Deck 4: Project Initiation

Question 1

Most organizations are beginning to realize the strategic important of IT to their success.

Answer 1

True

Question 2

Describe the steps to calculate NPV.

Answer 2

To calculate NPV, you first determine the total costs of the project each year and the total benefits each year over a set number of years. The second step in the process is to determine the interest or discount rate. This number is based on the cost of obtaining capital to fund the project or the amount of return an organization can get from other investment opportunities with similar risks. Next, you calculate the NPV using the following formula: NPV = Σt = 0 ... n = CF/(1 + i)^t, where t = year of the cash flow, n = last year of the cash flow, CF = cash flow at time t, i = interest rate or discount rate.

Question 3

IT portfolio management organizes a group of IT projects into multiple portfolios consisting of reports that capture project goals, costs, time lines, accomplishments, resources, risks, and other critical factors.

Answer 3

False

Question 4

The business case should be developed by the project manager alone.

Question 5

Organizations need to be selective in choosing the projects which will return the most value to the organization.

Question 6

With respect to putting a business case together, what are the benefits of building a team representative of all affected stakeholders?

Question 7

Andriole (2001) has identified four key issues that must be considered in order to understand the bigger organizational picture in which IT projects play a role. List and describe those four key issues.

Question 8

Organizations need to follow a formal structured, repeatable process in selecting projects to ensure that they are working on the best mix of projects to match their current economic and strategic situation.

Question 9

Define each category of SWOT.

Question 10

Selecting the right projects to work on is not important but sometimes difficult for an organization.

Question 11

The contents of a business case do not change depending on the size, cost, level of risk, or strategic importance of the project.

Question 12

In the past, IT professionals have done a poor job of understanding and presenting the value of IT projects. Describe the two reasons for this.

Question 13

Explain weighted scoring model.

Question 14

The two key deliverables of the initiation process are the project charter and the stakeholder assessment matrix.

Question 15

CIOs use project portfolio management to view projects as investments.

Question 16

Define ROI and how it is calculated.

Question 17

The balanced scorecard approach to project valuation suggests that the organization be viewed from four perspectives. List and explain those four.

Question 18

Describe the relationship between strategic planning and information technology.

Question 19

SWOT stands for strengths, weaknesses, opportunities, and tactics.

Question 20

Projects should be selected based on the value they will bring to the organization. Explain what value means in this sense.

Question 21

A project criterion with a higher weight has less importance than a criterion with a lower weight.

Question 22

Finding an IRR solution involves trial and error: You keep plugging in different discount rates and see which one drives NPV to zero.

Question 23

Net present value is a method of calculating the net monetary gain or loss from and investment (project) by discounting all future costs and benefits to the present time.

Question 24

The payback period is the amount of time it will take a project before the accrued costs surpass the accrued benefits.

Question 25

Internal rate of return is the discount rate at which NPV is 0%.

Question 26

To evaluate different investments or projects equally, you evaluate the present value of each investment. This is called discounting future values to present, or discounted cash flows.

Question 27

The importance and size of a project should have no bearing on the amount of time and money spent on building the business case.

Question 28

The movement toward the real options methodology for IT project portfolio management derives from a financial model that considers the management of a portfolio of stock investment options.

Question 29

The payback period ignores the time value of money.

Question 30

Models allow you to emphasize key parts of the puzzle and see them more clearly.

Question 31

SMEs are individuals either within a company or outside the company who possess expertise or unique knowledge in a particular facet of business.

Question 32

In the balanced scorecard approach, the organization needs to develop metrics, collect data relative to the business perspectives, and analyze the data.

Question 33

All other project characteristics being equal, the project with the highest NPV should be chosen.

Question 34

The first step in stakeholder analysis is to correctly identify the stakeholders.

Question 35

Sacred cow decisions are made because someone really wants a particular project done.

Question 36

The numbers generated by quantitative project selection models are finite and complete, eliminating the need to examine other project characteristics.

Question 37

The balanced scorecard approach suggests that the organization be viewed from four perspectives: financial; customer; internal business; learning and growth.

Question 38

Subject matter expert judgments, "sacred cow" decisions, and mandates are examples of quantitative project selection models.

Question 39

Mandates can come from vendors, government agencies, industry sectors, or markets.

Question 40

The real options theory is widely acknowledged as achieving poorer results than traditional valuation methods.

Question 41

The two basic types of project selection models are:

A) simple and advanced
B) small scale and large scale
C) quantitative and qualitative
D) IT and business

Question 42

A project ________ is a document composed of a set of project characteristics - costs, benefits, risks, etc. - that aid organizational decision makers in deciding what projects to work on.

A) plan
B) charter
C) contract
D) business case

Question 43

Project control is the process that controls any and all changes made to a project after the charter has been signed.

Question 44

The two key deliverables of the project initiation process are:

A) The project charter and the stakeholder assessment matrix.
B) The project charter and the business case.
C) The stakeholder assessment matrix and the business case.
D) The business case and the project plan.

Question 45

The project charter is the last tangible work product created in all projects.

Question 46

The ________ is a formal document that outlines an organization's 3- to 5-year mission, vision, goals, objectives, and strategies.

A) strategic plan
B) business plan
C) project plan
D) annual business report

Question 47

In the strategic plan, each goal or objective includes a list of ________ which will fulfill that objective.

A) requirements
B) projects
C) strategies
D) resources

Question 48

The development of strategies involves an analysis of the ________ environment to identify economic, social, and technological opportunities and potential threats.

A) internal
B) external
C) organizational
D) market

Question 49

A project ________ model is a simplified representation of project characteristics.

A) selection
B) management
C) simulation
D) portfolio

Question 50

The team used to put the business case together should be representative of all affected ________.

A) customers
B) end users
C) sponsors
D) stakeholders

Question 51

To get projects approved, IT managers must learn to align their projects with the company's ________.

A) finances
B) resources
C) strategic direction
D) executives

Question 52

SWOT stands for ________.

A) strengths, weaknesses, opportunities, threats
B) strengths, weaknesses, opportunities, tactics
C) strategy, works in progress, opportunities, threats
D) strengths, weaknesses, organizational strategy, threats

Question 53

The project charter is the first work product that is placed under configuration control.

Question 54

It is important for the project manager to understand the reasons why a project was selected so that the ________ for the project are clearly defined and understood.

A) resources
B) critical success factors
C) customers
D) executive sponsors

Question 55

The two stakeholder analysis deliverables, as described by PMBOK, are the stakeholder register and the stakeholder analysis matrix.

Question 56

The project charter template has three main sections: project identification, key project characteristics, and resource responsibilities and approvals.

Question 57

Which of the following is NOT a quantitative method used in project selection?

A) Estimated project cost
B) Return on investment
C) Net present value
D) Internal rate of return

Question 58

Which of the following is NOT a key component of a business case?

A) Resources required
B) Key objectives
C) Risks
D) Qualitative models

Question 59

Which of the following is NOT a benefit of IT project portfolio management?

A) Capability to identify redundancies
B) Capability to allocate resources across all projects appropriately
C) Capability to monitor project progress
D) Capability to control project managers

Question 60

A technique that assists organizations in managing multiple projects is called ________.

A) cost benefit analysis
B) project management
C) portfolio management
D) stakeholder analysis

Question 61

Assuming an interest rate of 10%, what is the present value of $1,000 in benefits one year from today?

A) $1,210
B) $909
C) $1,000
D) $2,100

Question 62

Organizations need to make sure they follow a ________ approach and evaluate any new projects against other potential projects and currently running projects.

A) program
B) systems
C) project
D) executive

Question 63

Subject matter expert judgments, "sacred cow" decisions, and mandates are examples of ________ project selection models.

A) quantitative
B) portfolio
C) program
D) qualitative

Question 64

________ rate of return is the discount rate at which NPV is zero.

A) External
B) Project
C) Future
D) Internal

Question 65

The payback period ignores the ________ value of money but offers a glimpse at the potential risk associated with a project.

A) real
B) invested
C) future
D) time

Question 66

ROI provides the percentage return expected over the life of the project, using which of the following formulas.

A) (Total discounted benefits - Total discounted costs) / Total discounted costs
B) (Total discounted costs - Total discounted benefits) / Total discounted costs
C) (Total discounted benefits - Total discounted costs) / Total discounted benefits
D) (Total discounted costs - Total discounted benefits) / Total discounted benefits

Question 67

How much is an investment of $1,000 worth at the end of year one, given an interest rate of 10%?

A) $1,210
B) $1,000
C) $1,010
D) $2,100

Question 68

The weighted ________ model is a culmination of many models, used to evaluate all projects on as equal a basis as humanly possible.

A) selection
B) scoring
C) project
D) analysis

Question 69

When looking at financial models of project selection, factors such as inflation and risk impact the ________ value of money.

A) current
B) real
C) project
D) time

Question 70

The reason we create financial models for project selection analysis is to ascertain whether the ________ outweigh the costs and to what degree.

A) benefits
B) resources
C) projects
D) requirements

Question 71

Which of the following is NOT a quantitative model used in project selection?

A) SME judgment
B) Net present value
C) Internal rate of return
D) Payback period

Question 72

A fundamental definition of option is "the right, but not the ________, to buy (call option) or sell (put option) an investment holding at a predetermined price (called the exercise price or strike price) at some particular date in the future." [Latimore, D. (2002) p. 2]

A) access
B) authority
C) obligation
D) strategy

Question 73

Which of the following is NOT one of the organizational perspectives viewed from the balanced scorecard approach?

A) Financial
B) Project
C) Customer
D) Internal business

Question 74

________ is a method of calculating the net monetary gain or loss from and investment (project) by discounting all future costs and benefits to the present time.

A) Internal rate of return
B) Payback period
C) Net present value
D) Return on investment

Question 75

A longer payback period generally infers a ________ project.

A) valuable
B) better
C) riskier
D) larger

Question 76

The balanced scorecard approach suggests that the organization be viewed from ________ perspectives.

A) four
B) three
C) two
D) five

Question 77

________ options allows an organization to value IT projects in a manner similar to the way we value stock options.

A) Real
B) Project
C) Future
D) Strategic

Question 78

The ________ period is the amount of time it will take a project before the accrued benefits surpass accrued costs.

A) internal
B) payback
C) return
D) investment

Question 79

A(n) ________ analysis identifies the influence and interests of the various stakeholders and documents their needs, wants, and expectations.

A) stakeholder
B) executive
C) project
D) strategic

Question 80

Which of the following is NOT one of the steps of stakeholder analysis?

A) Identify all potential stakeholders.
B) Determine interests, expectations, and influence for each stakeholder.
C) Assign anonymous name to each stakeholder.
D) Build a stakeholder assessment matrix.