Part i.

true or false

Write true if the statement is correct and false if it is incorrect on the space provided.

1. Project evaluation is judging, appraising or determining the worth or value of a project.

Answer:- True

2. Risk management and communication plan is the component of core planning process,

Answer:-True

3. Payback period is the time taken to gain a financial return equal to the initial investment.

Answer:- False

4. Project risk management is the process concerned with identifying, analyzing, and
responding to an uncertainty.

Answer:-True

5. There is a need to accept the project with its present value of income less than its present
value of the cost.

Answer:-False

6. The project manager is not responsible for management of all aspect of the project.

Answer:- False
7. Internal rate of return is the discount rate that makes the net present value equal to zero.
Answer: - True

8. The longest path of any project does not represent the critical path.

Answer: - False

9. Feasibility study is any in depth investigation to determine as to whether a given project

is practical and desirable.

Answer:- True
 10. Gantt charts are a useful tool for analyzing and planning simple projects than complex
project.

Answer: - False

Part II. Multiple choices

Choose the correct answer among the given alternatives and write the letter of your
choice on the space provided.

1. Among the given alternatives, which one is not the characteristic of a project

A. It is unique and non-routine

B. It is not bounded by time and quality
C. It is a temporary effort
D. It has a life cycle
Answer:- B

2. Which of the following is not component of project cost?

A. Miscellaneous fixed asset
B. Provision of contingency
C. Debenture capital
D. Pre-operative expense
Answer:- C
3. One of the following is the first step used to develop a work breakdown structure (WBS)

A. Development of a list that shows the hierarchy from major activities

B. Assign responsibility to each element in the work breakdown structure
C. Decompose the major activities in to sub- activities
D. Define the work breakdown structures elements
Answer:- D
4. Financial analysis is different from an economic analysis in that --------

A. Its market price may be adjusted to reflect social benefits

B. Its interest on capital is never separated and deducted from gross return
C. Its taxes and subsides are treated as transfer payment
D. Its interest is paid to external suppliers of money
Answer:- D

5. Which one the following is not the advantage of net present value?

A. It allows for inflation and escalation

B. It express all future cash flow in today’s value
C. It focuses on the profitability of the project
D. It uses a fixed interest over the duration of the project
Answer: - A

6. Which one is the process of review of cost and benefit among the following?

A. Project cash flow

B. Internal investment cost
C. Estimates of sales and production
D. Cost of production
Answer:- D

7. All are correct statements about project evaluation, except one

A. Project evaluation occurs periodically before or after project are completed

B. Project evaluation is used as a tools for learning and better management
C. Project evaluation is continues methodological process data collection
D. Project evaluation is concerned with overall project purpose and examines longer
term effect of the project
Answer:- D
8. One of the following is used to estimate the duration of a project when it is faced with high
uncertainty

A. Three point techniques (PERT)

B. Historical experience
C. Expert advice
D. Management feedback
Answer:- A

9. Which function component of risk management process is associated with the execution of
the project as well as external risks to the project?

A. Risk mitigation cot estimation

B. Risk response and monitoring
C. Risk identification
D. Risk qualification
Answer:- C

10. Suppose that, it is estimated that a certain project whose intimal outlay is birr 600, 000 and
expected to have a uniform annual cash flow of birr 12,000 for 7 years. How many years will
be required to get back the initial investment?

A. 7 years
B. 5 years
C. 3 years
D. 2 years
Answer:- A
Ato Alemu wants to invest on a certain project whose initial outlay is birr 150,000. The
project has the following cash flow,

Year cash flows

1--------------------------------------------------------------- Birr 60,000

2---------------------------------------------------------------- 76,000
 3------------------------------------------------------------------ 56,000

4 ---------------------------------------------------------------- 45,000

Refers to the above information and answer questions 11 and 12

11. What will be the project net present value if the discount rate is 10%

A. Birr 40,164.61
B. Birr 75,313.52
C. Birr 87,000.48
D. Birr 63,475.32
Answer: - B

12. What will be the project discount payback period if the discount rate is 10%

A. 2.78 years
B. 3.25 years
C. 4.2 years
D. 3.62 years
Answer:- A

13. Which one of the following is not the advantage of internal rate of return financial evaluation
techniques?
A. It recognizes the total cash flows during the project life
B. It conveys the direct message about the yield on the project
C. It reflects the scale or dollar size
D. It gives due consideration for the time value of money
Answer:- D

14. All are the entry barriers that result in the positive net present value of the project, except ----
A. Government policy
B. Diseconomies of scale
C. Cost advantage
D. Technological edge
Answer:- D

15. Among the given alternatives, which one is the wrong statement about project?
A. Project have a general objective
B. Project have clearly defined and allotted funds
C. Project are small in scope
D. Project cover specific area
Answer:- C

Part III. Short answer

Give short and precise answer to the following questions given below on the space
provided.
1. List down at least three essential elements of an economic analysis
 Economic impact analysis
 Programmatic cost analysis
 Benefit-cost analysis, and
 cost-effectiveness analysis

2. Define the term ‘Action plan’

An Action Plan is a list of tasks that you need to do to complete a simple project or objective. To
draw one up, simply list the tasks that you need to complete to deliver your project or objective,
in the order that you need to complete them.

3. Distinguish between market analysis and financial analysis of a project

The Marketing Analysis focuses more on the future aspects of the market and the viability of the
market. Whereas the financial analysis is based on the history records available
4. Write down the process of project implementation.
 Assess the project plan.
 Execute the plan.
 Make changes as needed.
 Analyze project data.
  Gather feedback.
 Provide final reports.
5. List down at least four important benefit of developing a project plan
 It boosts project performance and success rates.
 It improves team communication.
 It ensures the best use of resources.
 It makes it easy to track project goals and outcomes.
 Planning drives performance.
6. Write down the advantage of net present value of a project
 Helps the management of the company in better decision making
 It takes into account that a dollar today is worth more than a dollar tomorrow.
 NPV allows risk factors to enter into the calculation.

7. What are the difficulties that faced in capital expenditure decision?

Uncertainty of variables such as annual cash flows, discounting rates, changes in technology,
inflation rate, changes in tax rates etc.