Question 1

The method that evaluates intangible costs, benefits, and risks as complements to financial valuation results is best described as _________

Accepted Answer

information economics method

Question 2

Explain a key limitation of using ROI whereby division managers manipulate the ratio in an attempt to show enhanced short-term results.

Accepted Answer

A division manager can increase the ratio by either increasing the operating income (the numerator) or decreasing the investment base (the denominator), thus making the return on an investment look better than it actually is. This manipulation could occur if division management avoids profitable opportunities capable of earning ROIs in excess of the corporate-wide cost of capital, but which fail to exceed the current average ROI of the division.

Question 3

Briefly describe the methodology of portfolio valuation and its strengths and weaknesses.

Accepted Answer

Portfolio valuation builds a framework in which investment planning, and control measures that monitor project performance and incentive schemes should all be tied to maximizing the value of the firm. This method's strengths are that it assesses the interdependence of IT projects and seeks to ensure that the projects are aligned with the business strategies. Another strength is that it ensures that the risks associated with IT investments are in line with the business view of acceptable risk. A portfolio valuation weakness is that continuous monitoring of IT projects must be done and reevaluations require active management of all IT investments. Also, this method needs committed and active business and IT management.

Question 4

Which of the following best describes a technique for assessing the value of investments which measures the difference between a division's (or other activity's) reported income and the financial opportunity cost of the division's investment base?

Accepted Answer

A)  ROI 
B)  Residual income 
C)  EVA 
D)  Real options 
A)  ROI 
B)  Residual income 
C)  EVA 
D)  Real options

Question 5

Which of the following best describes an approach used in capital budgeting where the present value of cash outflow is subtracted from the present value of cash inflows?

Accepted Answer

A)  Modified NPV 
B)  NPV 
C)  EVA 
D)  Real options 
A)  Modified NPV 
B)  NPV 
C)  EVA 
D)  Real options

Question 6

Which of the following best describes a technique capable of accounting for a firm's revisions of its strategies and operations under uncertainty?

Accepted Answer

A)  NPV 
B)  DTA 
C)  EVA 
D)  Real options 
A)  NPV 
B)  DTA 
C)  EVA 
D)  Real options

Question 7

According to Buss, each of the following is considered an intangible benefit except:

Accepted Answer

A)  improving client service. 
B)  speeding up decision making. 
C)  standardizing manual processes. 
D)  residual income. 
A)  improving client service. 
B)  speeding up decision making. 
C)  standardizing manual processes. 
D)  residual income.

Question 8

A methodology that informs managers what the real cost of processes are and provides a basis of maximizing profit by encouraging profitable processes and discouraging unprofitable ones is best described as_________

Accepted Answer

activity-b

Question 9

The use of the ROI method has often led to its manipulation by managers attempting to show enhanced short-term results.

Accepted Answer

A) True 
 B)False

Question 10

A limitation of real options is that there is no option to defer an investment until some future time.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following best describes a methodology that informs managers what the real cost of processes are and provides a basis of maximizing profit by encouraging profitable processes and discouraging unprofitable ones?

Accepted Answer

A)  Value management framework 
B)  Total cost of ownership 
C)  Performance measurement 
D)  Activity-based management 
A)  Value management framework 
B)  Total cost of ownership 
C)  Performance measurement 
D)  Activity-based management

Question 12

Which of the following best describes an approach used in capital budgeting where the ratio of present value of the inflows to the present value of the outflow, including the interest earned during the deferral period?

Accepted Answer

A)  Modified NPV 
B)  NPV 
C)  EVA 
D)  Real options 
A)  Modified NPV 
B)  NPV 
C)  EVA 
D)  Real options

Question 13

The call option that can be exercised only at the date of expiration is referred to as a(n)_________

Accepted Answer

The answer of The call option that can be exercised...

Question 14

A strength of real options is that they reduce risk by permitting deferral of a final commitment of funds until long-term projects have reduced their uncertainty.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following financial approaches uses recent developments in corporate finance, especially the capital asset pricing model, to identify the cost of capital for a specific division or business unit, while attempting to remove distortions created by the GAAP?

Accepted Answer

A)  Modified NPV 
B)  Residual income 
C)  EVA 
D)  Real options 
A)  Modified NPV 
B)  Residual income 
C)  EVA 
D)  Real options

Question 16

The value management framework looks at business processes and expected outcomes, and how IT can enable them.

Accepted Answer

A) True 
 B)False

Question 17

Explain the limitations of traditional financial approaches to assessing the value of IT.

Accepted Answer

Traditional financial approaches of eval

Question 18

A strongpoint of discounted cash flow analyses, such as ROI and residual income, is that they are good for valuing strategic investment proposals having dynamic, strategic characteristics.

Accepted Answer

A) True 
 B)False

Question 19

Each of the following is considered a limitation of the real options model of investment valuation except:

Accepted Answer

A)  the model is based on cash flow projections, rather than any intangibles. 
B)  cumulative volatility adds an explicit incorporation of uncertainty into the model. 
C)  the risk exposures are increased relative to other valuation models. 
D)  the complexity of the model may act as a deterrent to IT managers from using it. 
A)  the model is based on cash flow projections, rather than any intangibles. 
B)  cumulative volatility adds an explicit incorporation of uncertainty into the model. 
C)  the risk exposures are increased relative to other valuation models. 
D)  the complexity of the model may act as a deterrent to IT managers from using it.

Question 20

A strength of ROI is that it looks at both the tangible and intangible value of IT investments.

Accepted Answer

A) True 
 B)False

The method that evaluates intangible costs, benefits, and risks as complements to financial valuation results is best described as _________

Explain a key limitation of using ROI whereby division managers manipulate the ratio in an attempt to show enhanced short-term results.

Briefly describe the methodology of portfolio valuation and its strengths and weaknesses.

Which of the following best describes a technique for assessing the value of investments which measures the difference between a division's (or other activity's) reported income and the financial opportunity cost of the division's investment base?

Which of the following best describes an approach used in capital budgeting where the present value of cash outflow is subtracted from the present value of cash inflows?

Which of the following best describes a technique capable of accounting for a firm's revisions of its strategies and operations under uncertainty?

According to Buss, each of the following is considered an intangible benefit except:

A methodology that informs managers what the real cost of processes are and provides a basis of maximizing profit by encouraging profitable processes and discouraging unprofitable ones is best described as_________

The use of the ROI method has often led to its manipulation by managers attempting to show enhanced short-term results.

A limitation of real options is that there is no option to defer an investment until some future time.

Which of the following best describes a methodology that informs managers what the real cost of processes are and provides a basis of maximizing profit by encouraging profitable processes and discouraging unprofitable ones?

Which of the following best describes an approach used in capital budgeting where the ratio of present value of the inflows to the present value of the outflow, including the interest earned during the deferral period?

The call option that can be exercised only at the date of expiration is referred to as a(n)_________

A strength of real options is that they reduce risk by permitting deferral of a final commitment of funds until long-term projects have reduced their uncertainty.

Which of the following financial approaches uses recent developments in corporate finance, especially the capital asset pricing model, to identify the cost of capital for a specific division or business unit, while attempting to remove distortions created by the GAAP?

The value management framework looks at business processes and expected outcomes, and how IT can enable them.

Explain the limitations of traditional financial approaches to assessing the value of IT.

A strongpoint of discounted cash flow analyses, such as ROI and residual income, is that they are good for valuing strategic investment proposals having dynamic, strategic characteristics.

Each of the following is considered a limitation of the real options model of investment valuation except:

A strength of ROI is that it looks at both the tangible and intangible value of IT investments.

Introduction

Achieving Strategic Alignment

Assessing Strategic Alignment Maturity

The Role of the Cio

Strategic, Tactical Operational IT Processes

IT Planning

Managing Emerging Technologies

Organizing IT

Human Resource HR Considerations

Managing IT Change

IT Governance

IT-Business Communications

Measuring, Reporting, and Controlling

Filters

Exam 14: The Value of IT

The method that evaluates intangible costs, benefits, and risks as complements to financial valuation results is best described as _________

Explain a key limitation of using ROI whereby division managers manipulate the ratio in an attempt to show enhanced short-term results.

Briefly describe the methodology of portfolio valuation and its strengths and weaknesses.

Which of the following best describes a technique for assessing the value of investments which measures the difference between a division's (or other activity's) reported income and the financial opportunity cost of the division's investment base?

Which of the following best describes an approach used in capital budgeting where the present value of cash outflow is subtracted from the present value of cash inflows?

Which of the following best describes a technique capable of accounting for a firm's revisions of its strategies and operations under uncertainty?

According to Buss, each of the following is considered an intangible benefit except:

A methodology that informs managers what the real cost of processes are and provides a basis of maximizing profit by encouraging profitable processes and discouraging unprofitable ones is best described as_________

The use of the ROI method has often led to its manipulation by managers attempting to show enhanced short-term results.

A limitation of real options is that there is no option to defer an investment until some future time.

Which of the following best describes a methodology that informs managers what the real cost of processes are and provides a basis of maximizing profit by encouraging profitable processes and discouraging unprofitable ones?

Which of the following best describes an approach used in capital budgeting where the ratio of present value of the inflows to the present value of the outflow, including the interest earned during the deferral period?

The call option that can be exercised only at the date of expiration is referred to as a(n)_________

A strength of real options is that they reduce risk by permitting deferral of a final commitment of funds until long-term projects have reduced their uncertainty.

Which of the following financial approaches uses recent developments in corporate finance, especially the capital asset pricing model, to identify the cost of capital for a specific division or business unit, while attempting to remove distortions created by the GAAP?

The value management framework looks at business processes and expected outcomes, and how IT can enable them.

Explain the limitations of traditional financial approaches to assessing the value of IT.

A strongpoint of discounted cash flow analyses, such as ROI and residual income, is that they are good for valuing strategic investment proposals having dynamic, strategic characteristics.

Each of the following is considered a limitation of the real options model of investment valuation except:

A strength of ROI is that it looks at both the tangible and intangible value of IT investments.

Introduction

Achieving Strategic Alignment

Assessing Strategic Alignment Maturity

The Role of the Cio

Strategic, Tactical Operational IT Processes

IT Planning

Managing Emerging Technologies

Organizing IT

Human Resource HR Considerations

Managing IT Change

IT Governance

IT-Business Communications

Measuring, Reporting, and Controlling

Filters