Project Selection Methods

Question 1

Reversed

Also known as weighted scoring models, these use a common set of values to “score” each project’s worthiness.

Answer 1

Scoring Models

Question 2

Reversed

This model compares benefits to costs.

Answer 2

Benefit-Cost Ratios (BCRs)

Consider a BCR of 4:1 versus another project of 2:5.

Question 3

Reversed

=PV(1+i)n

Answer 3

FV = PV(1+i)n

Future Value(FV), in where: FV is the value to be determined PV is the current investment i is the interest rate n is the number of time periods

Question 4

Reversed

=FV/(1+i)n

Answer 4

Present Value = FV/(1+i)n where: PV is the value to be determined FV is the promised return on investment i is the interest rate n is the number of time periods

Question 5

Reversed

This formula finds the present value on the project for each year the project promises a return: 1. Each time period’s promised return is calculated into present value. 2. Sum all of the time periods’ present value. 3. Subtract the project’s original investment from the sum. 4. An NPV greater than one is good, less than one is bad.

Answer 5

Net Present Value

Question 6

Reversed

Complex formulas to determine a project’s worthiness to be selected. Examples include: • Linear programming • Nonlinear programming • Integer algorithms • Dynamic programming • Multiobjective programming

Answer 6

Constrained Optimization Methods

Question 7

Reversed

Projects are chartered to give the project manager the authority to act on behalf of the project sponsor or customer. Projects are chartered to solve a problem or seize an opportunity.

Answer 7

Project Purpose