Chapter 3 Project Selection and Portfolio Management

Review Test

1) Souder's project screening criterion that indicates an effective model must reflect organization
objectives, including a firm's strategic goals and mission is called:
A) realism.
B) capability.
C) comparability.
D) ease of use.

2) A selection model that is broad enough to be applied to multiple projects has the benefit of:
A) ease of use.
B) comparability.
C) capability.
D) flexibility.

3) 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) flexibility.
B) ease of use.
C) capability.
D) realistic.

4) If a model can be applied successfully by people in all areas and levels of an organization, it is said to
possess the trait of:
A) capability.
B) ease of use.
C) flexibility.
D) realism.

5) An MBA redesign committee plans to spend a decade traveling the world to benchmark graduate
programs at other universities. Regardless of the screening model being used, it will suffer from poor
performance in the area of:
A) flexibility.
B) capability.
C) comparability.
D) cost.

6) 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:
A) objective and accurate.
B) subjective and accurate.
C) objective and inaccurate.
D) subjective and inaccurate.

3-1
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
7) 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:
A) numeric and subjective.
B) numeric and objective.
C) non-numeric and subjective.
D) non-numeric and objective.

8) An internal operating issue in project screening and selection is:

A) expected return on investment.
B) change in physical environment.
C) patent protection.
D) the chance that the firm's goodwill will suffer due to the quality of the finished project.

9) Quality risk refers to the chance that:

A) the project relies on developing new or untested technologies.
B) the firm's reputation may suffer when the product becomes available.
C) the well-being of the users or developers may decline dramatically.
D) the firm may face a lawsuit.

10) One facet of risk in project screening is:

A) the change in manufacturing operations resulting from the project.
B) the initial cash outlay.
C) the potential for lawsuits or legal obligation.
D) the strategic fit of the project with the company.

11) One project factor that directly impacts a firm's internal operations is the:
A) expected return on investment.
B) financial risk.
C) need to develop employees.
D) impact on company's image.

12) A commercial factor in project selection and screening might be:

A) a need to develop employees.
B) the likelihood that users of the project are injured.
C) the long-term market dominance.
D) the impact on the company's image.

13) Which statement regarding project selection is best?

A) Organizational reality can be perfectly captured by most decision-making models.
B) Before selecting any project, the team should identify all the relevant issues that play a role in project
selection.
C) Decision models must contain either objective or subjective factors.
D) Every decision model has both objective and subjective factors.

14) Which statement regarding project selection and screening criteria is best?
A) The most complete model in the world is still only a partial reflection of organization reality.
B) It is possible, given enough time and effort, to identify all relevant issues that play a role in project
selection.

3-2
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
C) Decision models are either objective or subjective.
D) For many projects, more than 80% of the decision criteria are vital.

15) A checklist screening model does not consider:

A) whether one criterion is more important than another.
B) governmental or stakeholder interference.
C) product durability and future market potential of the product line.
D) the riskiness of the new venture.

16) A simple scoring model for project evaluation requires:

A) importance weights from 1 to 10 assigned to each criterion.
B) score values assigned to each criterion in terms of its rating.
C) a division of weights by scores to arrive at a standardized score for each criterion.
D) a summation for each criterion to achieve an overall criterion score.

17) The simple scoring model has this advantage over a checklist model for screening projects.
A) Scaling from 1 to 5 is extremely accurate.
B) Scaling models ensure a reasonable link between the selected and weighted criteria and the business
objectives that motivated their selection.
C) Scaling models allow decision makers to treat one criterion as more important than another.
D) Scaling models have been proven to make correct decisions better than 95% of the time while
checklists only achieve 80% accuracy.

18) A project manager is using a simple scoring model to decide which of four projects is best, given the
company's limited resources. The criteria, importance weights, and scores for each are shown in the table.
Which project should be chosen?

Importance
Project Criteria Weight Score
Greenlight
1 1 3
2 2 1
3 3 1
Runway
1 1 2
2 2 2
3 3 1
X
1 1 2
2 2 3
3 3 2
Ilevomit
1 1 2
2 2 2
3 3 3

A) Project Greenlight
B) Project Runway
3-3
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
C) Project X
D) Project Ilevomit

19) A simple scoring model is used to decide among three projects that we'll call A, B, and C. The total
score for project A is 30, for project B is 20, and for project C is 10. Which of the following statements is
best?
A) If project A is successfully completed, it will yield three times the benefits that project C would have
provided.
B) If project C is chosen, the company would benefit only half as much as if they had chosen project B.
C) Project C is better than project B for this company at this point in time.
D) Project A is better than project B for this company at this point in time.

20) The profile model plots a graph on a(n):

A) perception-reality pair of axes.
B) risk-return pair of axes.
C) efficiency-effectiveness pair of axes.
D) Saxon-Norman pair of axes.

21) The efficient frontier in project management is the set of portfolio options that offer:
A) a minimum return for a minimum risk.
B) a minimum return for a maximum risk.
C) a maximum return for a minimum risk.
D) a maximum return for a maximum risk.

22) Between projects A and B, project A will be considered a superior financial undertaking if it has:
A) a shorter payback period than project B.
B) a lower average rate of return than project B.
C) a lower net present value than project B.
D) a longer payback period than project B.

23) The systematic process of selecting, supporting, and managing a firm's collection of projects is called:
A) heavyweight project management.
B) matrix project organization.
C) profile management.
D) project portfolio management.

24) A project with the chance for a big payout may be funded if an important criterion is:
A) cost.
B) opportunity.
C) top management pressure.
D) risk.

25) 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) strategic "fit."
B) risk.
C) desire for portfolio balance.

3-4
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall
D) top management pressure.

26) A firm is best served if its project portfolio:

A) has a number of low-cost experimental prototypes.
B) devotes significant resources to hit product "home runs."
C) aims to take the marketplace by storm regardless of future trends.
D) represents narrowly concentrated efforts.

27) Successful firms use project portfolio planning routinely to:

A) make quantum jumps from one product to another.
B) develop products with long lead times and plan ahead.
C) move as quickly as possible into new territory.
D) move at glacial pace always within the same product line.

28) 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:
A) scarce resources.
B) a conservative technical community.
C) out-of-sync projects and portfolios.
D) unpromising projects.

3-5
Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall