = ($10,001); Since the combined NPV is negative, we should not do this project.
Which of the following best describes the key benefit for the collect requirements process?
A. The key benefit of this process is it provides the basis for defining the product scope and project scope
B. The key benefit of the process is it provides the basis for creating the project Management Plan
C. The key benefit of this process is it provides the basis how schedule and cost will be determined
D. The key benefit of this process is it provides the basis of the performance measurement baseline which is established and managed using EVM
Answer: A
Business Environment - Task 2 - Evaluate/ Deliver Benefits
The key benefit of this process is it provides the basis for defining the product scope and project scope. This is verbatim from the PMBOK Guide on pg. 138.
The project steering committee is considering which project they should invest capital in. Bob’s project promises to be worth $175,000 in four years. The project steering committee is interested in Bob’s project, but they would like to know the present value of the return if the interest rate is 6 percent. What is the present value of Bob’s project?
A. $175,000
B. $139,000
C. $220,000
D. $43,750
Answer: B
Business Environment - Task 2 - Evaluate/ Deliver Benefits
The formula for Present Value (PV) is FV / (1 + i) ^n, where FV is the future value, i is the interest rate, and n is the number of periods. PV = 175,000 / (1.06 * 1.06 * 1.06 * 1.06), PV = $139,000.
You have been hired as a senior project manager for a defense contractor. You are on a tight schedule and must start the project immediately. Which of the following will you most likely not be involved with as part of your work?
A. Identifying stakeholders since you are new to the organization
B. Selecting the projects to be initiated
C. Balancing demands for time, cost, scope, and quality
D. Helping to establish clear and achievable project objectives
Answer: B
Business Environment - Task 2 - Evaluate/ Deliver Benefits
Project managers typically do not select which projects are to be initiated. The project selection committee, customers, or project sponsors are typically responsible for this. A, C, and D are all incorrect choices because the project manager is responsible for these activities.
You know your organization must choose projects that will be the most profitable for the company. This approach to project selection is based on which one of the following?
A. Dynamic algorithms
B. Opportunity cost
C. Economic model
D. Pareto diagraming
Answer: C
Business Environment - Task 2 - Evaluate/ Deliver Benefits
This is a simple economic model of choosing the most profitable project for the organization. Dynamic algorithms are an example of constrained optimization methods. While this question hints at opportunity cost, this is not the best choice. Opportunity costs describe the scenario when an organization has two or more projects to choose from and they can only do one project because of time or limited resources. Pareto diagraming is not a valid option for this question, as it pertains to quality matters.
Which of the following is used to define the project and its relation to the organization’s strategic goals?
A. Project Charter
B. Organizational Process Assets
C. Project Scope Statement
D. Scope Plan
Answer: A
Business Environment - Task 2 - Evaluate/ Deliver Benefits
The Charter authorizes the project’s existence and integrates the project itself with the organizational strategies and objectives.
You are assigned a new project. You learn that the technology department wants the project objective to be a 10% improvement in throughput. The operations department wants not more than 5% of its resources used on the project, and senior management wants the project to reduce tax liability. As a project manager, the best thing you can do is:
A. Incorporate all objectives into the project charter
B. Include only the senior management objective in the project charter
C. Include operations and technology objectives but not the management objectives until you have further details
D. Do not include any objectives until this has been agreed upon by the different departments
Answer: C
Business Environment - Task 2 - Evaluate/ Deliver Benefits
You are in the process of pulling together the project objective for the project charter. The technology department has a measurable objective (10% improvement in throughput). The operations department has a measurable objective (not using more than 5% of its resources). However, senior management is asking for a reduction in tax liability. This needs to be defined more clearly, with a measurable metric. Without clear and measurable project objectives, the success of the project cannot be measured. The percentages should be included in the benefits management plan to ensure the project benefits are measured and achieved.
Your company has a large client that has required a special component be created for one of their test engines. Your organization agrees, creates a standard contract with the customer, and your manager assigns you to manage this project. The project was launched because of which of the following?
A. A customer request
B. A change in the technology your customer is creating
C. A legal requirement (contractual)
D. Market demand for the new component
Answer: A
Business Environment - Task 2 - Evaluate/ Deliver Benefits
This project was launched because the customer requested the new component. B is incorrect because the project is not a response to a change in technology, but a customer request. C, a legal requirement, is not correct because this actually refers to a law or mandated regulation that has been created. D, an organizational need, typically refers to a project designed to enhance the performance of the organization.
Who is usually responsible for portfolio management within an organization?
A. Project managers
B. Project sponsors
C. Stakeholders
D. Senior management
Answer: D
Business Environment - Task 2 - Evaluate/ Deliver Benefits
Portfolio Management focuses on achieving an organization’s strategic business objectives. Thus, senior management is usually responsible for portfolio management.
Linda is a new project manager and took over a struggling project from a recently terminated project manager. The Project has a 0.67 CPI and an SPI of 0.55. It has become evident to Linda the expected benefit of this project is not going to be obtained. In this situation what is the best course of action for Linda to take?
A. Crash the schedule
B. Initiate project closing
C. Set up a meeting with stakeholders to discuss corrective actions
D. Crash and fast track the project to get it back on track
Answer: B
Business Environment - Task 2 - Evaluate/ Deliver Benefits
Once a project is not going to deliver the benefit it was designed to do it should be terminated, which makes answer B the best choice. Using the corrective actions of answers A and D are not suitable in this scenario because it has been determined the benefit of the project is unattainable. Answer C is incorrect because corrective actions are not applicable in this situation.
Project selection is critical for an organization. Projects need to be aligned with the strategic direction of the company and provide the most value possible. As a project manager, you need to understand how and why projects are selected. Which of the following is not a project selection tool?
A. Peer Review
B. Earned Value
C. Scoring Model
D. Economic Models
Answer: B
Business Environment - Task 2 - Evaluate/ Deliver Benefits
Choice B is the correct answer. Earned Value is a project progress measurement tool, while all of the other choices, which include Benefit Measurement Methods, Scoring Models, and Economic Models, are generally used for project selection.
An important aspect of success criteria is that they should be quantifiable. Which of the following is an example of quantifiable success criteria?
A. The product has high quality
B. A ten percent reduction in production costs
C. The customer is happy with the results
D. An increase in stakeholder satisfaction
Answer: B
Business Environment - Task 2 - Evaluate/ Deliver Benefits
Quantifiable means measurable, and thus is typically numeric. The only answer choice that can be accurately measured is choice B, because it has a number in it. All of the other answer choices are subjective.
You are the project manager for an up and coming organization. This project is the first of its kind for the organization and the market. Your sponsor is excited and so are the shareholders who have invested in the company. During a planned review of processes, you hope to identify activities that bring no value to the project. The Sponsor also reviewed the project charter to refresh their memory of the scope of the project to support your efforts. Which statement best identifies the current situation?
A. You are being audited by the Sponsor to ensure compliance to the project charter
B. You are conducting an analysis of the process
C. The quality department is reviewing your processes followed by formal acceptance of the results
D. You are conducting a comparison of the project charter to executed work to ensure only work identified in charter is completed
Answer: B
Business Environment - Task 2 - Evaluate/ Deliver Benefits
Do not let the question mislead you. Any information about the charter is irrelevant. You are conducting a process analysis which identifies opportunities for process improvements. It also identifies non-value-added activities and existing problems. If you answered A, you were caught by the red herring of the Sponsor reviewing the charter.
A Benefits Management Plan is a key document that the project sponsor provides. Which of the following is not a component of this plan?
A. Cost/benefit justification for the project
B. How the project is aligned with the company’s strategic goals and objectives
C. Who is responsible for monitoring, recording and reporting benefits
D. When the benefits are expected to be realized over time
Answer: A
Business Environment - Task 2 - Evaluate/ Deliver Benefits
Cost/benefit justification information is part of the Business Case document, which is also prepared by the project sponsor.
You are creating an online store, and as part of the sprint, your team is testing the checkout page with certain users. You are providing the users with two versions of the page; one lists the orders on the left-hand side of the page with the price breakdown on the right-hand side. The other version lists the orders on the right-hand side of the page with the price breakdown on the left in large red fonts. You are determining which version will be more user-friendly when this functionality goes live. What tool are you using?
A. User Acceptance Testing
B. A/B Testing
C. Root Cause Analysis
D. Scope Validation
Answer: B
Business Environment - Task 2 - Evaluate/ Deliver Benefits
A/B testing is where you have two very similar products and are trying to determine which will provide more value based on user interaction, and that is what you are trying to determine here. It is not User Acceptance Testing or Scope Validation since the users are not testing whether the product meets their requirements; you are just trying to determine which option they prefer. There is no issue here, so it is not a root cause analysis.
Upon reaching the project constrained end date of your new inventory control software project, you realize some high business value requirements have not been completed and will not be in your release. Which of the following did you most likely not do effectively?
A. Involving all of the right stakeholders to identify the requirements
B. Completing and using a product backlog
C. Following the stakeholder engagement strategies with the project team
D. Performing quality assurance
Answer: B
Business Environment - Task 2 - Evaluate/ Deliver Benefits
The key words constrained end date denotes a time-boxed or agile approach most likely using sprints
The fixed cost per year for a production facility is $1,000,000 and the cost to produce one unit of a product is $500. If the product is sold at $550 per unit, at what annual capacity would the facility reach the break-even point?
A. 2,000 units
B. 20,000 units
C. 200 units
D. 1,818 units
Answer: B
Business Environment - Task 2 - Evaluate/ Deliver Benefits
Break-even capacity is reached when the total profits equal total expenses. In this example, we can take 550 minus 500 (or 50) to get the variable profits. Then we divide the $1 million fixed costs by the per unit profit to arrive at the answer. In this case, $1,000,000 / 50 units. Break Even Units = 20,000 units.
Which of the following best describes a program?
A. Grouping of projects in a portfolio
B. Group of related projects managed in a coordinated way
C. Project with a cost over $1 million grouped together
D. Group of 3 or more projects which are overseen by the same parts of the organization
Answer: B
Business Environment - Task 2 - Evaluate/ Deliver Benefits
A program is a group of related projects managed in a coordinated way to obtain benefits and control not available from managing them individually. The key here is that the projects are related.
You have just started working for an organization and you are currently in a meeting that you feel is quite lengthy. Since this is your first week at the company, you do not know most of the attendees but are hearing phrases such as, "this meets the definition of done" and "this is the product backlog as it now stands". Most likely, which meeting are you in?
A. Daily Standup Meeting
B. Sprint Retrospective
C. Sprint Review
D. Sprint Planning
Answer: C
Business Environment - Task 2 - Evaluate/ Deliver Benefits
The key is this meets the definition of done, which implies that this is the product owner speaking and accepting the deliverable, which occurs in the Sprint Review. Additionally, the product owner can also discuss the remaining product backlog items. It is not the Daily Standup since that is only 15 minutes (the scenario states this meeting is lengthy), and it is not sprint planning since you are already delivering the product to the product owner. A Sprint Retrospective is a lessons-learned meeting. PMI Authorized PMP Exam Prep Student Guide/ Page 260
Which of the following is a true statement about how agile teams measure results?
A. Agile favors empirical and value-based measurements instead of predictive measurements.
B. Agile measures result at the end of the project only, and this is conducted by the project team without the PM present.
C. Agile measures result at the end of the project only, and this is conducted by the project team facilitated by the PM.
D. Agile favors empirical and predictive measurements instead of value-based measurements.
Answer: A
Business Environment - Task 2 - Evaluate/ Deliver Benefits
This question is discussed in the Agile Practice Guide on p. 61
As deliverables are being produced on your project, you evaluate how each one contributes to the goals and objectives of the project. What are you doing?
A. Benefits realization
B. Lessons learned
C. Quality audit
D. Risk audit
Answer: A
Business Environment - Task 2 - Evaluate/ Deliver Benefits
Throughout the project the PM needs to keep an eye on how the project is realizing the benefit goals and objectives established at project conception and confirmed with the Project Charter, making A the correct answer. Lessons learned allow for continual improvement and could support how we met or didn’t meet the benefits. Quality audits verify that the project has good quality processes in place and that they are being followed, and lessons learned are logged. A risk audit examines the effectiveness of the risk responses and the overall risk management process and also will create lessons learned.
Universal Global Company’s construction division has won a contract to build an office park in a busy part of downtown Paris. You are excited that you were elected to create a program for the development of the buildings. You have managed projects in the past, but this is your first real exposure to a program. Which of the following best describes a program?
A. A standardized approach to project management that ensures alignment with the portfolio of the organization
B. A standardized approach to project management
C. A collection of related projects managed in coordination to gain control that would not necessarily be available if the projects were managed independently
D. A collection of unrelated projects all contributing to the strategic objectives of the organization
Answer: C
Business Environment - Task 2 - Evaluate/ Deliver Benefits
A program is a collection of related projects managed and coordinated to gain a higher level of control. A, B, and D do not accurately describe a program.
The assurance that a product, service, or system meets the needs of the customer is?
A. Verification
B. Justification
C. Association
D. Validation
Answer: D
Business Environment - Task 2 - Evaluate/ Deliver Benefits
Verification is the evaluation of whether or not a product, service, or system complies with a regulation, requirement, specification, or imposed condition. Justification would be the support and reason for doing the project.
For agile projects, the product owner defines the initial functionality or capabilities that make up a minimum business increment. Release planning determines how many sprints will be included in a release, and how many releases will be done for the project. Which of the following typically has the least impact on release planning?
A. Availability of a set of features or capabilities.
B. Organizational tolerance for changes.
C. A time cadence for subsequent releases.
D. The velocity of the agile team(s).
Answer: D
Business Environment - Task 2 - Evaluate/ Deliver Benefits
Agile team velocity determines how many user stories or story points the team can deliver within a time-boxed sprint/iteration.
Your sponsor is currently evaluating multiple projects to determine which one would be the best to choose based on limited project resources. Project 1 is a five-year project with a net present value (NPV) of $115,000. Project 2 is a three-year project with an NPV of $85,000. Project 3 is a one-year project with an NPV of $74,000. Project 4 is a two-year project with an NPV of $55,000. Which project should be selected?
A. Project 4
B. Project 2
C. Project 1
D. There is not enough information to make a determination
Answer: C
Business Environment - Task 2 - Evaluate/ Deliver Benefits
When looking at an NPV, the years have already been taken into consideration. Projects should be judged on the highest NPV, regardless of the number of years involved. Project 1 has the highest NPV value.
You are the project manager for a large food and beverage company. You are currently managing a project to offer a platform that gives farmers direct access to the marketplace for their coffee, allowing them to maintain ownership until the point of sale. You need to conduct a feasibility study. A feasibility study is an example of which of the following?
A. A phase deliverable
B. A requirement for all project plans
C. A subsidiary project plan
D. A report to determine if a project is successful
Answer: A
Business Environment - Task 2 - Evaluate/ Deliver Benefits
A feasibility study is an example of a phase deliverable. Often feasibility studies are done as an initial phase to ensure the project has a good chance of success in later phases.
