Project Management : Project Selection

The statement suggests that there are certain core projects that possess characteristics such as high risk, high value, and the need for good timing. This implies that these projects are important and have the potential to bring significant benefits, but they also come with a level of uncertainty and require careful planning and execution. Therefore, the statement is true.

The explanation for the given correct answer is that when assigning weights based on percentage, the sum of all the criteria's weights must total 100 percent. This ensures that the weights are distributed proportionally and accurately represent the importance of each criterion. If the sum of the weights is less than 100 percent, it means that some criteria are not being considered or given enough weight. On the other hand, if the sum exceeds 100 percent, it means that the criteria are being overemphasized and may not accurately reflect their true importance. Therefore, it is important to ensure that the sum of all criteria's weights is equal to 100 percent.

The statement suggests that organizations, regardless of their size, are unable to pursue most of the potential projects they identify due to limitations in resources and other constraints. This implies that organizations have to prioritize and carefully select the projects they can undertake based on their available resources and constraints. Therefore, the answer "True" accurately reflects the information provided in the statement.

Money earned today is worth more than money earned in the future due to inflation. Inflation refers to the general increase in prices of goods and services over time. As prices increase, the purchasing power of money decreases. Therefore, money earned today has more value compared to the same amount earned in the future when prices are likely to be higher. This is why it is generally advantageous to have money now rather than later.

Programs are designed to achieve strategic objectives and deliver benefits that cannot be achieved by managing individual projects separately. Programs provide a framework for coordinating and aligning multiple projects to achieve a common goal, optimize resources, and facilitate effective decision-making. By managing projects collectively, programs can leverage synergies, manage interdependencies, and address complex issues that cannot be addressed by managing projects in isolation. Therefore, the statement is true.

The statement is false because when comparing projects based on NPV, a higher NPV indicates a more profitable project. Therefore, if Project 2 has a higher NPV than Project 1, Project 2 should be chosen.

The statement is true. The required rate of return refers to the minimum rate of return that an investor expects to receive on an investment in order to compensate for the risk taken. It is the benchmark against which the actual return is compared to determine if the investment is worthwhile. If the actual return is higher than the required rate of return, the investment is considered profitable. Conversely, if the actual return is lower than the required rate of return, the investment is considered unprofitable.

The statement is false because it is not always necessary to complete low- or medium-priority projects first if they can be finished in less time than high-priority projects. Prioritization of projects should be based on factors such as the impact of the project, its urgency, and its alignment with strategic goals. Therefore, high-priority projects may need to be completed first, even if they take longer to finish than low- or medium-priority projects.

Directives are new requirements imposed by government, management, or some external influence. These directives serve as instructions or guidelines that must be followed in order to comply with regulations or achieve specific goals. Unlike opportunities, which refer to favorable circumstances, thresholds, which indicate minimum or maximum limits, or problems, which denote challenges or difficulties, directives specifically pertain to the imposition of new requirements from external sources.

The correct answer is resource allocation because it is the final step in the four-stage planning process for selecting projects. After strategic planning, project planning, and business area analysis have been completed, the organization must allocate its resources effectively to ensure that the selected projects can be successfully implemented. Resource allocation involves determining the necessary financial, human, and material resources needed for each project and assigning them accordingly. This step ensures that the organization's resources are utilized efficiently and that the selected projects align with the overall strategic objectives.

The discounted benefit can be calculated by multiplying the benefit for the given year ($75,000) by the associated discount factor (.79). Therefore, the discounted benefit would be $59,250.

The discount rate is also known as the capitalization rate or opportunity cost of capital. This rate is used to determine the present value of future cash flows and is an important factor in investment decision-making. It represents the rate of return required by investors to compensate for the risk and time value of money. By discounting future cash flows at the discount rate, investors can determine the current value of an investment and assess its profitability.

The ROI (Return on Investment) is calculated by dividing the net profit (benefits - costs) by the total costs and then multiplying by 100 to get a percentage. In this case, the net profit is $516,000 - $243,200 = $272,800. Dividing $272,800 by $243,200 and multiplying by 100 gives us an ROI of 112%.

Organizations should not only pursue projects that have the best financial value. While financial value is an important factor to consider, there are other factors such as strategic alignment, customer satisfaction, and social impact that should also be taken into account when deciding which projects to pursue. Focusing solely on financial value may lead to missed opportunities for growth and innovation.

Portfolios should be formed and continuously updated to help the organization as a whole make better strategic decisions. Portfolios refer to a collection of programs, projects, and other work that are grouped together to achieve specific strategic goals. By creating and regularly updating portfolios, organizations can assess the performance and progress of various initiatives, allocate resources effectively, and prioritize projects based on their alignment with the overall strategic objectives. This allows the organization to make informed decisions and ensure that its efforts are focused on achieving the desired outcomes.

A project portfolio risk map compares the relative value of projects to their level of risk. This allows project managers to assess the potential benefits of each project in relation to the associated risks. By plotting projects on a risk map, decision-makers can prioritize projects that offer high value with manageable risks, while avoiding projects that may have high risks without significant value. This helps in making informed decisions and optimizing the project portfolio for maximum returns.

The method for selecting projects based on broad organizational needs involves considering three important criteria: need, practicality, and funding. While ambition and vision are also important factors to consider, the availability of funding is crucial for the successful implementation of a project. Without adequate funding, it may not be feasible to meet the needs of the organization and ensure the project's success. Therefore, funding is an essential criterion to consider when selecting projects.

A positive NPV means that the return from a project is higher than the cost of capital, which is the return available by investing the capital elsewhere. Therefore, the correct answer is "Opportunity" as it represents the return available from alternative investment opportunities.

This statement suggests that projects should not be seen solely as a means to generate cash, but rather as valuable endeavors in their own right. This implies that projects can have intrinsic worth beyond financial gain, such as personal growth, learning, or contributing to a larger goal. Therefore, the correct answer is False, as it contradicts the notion that projects should only be viewed as a source of cash.

Putting all projects in one list should occur first in the portfolio management process. This allows for a comprehensive view of all the projects and enables easier prioritization and decision-making. By having all projects in one list, it becomes easier to compare and evaluate them based on various criteria such as resource allocation, strategic alignment, and potential returns. This step lays the foundation for further analysis and decision-making in portfolio management.