Exam 3: Project Selection and Portfolio Management

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 five years.What is the non-discounted payback of a project that has cash flows as shown in the table? Year Cash Flow 0 -\ 500,000 1 \ 50,000 2 \ 75,000 3 \ 150,000 4 \ 150,000 5 \ 750,000

A project screening criterion that allows the company to compare long-term versus short-term projects,projects with different technologies,and projects with different commercial objectives is:

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:

A simplified scoring model is used to determine that project Cow has a score of 38 and project GiGi has a score of 30.Project Cow is therefore 26.7% better than project GiGi.

A wedding planner allows $10,000 for flowers and three weeks to receive all RSVPs back from the list of 700 guests.Both estimates are correct within a fraction of a percent.We could describe this factoid as:

One project factor that directly impacts a firm's internal operations is the:

A simple scoring model for project evaluation requires:

Because projects managed under a project portfolio management scheme may be independent of each other,it is not necessary to consider resource use when deciding to pursue any single project.

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 five years.What is the discounted payback of a project that has cash flows as shown in the table? Year Cash Flow 0 -\ 100,000 1 \ 20,000 2 \ 50,000 3 \ 50,000 4 \ 25,000 5 \ 500,000

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

A balanced project portfolio may be interpreted to mean that a single portfolio contains both high and low risk,low growth and high growth,and risky and safe projects.

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 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

Rank the problems in implementing portfolio management from largest to smallest and justify your rankings.

An effective project selection model must reflect organizational objectives,including a firm's strategic goals and mission.

A writer estimates it will take three months to generate spiffy documents to accompany a seminal work in operations management.He grossly underestimates the time required and misses his deadline by two months.This estimate was:

If an organization that currently is managing a vast and well-balanced portfolio of projects decides on a new strategic direction,it will initially face the problem of:

Provide an example of a numeric and non-numeric project selection model and indicate what advantage each might hold over the other.

How can a payback period approach be used to evaluate potential projects?

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?

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.