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Test 1 Chapter 2
| Question | Answer |
|---|---|
| Which of the following demonstrates the quality of realism required of a project selection model? | It reflects the multiple objectives of both the firm and its managers. |
| Which of the following demonstrates the quality of flexibility required of a project selection model? | It gives valid results within the range of conditions that the firm might experience. |
| The two basic types of project selection models identified in the text are ________. | numeric and nonnumeric |
| A project selected using the sacred cow model will be maintained until successfully completed or until __________. | the boss recognizes the project as a failure and terminates it |
| If a system is being updated due to operating necessity, the project was selected because__________. | the system is worth saving at the estimated cost of the project |
| For a project selected using nonnumeric models, identify the true statement regarding relative priorities for project selection. | Operating necessity projects have priority over competitive necessity projects. |
| The drawback of the __________ model is that it fails to consider cash flows obtained once the initial investment has been recovered. | payback period |
| If the NPV for a project is < 0, it indicates that the project will __________. | fail to cover its required rate of return |
| Scoring models are most often used to overcome this disadvantage of profitability models. | The inability to account for multiple decision criteria. |
| Which of the following is NOT an advantage that favors the use of weighted scoring models? | Decision makers are compelled to stick with the decision once it has been made. |
| Real options seek to reduce which of the following risks in projects? | technological |
| The Astebro study (2004) of R&D projects found that all the characteristics below were excellent predictors of project commercial success, EXCEPT __________. | managerial support |
| Project proposals should include all of the following, EXCEPT __________. | a list of the top executives in the proposing firm |
| Firms usually have two or more projects and this collection of projects is referred to as __________. | a portfolio |
| The __________ is also called the benefit-cost ratio. | profitability index |
| A formalized method for transforming the opinions of a group of individuals into quantitative measures that can be aggregated for use in decision-making is referred to as the __________. | Delphi system |
| Which of the following is NOT a type of nonnumeric model? | payback period |
| The __________is the value of an opportunity foregone. | opportunity cost |
| The ___________ is the interest rate set by an organization as the minimum acceptable rate of return for a project. | hurdle rate |
| ________________ is the process of evaluating individual projects or groups of projects, and then choosing to implement some set of them so that the objectives of the parent organization will be achieved. | Project selection |
| The process of “carving away the unwanted reality from the bones of a problem” is called __________. | modeling the problem |
| In a project portfolio process, the main purpose of the __________ is to establish and articulate a strategic direction for those projects spanning the internal or external boundaries of the organization. | project council |
| In a project portfolio, __________ projects have objectives or deliverables that are only incrementally different in both product and process from existing offerings. | derivative |
| In a project portfolio, a project that involves a new technology or even a disruptive technology that is known to the industry would serve as an example of a __________ project. | breakthrough |
| The set of documents submitted when evaluating a project is referred to as the __________. | project proposal |
| When the decision maker’s information is not complete, he/she will have to make a decision under conditions of __________. | uncertainty |
| The sophistication and experience of an organization in managing multiple projects is called ________. | maturity, or project management maturity |
| The discounted cash flow method determines the net present value of all cash flows by discounting them by the __________. | hurdle rate |
| If the initial project investment is $50,000 and the average net cash flow is $10,000 per year into the foreseeable future, the payback period is __________. | 5 years |
| Financial forecasts are reported as __________ financial statements. | pro forma |
Created by:
bmarietto