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Exam 3: Project Selection: Doing the Right Thing

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Question 1

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Company B is considering implementing a new CRM Customer Relationship Management) system for its 10 UK facilities. The initial cost of the project will be £500,000 and the system is predicted to have a useful life of five years. The annual cost of maintaining the system will be £20,000, but it will increase revenues by £100,000 per year. What can we conclude about this potential project?

A) Payback period will be 6.25 years
B) If we consider only the information available, this would not be considered a worthwhile investment.
C) Payback period will be 5 years.
D) If we consider only the information available, this would be considered a worthwhile investment.
E) NPV is positive.
F) A and B only
G) C, D, and E only

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Question 2

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Each of the following is an example of a problem statement component EXCEPT:

A) Identity
B) People
C) Market
D) Timing
E) A and B
F) B and C

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Question 3

Multiple Choice

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Project Thunderbolt will incur $30,000 in cost during year 0 and will produce $10,000 in net cost savings to the company in years 1 through 6. What would the net present value be for this project for 15% and 20% required rates of return? Use the appropriate table at the end of this exam.)

Fredrika has been asked to develop a Pareto Priority Index for a process improvement project. She and her team have researched the situation and developed the following parameters: Estimated lifetime cost savings: $200,000 Total estimated cost: $50,000 Forecasted project success probability: 70% Estimated project duration: 2 years Given this information, what is the Pareto Priority Index?

Which of the following tools for causal analysis would be the most appropriate to apply to the following situation: "We experienced low attendance and dismal sales during the grand opening of our newest retail store in Cairo last week. Let's gather a small team to engage in a structured discussion about the interacting set of factors that worked systematically to create this situation."

Which of the following problem statements includes all of the critical components required for a complete problem statement?

Project Bird-in-Hand will require an initial investment of $1.5 million and will result in a payment of $2 million from the client at the end of three years. If the required rate of return is 8%, what is the NPV for this project?

Which of the following factors can influence the selection of a project as it moves through the project selection funnel?

A planning committee is attempting to decide on a venue for an upcoming week-long sales meeting. The locations are similar in price, but each offers different strengths such as on-site entertainment, weather, restaurants within walking distance, and hotel amenities. The best method for project assessment is most likely:

An advantage of factor rating for project selection is that it:

NPV is a measure of:

If a team wishes to use brainstorming to evaluate an option for achieving a project's goal, which of the following methods would be most appropriate?

Which of these is a potential disadvantage of a real options approach?

Which of the following undesirable outcomes could an organization prevent by creating a portfolio map?