Information Technology Project Management 5e – Marchewka
Chapter 3: Measurable Organizational Value and the Business
Case
True/False
1. A business case is a deliverable that documents the project’s goal, as well as
several alternatives or options.
a. True
b. False
2. The MOV should be adjusted at each phase of a project to align with the
realities of project execution.
a. True
b. False
3. The MOV should explicitly state the technology that will support the IT project.
a. True
b. False
4. For the sake of efficiency and unity of purpose and direction, it is usually
advisable to have the project manager take sole responsibility for developing the
business case.
a. True
b. False
5. The total cost of ownership (TCO) includes only the direct or up-front costs and
ongoing expenditures.
a. True
b. False
Information Technology Project Management 5e – Marchewka
6. The total benefits of ownership (TBO) should address the benefits of an
alternative over the course of its useful life.
a. True
b. False
7. A significant deficiency of the payback method of analyzing alternatives is the
failure to account for the time value of money.
a. True
b. False
8. All cash flows over the useful life of a project alternative must be included in
the payback method of analysis.
a. True
b. False
9. The net present value method of project valuation takes into account all relevant
cash flows as well as the company’s required rate of return.
a. True
b. False
10. In general, riskier project alternatives will have a lower breakeven point than
less risky project alternatives.
a. True
b. False
Information Technology Project Management 5e – Marchewka
11. Scoring models are useful because they allow for the inclusion of qualitative
factors.
a. True
b. False
12. A scoring model can combine both qualitative items reflected in the weights and
scores that are based on people’s judgments.
a. True
b. False
13. Development of the project charter is the responsibility of the project sponsor.
a. True
b. False
Information Technology Project Management 5e – Marchewka
Multiple Choice
1. Scope and schedule are examples of:
a) Project Management processes.
b) Project Management tools.
c) PMBOK® areas of knowledge
d) Project Management objectives
e) Project Management infrastructure.
2. The overall goal and measure of project success is:
a) the project’s MOV.
b) the project’s NPV.
c) the project’s technical competency.
d) the project’s adherence to budget and schedule.
e) the project’s end-user acceptance.
3. All of the following are steps in developing the project MOV except:
a) Identify the available organizational resources.
b) Identify the desired value of the IT project.
c) Develop an appropriate metric.
d) Set a time frame for achieving MOV.
e) Verify and get agreement from project stakeholders.
4. Which of the following statements is the best indicator that the new software
project was successful.
Information Technology Project Management 5e – Marchewka
a) The project’s product, a software system, was enthusiastically accepted by
100% of the end users who were able to begin using it after completing only
a one-day training session.
b) The project’s product, a software system, was a week late and 2% over budget,
but six months later was found to have met the company’s goal of reducing
service callbacks by 15%.
c) The project’s product, a software system, was completed two weeks ahead of
time freeing up the entire development team to begin work on other projects.
d) The project’s product, a software system, was completed right on schedule and
was delivered $10,000 under the $100,000 budget allocation.
e) The project’s product, a software system, was completed on time and on
budget and was tested and shown to be 100% bug-free.
5. Which of the following is the best MOV statement?
a) Our project should make Dayton customers flock to the stores in droves to buy
our products.
b) Our project should be completed in no more than 180 days and should cost no
more than $150,000 and be completed 100% in-house.
c) Our project should increase sales in the Dayton market by 15% next year to
complete our company’s Ohio expansion strategy.
d) Our project should utilize the Spiral Development approach to eliminate 95%
of the major risks to our Dayton sales program.
e) Our project should produce an advertising campaign in Dayton that wins the
Ohio Advertising Guild’s Award for most creative campaign.
6. A project that increased market share would impact the _____area of an
organization.
a) strategic
b) customer
c) financial
d) operational
e) social
Information Technology Project Management 5e – Marchewka
7. A project that provided customers better products and services would impact the
_____area of an organization.
a) strategic
b) customer
c) financial
d) operational
e) social
8. A project that increased profits would impact the _____area of an organization.
a) strategic
b) customer
c) financial
d) operational
e) social
9. A project that improved operational effectiveness would impact the _____area of
an organization.
a) strategic
b) customer
c) financial
d) operational
e) social
Information Technology Project Management 5e – Marchewka
10. A project that provided cleaner air would impact the _____area of an
organization.
a) strategic
b) customer
c) financial
d) operational
e) social
11. Which of the following statements about the business case is NOT true:
a) A business case provides an analysis of feasibility
b) A business case provides senior management with sufficient information to
fund a project.
c) A business case provides details of possible impacts, costs and benefits.
d) A business case provides a project budget.
e) A business case may be a large, formal document.
Ans: D
12. Which of the following was NOT given as a reason for recruiting a core team to
develop the business case?
a) enhanced credibility
b) alignment with organizational goals
c) access to real costs
d) early identification of project team.
e) shared sense of ownership
13. A company utilizes the payback method exclusively to select projects. Which of
the following mutually exclusive (they can only do one of them) projects will they
choose? (Assume cash flows occur in equal monthly installments)
Information Technology Project Management 5e – Marchewka
a) Initial Investment: $10,000 Net Cash Flows: year 1:$0 year 2:$120,000
year 3:$60,000 each year thereafter:$60,000
b) Initial Investment:$100,000 Net Cash Flows: year 1:$50,000 year 2:$50,000
year 3:$100,000 each year thereafter:$1,000,000
c) Initial Investment:$10,000 Net Cash Flows: year 1:0 year 2:$100,000 year
3:$100,000 each year thereafter:$100,000
d) Initial Investment:$100,000 Net Cash Flows: year 1:$1,000,000 year
2:$2,000,000 year 3:$2,000,000 each year thereafter:0
e) Initial Investment:$10,000 Net Cash Flows: year 1:$8,000 year 2:$12,000
year 3:$120,000 each year thereafter:$120,000
14. Evaluating the feasibility of an alternative in terms of the funds and resources
available to support a project for the organization is a measure of _____.
a) organizational feasibility
b) technical feasibility
c) economic feasibility
d) legal feasibility
e) ethical feasibility
15. Determining whether employees will be able to adapt to the planned change is
_____.
a) organizational feasibility
b) technical feasibility
c) economic feasibility
d) legal feasibility
e) ethical feasibility
16. Determining whether the proposed solution will work within the software
architecture is a measure of _____.
Information Technology Project Management 5e – Marchewka
a) organizational feasibility
b) technical feasibility
c) economic feasibility
d) legal feasibility
e) ethical feasibility
17. Evaluating the feasibility of an alternative in terms of the funds and resources
available to support a project for the organization is a measure of _____.
a) organizational feasibility
b) technical feasibility
c) economic feasibility
d) legal feasibility
e) ethical feasibility
18. How many widgets would a company have to sell if their initial investment was
$60,000 and widgets sold for $25? Materials to produce 100 widgets cost $1000.
Direct labor costs $2.50 per widget. Total indirect costs & overhead is 10% of the
selling price.
a) 4,800
b) 6,000
c) 8,000
d) 8,142
e) Not enough information to calculate.
19. Calculate the ROI for a project with total expected costs of $40,000 and total
expected benefits of 35,000.
a) -12.5%
Information Technology Project Management 5e – Marchewka
b) 12.5%
c) 1.875%
d) 187.5%
e) -18.75%
20. Calculate the Net Present Value for a project with the following cash flows: Year
0: ($5,000) Year 1: $10,000 Year 2: $10,000 Year3: ($2,000). The discount rate
is 5%.
a) $19,209.75
b) $14,209.75
c) $18,840.25
d) $23,840.25
e) $12,350.00
21. Trying to decide between three alternatives, a company employed a scoring
model. Three criteria were chosen. Criteria A was believed to be the most
important and so was given a weight of 50%. The other two were deemed to be
equal to each other in importance. A relative scoring range of 0 to 10 was used.
The table below shows each alternative and their scores. Which alternative should
the company choose?
Criteria Alternative A Alternative B Alternative C
A 5 6 7
B 8 7 7
C 8 8 5
a) Choose alternative A
b) Choose alternative B
c) Choose alternative C
d) Choose either alternative A or B
e) Choose either alternative A or C
Information Technology Project Management 5e – Marchewka
Short Answer
1. Describe how a project’s MOV can support an organization’s goals and
strategies.
2. Why should a project begin with developing an MOV?
3. Why must the MOV be measurable?
4. Why is it important that the MOV provide value to the organization?
Information Technology Project Management 5e – Marchewka
5. Why must stakeholders agree on the project’s MOV?
6. What is a business case?
7. What is economic feasibility?
Information Technology Project Management 5e – Marchewka
8. What is technical feasibility?
9. What is organizational feasibility?
10. What is Total Cost of Ownership?
11. What is Total Benefits of Ownership?
Information Technology Project Management 5e – Marchewka
12. Describe the criteria that should be used to make a project selection decision.
Information Technology Project Management 5e – Marchewka
Essay Questions
1. What is the purpose of a Business Case and what are the characteristics of a good
Business Case?
2. What is Measurable Organizational Value (MOV) and what are the four major
characteristics of a good MOV?
3. The text discusses numerous aspects of feasibility; name and define three of them.
4. There are numerous financial models for analyzing the benefits from a project.
Among those models discussed in the chapter are: payback, breakeven, return on
investment (ROI), net present value (NPV), and scoring models. What are the
strengths and weaknesses of each approach to analyzing value?
5. Describe the Balanced Scorecard Approach and list at least three significant
reasons why it can fail as an analysis tool.