Podcast
Questions and Answers
What does the Payback Period metric determine?
What does the Payback Period metric determine?
- The total investment needed for the project
- The overall success of a project
- The likelihood of future cash flows
- How quickly a project recoups its costs (correct)
In a weighted selection method, why is it important to assign a numeric weight to each criterion?
In a weighted selection method, why is it important to assign a numeric weight to each criterion?
- To ensure all criteria are viewed equally
- To simplify the scoring process
- To prioritize certain factors over others (correct)
- To evaluate the projects without bias
Which selection tool uniquely estimates the current worth of anticipated cash flows?
Which selection tool uniquely estimates the current worth of anticipated cash flows?
- Payback Period
- ROI
- Net Present Value (correct)
- Unweighted Selection
When using unweighted criteria, how are the project scores typically derived?
When using unweighted criteria, how are the project scores typically derived?
What is the main purpose of calculating ROI in project evaluation?
What is the main purpose of calculating ROI in project evaluation?
Which project has the higher Return on Investment (ROI)?
Which project has the higher Return on Investment (ROI)?
What is the calculation used to determine Net Present Value (NPV)?
What is the calculation used to determine Net Present Value (NPV)?
How much is the NPV for Outsourced Development?
How much is the NPV for Outsourced Development?
What is the Payback Period for Inhouse Development?
What is the Payback Period for Inhouse Development?
Which project's NPV indicates a more favorable investment outcome?
Which project's NPV indicates a more favorable investment outcome?
What is the purpose of calculating the Payback Period in project evaluation?
What is the purpose of calculating the Payback Period in project evaluation?
What are the total benefits from Inhouse Development in Year 2?
What are the total benefits from Inhouse Development in Year 2?
Which calculation best describes how the PV of costs for Outsourced Development is derived?
Which calculation best describes how the PV of costs for Outsourced Development is derived?
What is the primary purpose of the project charter?
What is the primary purpose of the project charter?
Which process is NOT part of the Initiating Process Group?
Which process is NOT part of the Initiating Process Group?
Who provides the project manager with the authority to apply organizational resources to project activities?
Who provides the project manager with the authority to apply organizational resources to project activities?
What is the first step in Project Procurement Management?
What is the first step in Project Procurement Management?
Identify the knowledge area associated with identifying stakeholders.
Identify the knowledge area associated with identifying stakeholders.
What is the first step in Project Scope Management?
What is the first step in Project Scope Management?
Which process involves controlling project work?
Which process involves controlling project work?
In Project Time Management, what is the purpose of the 'Define Activities' process?
In Project Time Management, what is the purpose of the 'Define Activities' process?
What is the final process in Cost Management?
What is the final process in Cost Management?
Which of the following is not part of Project Quality Management?
Which of the following is not part of Project Quality Management?
What is the main objective of the 'Manage Team' process in Project Resource Management?
What is the main objective of the 'Manage Team' process in Project Resource Management?
Which process ensures communication is effectively managed throughout the project?
Which process ensures communication is effectively managed throughout the project?
What does the 'Perform Integrated Change Control' process involve?
What does the 'Perform Integrated Change Control' process involve?
What is the primary purpose of a business case in project selection?
What is the primary purpose of a business case in project selection?
Which of the following is NOT a common reason for embarking on a project?
Which of the following is NOT a common reason for embarking on a project?
Which component is essential for understanding the current project's status and justifications?
Which component is essential for understanding the current project's status and justifications?
What type of constraints may limit a project due to budget issues?
What type of constraints may limit a project due to budget issues?
What are assumptions in the context of project management?
What are assumptions in the context of project management?
Which of the following represents a common technical constraint?
Which of the following represents a common technical constraint?
What is the role of the Project Charter in the initiating process group?
What is the role of the Project Charter in the initiating process group?
Which of the following scenarios indicates a common constraint in project management?
Which of the following scenarios indicates a common constraint in project management?
Study Notes
Selection Tools Overview
- Payback Period: Measures how quickly a project recovers its initial costs.
- Net Present Value (NPV): Calculates the current worth of expected cash flows from the project, factoring in a discount rate.
- Return on Investment (ROI): Assesses the profitability of an investment relative to its cost.
- Unweighted Selection: Scores projects uniformly against criteria, treating each equally.
- Weighted Selection: Scores projects against criteria with specific weights indicating their importance.
Unweighted and Weighted Criteria Examples
- Unweighted scores can vary for projects based on specific factors like ROI and service improvement, typically scaled from 1 to 5.
- Weighted criteria incorporate varying importance for different factors, influencing the overall evaluation of each project option.
ROI Calculation Example
- Outsourced Development: Year 0 costs of $2,500,000; Year 1 benefits of $1,200,000; Year 2 benefits of $1,500,000 results in an ROI of 8%.
- In-house Development: Year 0 costs of $1,400,000; Year 1 benefits of $1,600,000; Year 2 benefits of $2,500,000 results in an ROI of 193%.
- Conclusion: In-house development is favorable due to higher ROI.
NPV Calculation Example
- Discount Rate: 10%.
- Outsourced Development: NPV calculation yields -$163,000.
- In-house Development: NPV calculation yields $2,131,000.
- Conclusion: In-house development is preferred based on higher NPV.
Payback Period Calculation Example
- Outsourced Development: Cost recovery occurs at Year 2.
- In-house Development: Cost recovery occurs at Year 1.
- Conclusion: Choose in-house development for quicker payback.
Business Case Fundamentals
- Purpose: Justifies investment in a project.
- Reasons for Projects: Address business problems, seize opportunities, or fulfill directives.
Components of a Business Case
- Background and objectives, current situation, assumptions, constraints, budget estimates, and preliminary schedules.
Project Constraints
- Types: Budget limitations, time restrictions, resource skill limitations.
- Technical Constraints: Development languages, infrastructure compatibility.
Assumptions in Projects
- Assumptions are treated as truths without verification but present risks if proven false.
- Examples: Staff roles remaining unchanged, cross-training among dedicated staff, collaboration from business teams in testing.
Initiating Process Group
- Defines new projects or phases and secures authorization to start.
- Key processes: Develop Project Charter and Identify Stakeholders.
Project Charter
- A formal document that authorizes a project and grants the project manager authority to utilize organizational resources.
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Description
Test your knowledge on various project selection tools and methods such as Payback Period, Net Present Value, and ROI. This quiz covers key concepts essential for evaluating project feasibility and returns. Perfect for students and professionals in project management.
