IST 352 - Chapter Five
A) Baseline Project Plan B) Information Systems Plan C) Mission Statement D) Statement of Work Answer: A Diff: 2 Page Ref: 118
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) development group B) project structure C) project size D) user group Answer: B Diff: 3 Page Ref: 129
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) walkthrough B) feasibility assessment C) joint application discussion D) product evaluation Answer: A Diff: 2 Page Ref: 136
A peer group review of any product created during the system development process refers to:
A) intangible benefit B) qualitative benefit C) tangible benefit D) operational benefit Answer: C Diff: 2 Page Ref: 121
A savings of $3,000 resulting from a data entry error correction would most likely be classified as a(n):
Answer: The overall NPV is $92,454; the overall ROI is .17, and break-even occurs in year 4. Diff: 2 Page Ref: 125
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?
Answer: 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. Diff: 2 Page Ref: 125
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?
A) coordinator B) user C) maintenance oracle D) standards bearer Answer: B Diff: 2 Page Ref: 137
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) operating system manager B) presenter C) DBA D) top management Answer: B Diff: 3 Page Ref: 137
At walkthrough meetings, there is a need to have individuals play specific roles such as:
A) project-related costs B) operating costs C) start-up costs D) procurement costs Answer: D Diff: 3 Page Ref: 123
Capital costs, management and staff time, and consulting costs are examples of:
A) intangible benefits B) qualitative benefits C) tangible benefits D) legal and contractual benefits Answer: C Diff: 2 Page Ref: 121
Cost reduction and avoidance, error reduction, and increased flexibility are examples of:
True
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.
False
If the NPV of all costs is $100,000 and the NPV of all benefits is $170,000, then the ROI would be 35%.
A) project-related costs B) operating costs C) start-up costs D) procurement costs Answer: B Diff: 3 Page Ref: 123
Infrastructure replacement/improvements, system maintenance costs, and user training and support are examples of:
False
Intangible benefits are benefits associated with project start-up, development, or system start-up.
False
Management, operation, and planning personnel are examples of start-up costs.
True
Most techniques for analyzing economic feasibility employ the time value of money concept.
True
Project planning focuses on defining clear, discrete activities and the work needed to complete each task.
A) improved organizational planning B) ability to investigate more alternatives C) improved asset control utilization D) lower transaction costs Answer: D Diff: 2 Page Ref: 121
Tangible benefits would include:
A) technical feasibility B) legal and contractual feasibility C) economic feasibility D) operational feasibility Answer: B Diff: 2 Page Ref: 131
The process of assessing potential legal and contractual ramifications due to the construction of a system refers to:
A) intangible benefit B) qualitative benefit C) tangible benefit D) operational benefit Answer: A Diff: 2 Page Ref: 122
The reduction of waste creation is an example of a(n):
False
Using a discount rate of 14%, the present value of a $10,000 benefit received 5 years from now is $5,500.49.
True
Walkthroughs are a common occurrence in most system development groups.
A) establishing management procedures B) dividing the project into manageable tasks C) establishing a relationship with the customer D) establishing the project initiation team Answer: B Diff: 2 Page Ref: 118
Which of the following is not an element of project initiation?
A) hardware costs B) labor costs C) employee morale D) operational costs Answer: C Diff: 2 Page Ref: 122
Which of the following would be classified as an intangible cost?
Answer: Technical feasibility Diff: 2 Page Ref: 128
_______ is the process of assessing the development organization's ability to construct a proposed system.
Answer: One-time costs Diff: 2 Page Ref: 122
________ are costs associated with project start-up and development, or system start-up.
Answer: Recurring costs Diff: 2 Page Ref: 123
________ are costs resulting from the ongoing evolution and use of a system.
A) intangible benefit B) qualitative benefit C) tangible benefit D) operational benefit Answer: C Diff: 2 Page Ref: 121
A benefit derived from the creation of an information system that can be measured in dollars and with certainty is a(n):
A) economic cost B) tangible cost C) intangible cost D) one-time cost Answer: C Diff: 2 Page Ref: 122
A cost associated with an information system that cannot be easily measured in terms of dollars or with certainty refers to:
A) recurring cost B) one-time cost C) incremental cost D) infrequent cost Answer: B Diff: 2 Page Ref: 122-123
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) frequent cost Answer: A Diff: 2 Page Ref: 123
A cost resulting from the ongoing evolution and use of a system refers to a(n):
Answer: The overall NPV is $895,393 and the overall ROI is .46. The project breaks even in year 3. Diff: 2 Page Ref: 125
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?
Answer: The overall NPV is $895,393; the overall ROI is .46, and break-even occurs in year 3. Diff: 2 Page Ref: 125
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?
Answer: The overall NPV is $25,816; the overall ROI is .18, and break-even occurs in year 4. Diff: 2 Page Ref: 125
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?
A) coordinator B) user C) maintenance oracle D) standards bearer Answer: D Diff: 2 Page Ref: 137
At a walkthrough meeting, the person who ensures that the work product adheres to organizational technical standards is referred to as the:
A) presenter B) coordinator C) standards bearer D) maintenance oracle Answer: B Diff: 2 Page Ref: 137
At a walkthrough meeting, the person who plans the meetings and facilitates a smooth meeting process is referred to as the:
A) coordinator B) user C) maintenance oracle D) standards bearer Answer: C Diff: 2 Page Ref: 137
At a walkthrough meeting, the person who reviews the work product in terms of future maintenance activities is referred to as the:
False
Increased flexibility is an intangible benefit.
True
Proper and insightful project planning, including determining project scope as well as identifying project activities, can easily reduce time in later project phases.
Answer: standards bearer Diff: 3 Page Ref: 137
Referencing a walkthrough meeting, the ________ ensures that the work product adheres to organizational technical standards.
Answer: coordinator Diff: 3 Page Ref: 137
Referencing a walkthrough meeting, the ________ plans the meeting and facilitates a smooth meeting process.
Answer: maintenance oracle Diff: 3 Page Ref: 137
Referencing a walkthrough meeting, the ________, reviews the work product in terms of future maintenance activities.
False
Referencing a walkthrough, the maintenance oracle ensures that the work product adheres to organizational technical standards.
False
Referencing the Management Issues section of the Baseline Project Plan, the communication plan provides a description of the team member roles and reporting relationships.
True
Site preparation is an example of a one-time cost.
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 Answer: A Diff: 2 Page Ref: 118
The objective of the project planning process is:
A) schedule feasibility B) operational feasibility C) technical feasibility D) political feasibility Answer: B Diff: 2 Page Ref: 130
The process of assessing the degree to which a proposed system solves business problems or takes advantage of business opportunities refers to:
A) discount rate B) investment rate C) transfer rate D) future cash flow rate Answer: A Diff: 2 Page Ref: 125
The rate of return used to compute the present value of future cash flows refers to:
A) return on investment (ROI) B) break-even analysis (BEA) C) net present value (NPV) D) future value (FV) Answer: A Diff: 2 Page Ref: 125
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) schedule feasibility B) operational feasibility C) technical feasibility D) political feasibility Answer: A Diff: 2 Page Ref: 130
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) operational feasibility B) schedule feasibility C) technical feasibility D) political feasibility Answer: C Diff: 2 Page Ref: 128
To gain an understanding of the organization's ability to construct the proposed system is the purpose of:
Answer: tangible benefit Diff: 1 Page Ref: 121
A ________ is a benefit derived from the creation of an information system that can be measured in dollars and with certainty.
Answer: tangible cost Diff: 1 Page Ref: 122
A ________ is a cost associated with an information system that can be easily measured in dollars and with certainty.
Answer: walkthrough Diff: 2 Page Ref: 136
A ________ is a peer group review of any product created during the systems development process.
Answer: business case Diff: 2 Page Ref: 118
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.
Answer: 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. Diff: 2 Page Ref: 128-131
Briefly identify and define the six major categories of feasibility.
Answer: 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. Diff: 3 Page Ref: 127
Briefly identify three commonly used economic cost-benefit analysis techniques.
True
Economic feasibility is the process of identifying the financial benefits and costs associated with a development project.
False
The Project Scope Statement clearly outlines the objectives and constraints of the project for the development group.
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 Answer: D Diff: 2 Page Ref: 119
The Project Scope Statement:
False
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.
A) return on investment (ROI) B) break-even analysis (BEA) C) net present value (NPV) D) future value (FV) Answer: B Diff: 2 Page Ref: 126
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) Answer: C Diff: 2 Page Ref: 125
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) cost/benefit analysis B) internal rate of return C) time value of money D) investment return analysis Answer: C Diff: 2 Page Ref: 124
The concept of comparing present cash outlays to future expected returns best defines:
True
The time value of money compares present cash outlays to future expected returns.
A) technical feasibility B) legal and contractual feasibility C) political feasibility D) operational feasibility Answer: C Diff: 2 Page Ref: 131
To gain an understanding of how key stakeholders within the organization view the proposed system is the purpose of:
Answer: intangible benefit Diff: 1 Page Ref: 122
An ________ is a benefit derived from the creation of an information system that cannot be easily measured in dollars or with certainty.
Answer: intangible cost Diff: 1 Page Ref: 122
An ________ is a cost associated with an information system that cannot be easily measured in terms of dollars or with certainty.
A) technical feasibility B) political feasibility C) operational feasibility D) schedule feasibility Answer: A Diff: 2 Page Ref: 128
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) recurring costs B) one-time costs C) incremental costs D) frequent costs Answer: A Diff: 2 Page Ref: 123
Application software maintenance, new software and hardware leases, and incremental communications are examples of:
A) between 10 and 20 percent B) less than 5 percent C) less than 10 percent D) between 20 and 30 percent Answer: A Diff: 2 Page Ref: 116
As a rule of thumb estimate, what percentage of the entire development effort should be devoted to the project initiation and planning process?
Answer: 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. Diff: 2 Page Ref: 136-138
Briefly define walkthrough and describe the role of each participant.
Answer: 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. Diff: 3 Page Ref: 121-122
Describe the differences between tangible and intangible benefits and costs, and between one-time and recurring benefits and costs.
Answer: Project Scope Statement Diff: 2 Page Ref: 119
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.
Answer: time value of money Diff: 2 Page Ref: 124
The ________ is the concept of comparing present cash outlays to future expected returns.
Answer: Baseline Project Plan Diff: 2 Page Ref: 118
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.
Answer: discount rate Diff: 2 Page Ref: 125
The ________ is the rate of return used to compute the present value of future cash flows.
True
The culmination of the feasibility analyses form the business case that justifies the expenditure of resources on the project.
A) future value B) present value C) investment value D) discount rate Answer: B Diff: 2 Page Ref: 125
The current value of a future cash flow is referred to as its:
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 Answer: B Diff: 2 Page Ref: 118
The following are elements of project planning:
A) development group B) project structure C) project size D) user group Answer: C Diff: 2 Page Ref: 129
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?
Answer: 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. Diff: 3 Page Ref: 118-119
What is a Project Scope Statement and Baseline Project Plan? How are they different?
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. Answer: D Diff: 2 Page Ref: 128-129
When conducting a technical risk assessment, which of the following is true?
A) design issues B) introduction C) system description D) feasibility assessment Answer: A Diff: 3 Page Ref: 134
Which of the following is NOT a major section of the Baseline Project Plan?
A) coordinator B) user C) secretary D) support staff Answer: D Diff: 2 Page Ref: 137
Which of the following is NOT a role at a walkthrough meeting?
A) loss of customer goodwill B) cost of hardware C) employee morale D) operational inefficiency Answer: B Diff: 2 Page Ref: 121
Which of the following would be classified as a tangible cost?
Answer: Break-even analysis Diff: 2 Page Ref: 126
________ finds the amount of time required for the cumulative cash flow from a project to equal its initial and ongoing investment.
Answer: Present value Diff: 2 Page Ref: 125
________ is the current value of a future cash flow.
Answer: Legal and contractual feasibility Diff: 1 Page Ref: 131
________ is the process of assessing potential legal and contractual ramifications due to the construction of a system.
Answer: Operational feasibility Diff: 2 Page Ref: 130
________ is the process of assessing the degree to which a proposed system solves business problems or takes advantage of business opportunities.
Answer: Schedule feasibility Diff: 2 Page Ref: 130
________ 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.
Answer: Political feasibility Diff: 2 Page Ref: 131
________ is the process of evaluating how key stakeholders within the organization view the proposed system.
Answer: Economic feasibility Diff: 1 Page Ref: 119
________ is the process of identifying the financial benefits and costs associated with a development project.
Answer: Return on investment Diff: 3 Page Ref: 127
________ is the ratio of the net cash receipts of the project divided by the cash outlays of the project.
Answer: Net present value Diff: 2 Page Ref: 127
________ uses a discount rate determined from the company's cost of capital to establish the present value of the project.
