project
Topics: Internal rate of return, Net present value, Project management / Pages: 36 (6717 words) / Published: Oct 14th, 2014

Project Management, 2e (Pinto)
Chapter 3 Project Selection and Portfolio Management

3.1 True/False

1) Numeric project selection models, by their very nature, employ objective values.
Answer: FALSE
Diff: 2
Section: 3.1 Project Selection
Skill: Definition
AACSB Tag: Reflective

2) Every decision model contains both objective and subjective factors.
Answer: TRUE
Diff: 3
Section: 3.1 Project Selection
Skill: Factual
AACSB Tag: Reflective

3) A simplified scoring model addresses all the weakness of a checklist model for project screening.
Answer: TRUE
Diff: 1
Section: 3.2 Approaches to Project Screening and Selection
Skill: Conceptual
AACSB Tag: Reflective

4) The Analytical Hierarchy Process elegantly addresses scaling issues in criteria and negative utility in alternative scores.
Answer: FALSE
Diff: 1
Section: 3.2 Approaches to Project Screening and Selection
Skill: Conceptual
AACSB Tag: Analytic Skills

5) The efficient frontier in a profile model is the set of options that offers a maximum return for a given level of risk or a minimum risk for every level of return.
Answer: TRUE
Diff: 2
Section: 3.2 Approaches to Project Screening and Selection
Skill: Factual
AACSB Tag: Analytic Skills

6) The present value of money is lower the further out in the future I expect to spend it.
Answer: FALSE
Diff: 2
Section: 3.3 Financial Models
Skill: Analytical
AACSB Tag: Analytic Skills
7) The reciprocal of the payback period is used to calculate the average rate of return for a project.
Answer: TRUE
Diff: 2
Section: 3.3 Financial Models
Skill: Analytical
AACSB Tag: Analytic Skills

8) Internal rate of return is preferable to net present value because IRR employs a weighted average cost of capital discount rate that reflects potential reinvestment.
Answer: FALSE
Diff: 3
Section: 3.3 Financial Models
Skill: Conceptual
AACSB Tag: Analytic Skills

9) An options model could be used when

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