Project Pre-Initiation Flashcards
What is the purpose of a business case?
To document the justification for the undertaking of the project.
What is the business based on?
Estimated cost of development and implementation
Risks involved
Anticipated business benefits and savings to be gained.
What is CAPEX?
Capital expenditures is money spent in order to create future benefits for an organization. I.e. invest back into the business.
What is OPEX?
An operating expense is any on-going cost for operating the business.
What is TCO?
TCO (Total Cost of Ownership) is a financial estimate whose purpose is to determine the cost of acquiring and maintaining an asset over a number of years.
What elements are mentioned in the business case?
Problem statement and project objectives. Summary of scope. Associated costs. Anticipated benefits from the project. Risks involved. Schedule. Assumptions made.
What are three types of estimation approaches
Top-down, bottom-up and parametric.
Describe the top-down estimation approach
It uses the previous costs of similar projects as a basis for estimating the cost of the current project.
Describe the bottom-up estimation approach
This type is used by estimating costs of individual tasks and summing them up to get the total estimate.
Accuracy of the estimate depends on experience of the evaluators and the size of tasks involved.
Time consuming
Describe the parametric estimation approach
This type is used by using project characteristics in a mathematical model. For example, Function Point analysis. Requires a strong model, historical data.
Types of cost estimates
Order of Magnitude, Budgetary and Definitive.
Describe ROM cost estimates
Precision range is -25% to +75%.
Used when only very basic information is available. This is typically used before the project is started.
Describe budgetary cost estimates
Precision range is -10% to +25%.
Helps allocate a budget for the project. Used when information on the scope, requirements and resources is available.
Describe definitive cost estimates
Precision range is -5% to +10%.
Used when detailed information is available i.e. purchasing decisions to be made.
What is Net Present Value?
NPV is the sum of present values (PV) of all Net Cash Flows during the period into consideration t (affected by the discount rate) for the investment.
