PROJECT SELECTION Flashcards
Which of these is NOT part of a benefits management plan?
a. Strategic alignment
b. Timeframe for realizing benefits
c. Target benefits
d. Objectives and reasons for the project
D
A benefits management plan will contain strategic alignment, the timeframe for realizing benefits, and the target benefits. The objectives and reasons for the project are part of the business case.
There are several financial calculations used to evaluate potential projects. Which of the following evaluation techniques takes the present value and deducts the initial costs and ongoing expenditures?
a. Net present value
b. Future value
c. Payback value
d. Cost/Benefit
A
Net present value (NPV) takes the present value and subtracts the cost of the initial and ongoing investment.
During a year-end company performance review meeting, several associates provide feedback that an
automated timekeeping system would greatly improve the speed of client billing. Senior management
immediately approves the formation of an ad-hoc committee to provide guidance and offer suggestions for implementation. According to the PMBOK® Guide, this would be an example of which project initiator?
a. Legal requirement
b. Customer request
c. Organizational need
d. Social need
C
Examples of organizational need projects include process improvement, relocations, reorganizations, or any project undertaken to improve the efficiency and overall effectiveness of the performing organization.
Sponge-Back Technologies services their market with shock-absorbent packaging. Over the past year, the
company has noticed an increase in demand for most of their packaging products, along with frequent
requests for custom cutout configurations. The company has decided to invest more than $65,000 on a specialized machine that will slice block sponges into any desired shape or size requested by a customer. Which of the following project initiators best describes this situation, according to the PMBOK® Guide?
a. Organizational need
b. Legal requirement
c. Social need
d. Market demand
D
A project is being initiated because of a market demand opportunity available to Sponge-Back Technologies.
When choosing between two or more mutually exclusive alternatives, which project cost evaluation would be appropriate?
a. Incurred cost
b. Sunk cost
c. Recoverable cost
d. Opportunity cost
D
Opportunity cost is incurred by selecting one project over another.
Determining if a project aligns with a company’s Key Performance Indicators as part of the project selection
process refers to which project selection variable?
a. Expected financial benefit
b. Available funding
c. Strategic alignment
d. Riskiness of the project
C
Strategic alignment is a key variable factored in the project selection process and examines if a project aligns with a company’s strategic plan and Key Performance Indicators.
When concerned with workflows that are costly or ineffective, an organization will focus on which of the
following non-financial metrics?
a. Process improvement
b. Customer retention
c. Employee satisfaction
d. Future opportunities
A
Process improvement, which is the act of increasing the efficiencies of organizational procedures, is a common non-financial metric that organizations will consider.
When comparing the reward or income of a project to the project’s expenses, which of the following metrics
would be most useful?
a. Cost/benefit ratio
b. Net present value
c. Payback period
d. Future value
A
The cost/benefit ratio compares the benefit or revenue of a project with the cost of (or investment in) a project.
When considering sunk costs, which of the following best defines the situation?
a. It is a cost that hasn’t been incurred by selecting one project over another.
b. It is a cost that has been incurred by selecting one project over another.
c. It is a cost that has already been incurred but can still be recovered.
d. It is a cost that has already been incurred and cannot be recovered.
D
A sunk cost is money that an organization has already spent and, because it cannot be recovered, should not be factored into future expenditures.
If an organization were to focus on the amount of money being spent recruiting and training new hires, which of the following non-financial metrics might be most useful?
a. Public opinion
b. Future opportunities
c. Employee retention
d. Customer satisfaction
C
The process of maintaining employees (or employee retention) is a common non-financial metric that organizations consider.
A financial assessment that determines how soon you can expect to recapture your investment and start
making a profit is called:
a. Cost-benefit analysis
b. Payback period
c. Net present value
d. Sunk costs
B
By definition, the payback period calculates the initial investment and the estimated income over time to determine when you will recapture your investment.
