Ch. 5 (IST 352)
76) ________ uses a discount rate determined from the company's cost of capital to establish the present value of the project.
Net present value
69) ________ are costs associated with project start-up and development, or system start-up.
One-time costs
78) ________ is the process of assessing the degree to which a proposed system solves business problems or takes advantage of business opportunities.
Operational feasibility
81) ________ is the process of evaluating how key stakeholders within the organization view the proposed system.
Political feasibility
35) A cost resulting from the ongoing evolution and use of a system refers to a(n): A) recurring cost B) one-time cost C) incremental cost D) frequent cost
A
38) The rate of return used to compute the present value of future cash flows refers to: A) discount rate B) investment rate C) transfer rate D) future cash flow rate
A
44) An assessment of the development group's understanding of the possible target hardware, software, and operating environments, system size, complexity, and the group's experience with similar systems should be included as part of: A) technical feasibility B) political feasibility C) operational feasibility D) schedule feasibility
A
48) To gain an understanding of the likelihood that all potential time frame and completion date schedules can be met and that meeting these dates will be sufficient for dealing with the needs of the organization is the purpose of: A) schedule feasibility B) operational feasibility C) technical feasibility D) political feasibility
A
53) A peer group review of any product created during the system development process refers to: A) walkthrough B) feasibility assessment C) joint application discussion D) product evaluation
A
60) Which of the following is NOT a major section of the Baseline Project Plan? A) design issues B) introduction C) system description D) feasibility assessment
A
29) Which of the following would be classified as a tangible cost? A) loss of customer goodwill B) cost of hardware C) employee morale D) operational inefficiency
B
31) Infrastructure replacement/improvements, system maintenance costs, and user training and support are examples of: A) project-related costs B) operating costs C) start-up costs D) procurement costs
B
42) The analysis technique that finds the amount of time required for the cumulative cash flow from a project to equal its initial and ongoing investment is referred to as: A) return on investment (ROI) B) break-even analysis (BEA) C) net present value (NPV) D) future value (FV)
B
52) The following are elements of project planning: A) describing the physical design statement B) describing the project scope, alternatives, and feasibility C) describing the identification of the business mission D) describing the logical design statement
B
58) At walkthrough meetings, there is a need to have individuals play specific roles such as: A) operating system manager B) presenter C) DBA D) top management
B
74) ________ finds the amount of time required for the cumulative cash flow from a project to equal its initial and ongoing investment.
Break-even analysis
87) Briefly identify three commonly used economic cost-benefit analysis techniques.
Break-even analysis (BEA) is the process of finding the amount of time required for the cumulative cash flow from a project to equal its initial and ongoing investment. Net present value (NPV) uses a discount rate determined from the company's cost of capital to establish the present value of a project. Return on investment (ROI) is the ratio of the net cash receipts of the project divided by the cash outlays of the project. A tradeoff analysis can be made between competing projects.
25) A savings of $3,000 resulting from a data entry error correction would most likely be classified as a(n): A) intangible benefit B) qualitative benefit C) tangible benefit D) operational benefit
C
26) A benefit derived from the creation of an information system that can be measured in dollars and with certainty is a(n): A) intangible benefit B) qualitative benefit C) tangible benefit D) operational benefit
C
32) Which of the following would be classified as an intangible cost? A) hardware costs B) labor costs C) employee morale D) operational costs
C
33) A cost associated with an information system that cannot be easily measured in terms of dollars or with certainty refers to: A) economic cost B) tangible cost C) intangible cost D) one-time cost
C
37) The concept of comparing present cash outlays to future expected returns best defines: A) cost/benefit analysis B) internal rate of return C) time value of money D) investment return analysis
C
47) The number of members on the project team, project duration, and the number of organizational departments involved in the project are examples of which of the following risk factors? A) development group B) project structure C) project size D) user group
C
51) To gain an understanding of how key stakeholders within the organization view the proposed system is the purpose of: A) technical feasibility B) legal and contractual feasibility C) political feasibility D) operational feasibility
C
23) The Project Scope Statement: A) is a short document prepared for the customer that describes what the project will deliver and outlines all work required to complete the project B) is useful for ensuring that both you and your customer gain a common understanding of the project C) is a very easy document to create because it typically consists of a high-level summary of the BPP information D) all of the above
D
27) Tangible benefits would include: A) improved organizational planning B) ability to investigate more alternatives C) improved asset control utilization D) lower transaction costs
D
56) At a walkthrough meeting, the person who ensures that the work product adheres to organizational technical standards is referred to as the: A) coordinator B) user C) maintenance oracle D) standards bearer
D
59) Which of the following is NOT a role at a walkthrough meeting? A) coordinator B) user C) secretary D) support staff
D
10) Intangible benefits are benefits associated with project start-up, development, or system start-up.
FALSE
12) Using a discount rate of 14%, the present value of a $10,000 benefit received 5 years from now is $5,500.49.
FALSE
13) If the NPV of all costs is $100,000 and the NPV of all benefits is $170,000, then the ROI would be 35%.
FALSE
17) Referencing a walkthrough, the maintenance oracle ensures that the work product adheres to organizational technical standards.
FALSE
9) Management, operation, and planning personnel are examples of start-up costs.
FALSE
80) ________ is the process of assessing potential legal and contractual ramifications due to the construction of a system.
Legal and contractual feasibility
73) ________ is the current value of a future cash flow.
Present value
61) A ________ is the justification for an information system, presented in terms of the tangible and intangible economic benefits and costs and the technical and organizational feasibility of the proposed system.
business case
83) Referencing a walkthrough meeting, the ________ plans the meeting and facilitates a smooth meeting process.
coordinator
65) A ________ is a benefit derived from the creation of an information system that can be measured in dollars and with certainty.
tangible benefit
71) The ________ is the concept of comparing present cash outlays to future expected returns.
time value of money
82) A ________ is a peer group review of any product created during the systems development process.
walkthrough
70) ________ are costs resulting from the ongoing evolution and use of a system.
Recurring costs
75) ________ is the ratio of the net cash receipts of the project divided by the cash outlays of the project.
Return on investment
79) ________ is the process of assessing the degree to which the potential time frame and completion dates for all major activities within a project meet organizational deadlines and constraints for affecting change.
Schedule feasibility
1) Proper and insightful project planning, including determining project scope as well as identifying project activities, can easily reduce time in later project phases.
TRUE
11) The time value of money compares present cash outlays to future expected returns.
TRUE
14) Most techniques for analyzing economic feasibility employ the time value of money concept.
TRUE
15) Generally speaking, legal and contractual feasibility is a greater consideration if your organization has historically used an outside organization for specific systems or services that you now are considering handling yourself.
TRUE
18) Walkthroughs are a common occurrence in most system development groups.
TRUE
77) ________ is the process of assessing the development organization's ability to construct a proposed system.
Technical feasibility
94) Assume a proposed system has a useful life of 5 years, one-time costs of $50,000, recurring costs of $25,000 per year, and tangible benefits of $35,000 per year. If the cost of capital is 10%, what is the overall NPV? Overall ROI? Break-even point?
The overall NPV is $12,092, and the overall ROI is negative. Based on the information given, this project will not break-even during its useful life.
19) As a rule of thumb estimate, what percentage of the entire development effort should be devoted to the project initiation and planning process? A) between 10 and 20 percent B) less than 5 percent C) less than 10 percent D) between 20 and 30 percent
A
20) Which of the following is not an element of project initiation? A) establishing management procedures B) dividing the project into manageable tasks C) establishing a relationship with the customer D) establishing the project initiation team
A
21) The objective of the project planning process is: A) the development of a Baseline Project Plan and Project Scope Statement B) the development of a Systems Service Request C) the development of entity relationship diagrams D) the development of transitional operations plans
A
22) A major outcome and deliverable from the project initiation and planning phase that contains the best estimate of a project's scope, benefits, costs, risks, and resource requirements defines the: A) Baseline Project Plan B) Information Systems Plan C) Mission Statement D) Statement of Work
A
28) The reduction of waste creation is an example of a(n): A) intangible benefit B) qualitative benefit C) tangible benefit D) operational benefit
A
36) Application software maintenance, new software and hardware leases, and incremental communications are examples of: A) recurring costs B) one-time costs C) incremental costs D) frequent costs
A
41) The ratio of the net cash receipts of the project divided by the cash outlays of the project, enabling tradeoff analysis to be made between competing projects is often referred to as: A) return on investment (ROI) B) break-even analysis (BEA) C) net present value (NPV) D) future value (FV)
A
34) A cost associated with project start-up and development or system start-up refers to a(n): A) recurring cost B) one-time cost C) incremental cost D) infrequent cost
B
39) The current value of a future cash flow is referred to as its: A) future value B) present value C) investment value D) discount rate
B
46) A new system or the renovation of existing systems, user perceptions, and management commitment to the system are examples of which of the following risk factors? A) development group B) project structure C) project size D) user group
B
49) The process of assessing the degree to which a proposed system solves business problems or takes advantage of business opportunities refers to: A) schedule feasibility B) operational feasibility C) technical feasibility D) political feasibility
B
50) The process of assessing potential legal and contractual ramifications due to the construction of a system refers to: A) technical feasibility B) legal and contractual feasibility C) economic feasibility D) operational feasibility
B
54) At a walkthrough meeting, the person who plans the meetings and facilitates a smooth meeting process is referred to as the: A) presenter B) coordinator C) standards bearer D) maintenance oracle
B
55) At a walkthrough meeting, the person (or group) who ensures that the work product meets the needs of the project's customers is referred to as the: A) coordinator B) user C) maintenance oracle D) standards bearer
B
62) The ________ is the major outcome and deliverable from the project initiation and planning phase that contains the best estimate of the project's scope, benefits, costs, risks, and resource requirements.
Baseline Project Plan
16) Referencing the Management Issues section of the Baseline Project Plan, the communication plan provides a description of the team member roles and reporting relationships.
FALSE
3) The Project Scope Statement clearly outlines the objectives and constraints of the project for the development group.
FALSE
4) The Statement of Work is a document prepared for the customer during project initiation and planning that describes what the project will deliver and outlines generally at a high level all work required to complete the project.
FALSE
7) Increased flexibility is an intangible benefit.
FALSE
63) The ________ is a document prepared for the customer during project initiation and planning that describes what the project will deliver and outlines generally at a high level all work required to complete the project.
Project Scope Statement
2) Project planning focuses on defining clear, discrete activities and the work needed to complete each task.
TRUE
5) The culmination of the feasibility analyses form the business case that justifies the expenditure of resources on the project.
TRUE
6) Economic feasibility is the process of identifying the financial benefits and costs associated with a development project.
TRUE
8) Site preparation is an example of a one-time cost.
TRUE
91) Assume a proposed system has a useful life of 5 years, one-time costs of $50,000, recurring costs of $25,000 per year, and tangible benefits of $45,000 per year. If the cost of capital is 10%, what is the overall NPV? Overall ROI? Break-even point?
The overall NPV is $25,816; the overall ROI is .18, and break-even occurs in year 4.
95) Assume a proposed system has a useful life of 5 years, one-time costs of $1,000,000, recurring costs of $250,000 per year, and tangible benefits of $750,000 per year. If the cost of capital is 10%, what is the overall NPV? Overall ROI? Break-even point?
The overall NPV is $895,393 and the overall ROI is .46. The project breaks even in year 3.
93) Assume a proposed system has a useful life of 5 years, one-time costs of $1,000,000, recurring costs of $250,000 per year, and tangible benefits of $750,000 per year. If the cost of capital is 10%, what is the overall NPV? Overall ROI? Break-even point?
The overall NPV is $895,393; the overall ROI is .46, and break-even occurs in year 3.
92) Assume a proposed system has a useful life of 5 years, one-time costs of $250,000, recurring costs of $80,000 per year, and tangible benefits of $175,000 per year. If the cost of capital is 12%, what is the overall NPV? Overall ROI? Break-even point?
The overall NPV is $92,454; the overall ROI is .17, and break-even occurs in year 4.
85) Referencing a walkthrough meeting, the ________, reviews the work product in terms of future maintenance activities.
maintenance oracle
84) Referencing a walkthrough meeting, the ________ ensures that the work product adheres to organizational technical standards.
standards bearer
67) A ________ is a cost associated with an information system that can be easily measured in dollars and with certainty.
tangible cost
72) The ________ is the rate of return used to compute the present value of future cash flows.
discount rate
66) An ________ is a benefit derived from the creation of an information system that cannot be easily measured in dollars or with certainty.
intangible benefit
68) An ________ is a cost associated with an information system that cannot be easily measured in terms of dollars or with certainty.
intangible cost
89) Describe the differences between tangible and intangible benefits and costs, and between one-time and recurring benefits and costs.
A tangible benefit refers to a benefit derived from the creation of an information system that can be measured in dollars and with certainty. Examples include reduced personnel expenses, lower transaction costs, and higher profit margins. Intangible benefit refers to a benefit derived from the creation of an information system that cannot be easily measured in dollars or with certainty. Examples include competitive necessity, promotion of organizational learning and understanding, and improved asset utilization. While tangible costs are costs associated with an information system that can be measured in dollars and with certainty, intangible costs are costs associated with an information system that cannot be easily measured in terms of dollars or with certainty. Hardware costs, labor costs, and operational costs are tangible costs. Loss of customer goodwill, employee morale, and operational inefficiency are intangible costs. One-time costs are costs associated with project start-up and development or system start-up. This type of cost includes hardware and software purchases, user training, and site preparation. Recurring costs are costs resulting from the ongoing evolution and use of a system. New software and hardware leases, incremental communications, and incremental data storage expense are recurring costs.
90) Briefly define walkthrough and describe the role of each participant.
A walkthrough is a peer group review of any product created during the systems development process. During the review users, management, and the development group participate through various roles. These roles are coordinator, presenter, user, secretary, standards bearer, and maintenance oracle. The coordinator is the person who plans the meeting and facilitates a smooth meeting process. The presenter is the individual who describes the work product to the group. Ensuring that the work product meets the needs of the project's customers is the role fulfilled by the user. The person taking notes and recording decisions or recommendations made by the group is the secretary. The standards bearer role is to ensure that the work product adheres to organizational technical standards. The maintenance oracle is the individual who reviews the work product in terms of future maintenance activities.
88) What is a Project Scope Statement and Baseline Project Plan? How are they different?
The Baseline Project Plan and the Project Scope Statement are the major outcomes and deliverables for the project initiation and planning phase. All information collected and analyzed during this phase is contained in the BP. This plan reflects the best estimate of the project's scope, benefits, costs, risks, and resource requirements. It also specifies detailed project activities for the following phase and more general specifications for the remaining phases. The BPP can be used by the project selection committee to determine the project worth - accept, reject, or modify. The project Scope Statement is a document prepared for the customer during project initiation and planning that describes what the project will deliver and outlines generally at a high level all work required to complete the project. The PSS consists of a high-level summary of the BP. While the actual role of the PSS can vary, the PSS can be used by the analyst and the customer to gain an understanding of the project.
86) Briefly identify and define the six major categories of feasibility.
The six feasibility categories are economic, technical, operational, schedule, legal and contractual, and political. The specifics of a particular project will determine the emphasis placed on each of the feasibility criteria. Economic feasibility seeks to identify the financial benefits and costs associated with the project. Technical feasibility seeks to determine if the organization is capable of developing the new system. Operational feasibility examines the degree of likelihood that the candidate system will be able to solve the business problem or take advantage of opportunities. Schedule feasibility examines the likelihood that all potential time frame and completion date schedules can be met. Legal and contractual feasibility tries to assess the potential legal ramifications due to the construction of the new system. Determining stakeholder's views of the candidate system is the intent of political feasibility.
24) Cost reduction and avoidance, error reduction, and increased flexibility are examples of: A) intangible benefits B) qualitative benefits C) tangible benefits D) legal and contractual benefits
C
40) The analysis technique that uses a discount rate determined from the company's cost of capital to establish the present value of a project is commonly called: A) return on investment (ROI) B) break-even analysis (BEA) C) net present value (NPV) D) future value (FV)
C
43) To gain an understanding of the organization's ability to construct the proposed system is the purpose of: A) operational feasibility B) schedule feasibility C) technical feasibility D) political feasibility
C
57) At a walkthrough meeting, the person who reviews the work product in terms of future maintenance activities is referred to as the: A) coordinator B) user C) maintenance oracle D) standards bearer
C
30) Capital costs, management and staff time, and consulting costs are examples of: A) project-related costs B) operating costs C) start-up costs D) procurement costs
D
45) When conducting a technical risk assessment, which of the following is true? A) A project has a greater likelihood of experiencing unforeseen technical problems when the development group lacks knowledge related to some aspect of the technology environment. B) Large projects are riskier than small projects. C) Successful IS projects require active involvement and cooperation between the user and development groups. D) All of the above.
D
64) ________ is the process of identifying the financial benefits and costs associated with a development project.
Economic feasibility
