Exam 3: Project Selection and Portfolio Management

A company facing an interest rate of 8% must choose among projects offering the following four-year cash flows.If the company is employing the net present value criterion,which project should they choose?

What is an internal rate of return and what advantages and disadvantages are accrued by using it to evaluate projects?

Successful firms use project portfolio planning routinely to:

Multiple project environments thrive on:

To see if a potential new project fits within the whole,an organization may consider interactions among various portfolio projects,such as interdependencies,competing resources,and timing.These activities best fit within the ________ step of the process phase of the portfolio selection process.

A project that is exceptionally risky might still be undertaken by a firm if they have several other projects underway that are considered more of a sure thing.This approach to project selection is BEST described by the criterion called:

The concept of project portfolio management holds that firms should:

Inatech is contemplating two different projects and decides to perform a financial analysis to determine which is more financially lucrative.Project A and B have the cash flows as shown and Inatech uses a required rate of return of 8%.Compute the internal rate of return for both projects to determine which is worth of funding. Year A 0 -\ 500,000 -\ 400,000 1 \ 260,000 \ 200,000 2 \ 170,000 \ 100,000 3 \ 125,000 \ 100,000 4 \ 75,000 \ 50,000 5 \ 25,000 \ 25,000

Which of these statements about internal rate of return analysis is BEST?

An expert's opinion on an issue may be subjective but very accurate.

A commercial factor in project selection and screening might be:

The reciprocal of the payback period is used to calculate the average rate of return for a project.

A project manager is using the internal rate of return method to make the final decision on which project to undertake.Which of these four projects has the highest internal rate of return?

Between projects A and B,project A will be considered a superior financial undertaking if it has:

A selection model that is broad enough to be applied to multiple projects has the benefit of:

A project manager is using the payback method to make the final decision on which project to undertake.The company has a 10% required rate of return and expects a 4% rate of inflation for the following four years.What is the non-discounted payback of a project that has cash flows as shown in the table? Year Cash Flow 0 -\ 250,000 1 \ 50,000 2 \ 60,000 3 \ 70,000 4 \ 80,000

The first step in the Analytical Hierarchy Process:

If strategy and portfolio are not in sync,the firm is poised on the cusp of success.

Your university is considering two projects to increase enrollment: offering traditional classes from midnight to 6 a.m.or offering house call classes where the professor would visit your home to provide instruction.Use a simple scoring model with at least three criteria to evaluate these two potential projects and indicate which project should be chosen.

The simple scoring model has this advantage over a checklist model for screening projects.