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The arrow on the graph is pointing to the breakeven point. 

True or False

1.    The general Price-Demand relationship can be expressed as a linear function. 

1.       _______ are costs that are difficult to attribute or allocate to a specific output or work activity.

a.       Indirect costs

1.       A license fee is an example of an incremental cost.

1.       One reason why perfect monopolies rarely occur in practice is because:

1.       The WBS is sometimes called a work element structure.

TRUE

1.       An index is a dimensionless number that indicates how a cost or price has changed with time with respect to a base year.

1.       ___ are used in preliminary or conceptual design stage of a project.

a.       Parametric cost-estimating

1.       The power-sizing technique is sometimes referred to as a linear model

1.       The ____ defines a maximum time period and establishes a range of cost and revenue elements that need to be considered in developing cash flows.

a.       Life cycle 

1.       On a cash flow diagram, the vertical arrows pointing upwards represent a negative cash flow.

1.       Compound interest takes the interest accumulated in one interest period and adds it to the principle amount used to calculate interest in the next period.

1.       Market equivalence is a consequence of the ability to _________ one cash flow for another at zero cost.

a.       Exchange 

1.       The conventional approach for computing interest is the compound interest approach.

1.       Effective interest rate is the conventional method of stating the annual interest rate.

1.       Decisional equivalence is a consequence of the ______ on the part of a decision maker among available choices.

a.       Indifference

1.       Market equivalence is a consequence of the ability to ______ one cash flow for another at zero cost.

a.       Exchange

1.       Mathematical equivalence is a consequence of the mathematical relationship between ____.

a.       Time and Money 

1.       The timing of cash flows is always simple and regular.

1.       The future worth of an infinitely long uniform series of cash flows is called the capitalized value of the series.

1.       The ____ worth of an infinitely long uniform series of cash flows is called the capitalized value of the series.

                                                             a.      Present 

1.       An arithmetic gradient series is a series of receipts or disbursements that starts at zero at the end of the first period and then remains constant from period to period.

1.       The ______, denoted (P/F,i,N), gives the present amount, P, that is equivalent to a future amount, F, when the interest rate is i and the number of periods is N.

a.       Present worth factor

1.       To find the annuity value, A, equivalent to a present amount, P, with a given interest rate, I, and the number of periods over which this annuity will be paid, N, one would use the ____ factor.

                                                             a.      Capital recovery 

1.       The payback period is the number of years it takes for an investment to be recouped when the interest rate is assumed to be zero.

1.       An investment may be thought of as an exchange of resources now for an expected flow of benefits in the future.

a.       Repeated lives. 

1.       The cost of capital for large companies is an average of the costs of borrowing and of selling shares, which is referred to as the __ average cost of capital.

a.       Weighted 

1.       A comparison of rate of return and present/annual worth of methods leads to the conclusion that the two sets of methods when properly used give opposing decision.

1.       The payback period method will always give results consistent with rate of return or present/annual worth methods.

1.       The meaning of multiple roots is seen most easily with the concept of ______.

a.       Project balance

1.       The IRR method cannot be used to determine which of a group of mutually exclusive alternatives to accept

1.       The payback period method will always give results consistent with rate of return or present/annual worth methods.

1.       You should invest in any project that has an IRR equal to or exceeding the _____.

a.       MARR

1.       Which of the following are steps for computing the ERR that belong to a more convenient, but approximate procedure that finding a precise ERR?

a.       Take all net receipts forward at the MARR to the times of the last cash flow

b.      Take all net disbursements forward at an unknown interest rate also to the time of the last cash flow

c.       Equate the future value of the receipts from the first step of the procedure to the future value of the disbursements for the second step of the procedure and solve for

d.      All of the above

1.       The IRR is the interest rate at which a project ____.

a.       Just breaks even

1.       The salvage value of an asset can be estimated using a depreciation model.

1.       The book value is usually taken as the actual value an asset can be sold for in an open market.

1.       An asset starts to lose value as soon as it’s purchased.

1.       A declining-balance method in which the depreciation rate is calculated as 1.5/N for a service life of N years is known as:

a.       150%-declining balance

1.       Bicycles have a limited life span because the tires wear out. This is an example of:

a.       Use-related physical loss

1.       An asset is purchased for $5,000. The salvage value at the end of its four year life is $1000. What is the annual depreciation charge assuming the rate of loss in asset value is constant.

a.       1000 

4.       Graphically the ____ of an asset can be determined by drawing a straight line between its first cost and its salvage value when using the straight-line depreciation method.

a.       Book Value 

1.       Savings (reducing expenses) increase the profits of a firm and therefore they are taxed.

1.       The effective cost of purchasing an asset is less than its first cost.

1.       Capital purchases cannot usually be fully claimed as an expense in the year in which the purchase occurred.

1.       If an investment yields a profit, the total investment price will be taxed.

1.       What would the after-tax MARR be on an investment with a before-tax MARR of 16% for a company who pays 30% corporate taxes?

1.       The CCA system specifies the ______ rate a firm can use to depreciate its assets for tax purposes, known as the CCA rate.

a.       Maximum

1.       Personal income taxes usually exhibit a:

a.       Progressive tax rate 

1.       In the early years of an asset’s life, the capital costs per year always dominate total yearly costs.

1.       In the replacement case where the defender and challenger are identical, it is not necessary to assume that the two options are technologically identical.

1.       Sunk costs are irrelevant to any decision to replace the current asset.

1.       Capital cost is incurred by the difference between what is paid for the asset and what the asset could be resold for some time after purchase.

1.       Purchase of a long-lived asset implies which of the following?

a.       Capital cost

b.      Maintenance cost

c.       Operating cost

d.      Installation cost

e.       All of the above

1.       It is ____ true that capital cost per year falls with increasing life.

a.       Usually 

1.       The costs discussed in Chapter 13 can be related to the more general ideas of ___ and ___ costs.

a.       Fixed, variable 

1.       The above below figure shows that a basket of goods that cost $100 in 2002 would have cost approximately $60 in 1984 and $20 in 1970.

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1.       The actual MARR is the real MARR plus an upward adjustment that reflects the effect of inflation

1.       The inflation rate is the rate of increase in average prices of goods and services over a specified time period, usually a year.

1.       To judge whether an index is appropriate for a particular purpose, the analyst should know how the _______

a.       Goods and services for which he or she is estimating inflation compare with the set of goods and services use to compute the index

1.       Inflation can also be viewed as ____ the purchasing power of money over time.

a.       An increase in

b.      A change in

c.       An interest rate change in

d.      A published number describing

e.       None of the above 

1.       Typically a price index relates the average price of a given set of ____ in some time period to the average price of the same ____ in another period.

a.       Goods 

1.       A decision tree is a graphical representation of the logical structure of a decision problem in terms of the sequence of decisions to be made and outcomes of chance events

1.       A random variable is a parameter that can take on a number of possible outcomes

a.       Determine the MARR that results in a zero present worth

b.      Determine what parameter value causes the performance measure to reach some threshold

c.       Compare multiple projects

d.      Determine the revenues required to produce a zero annual worth

e.       All of the above

1.       Decision trees are a graphical means of structuring _______

a.       A decision-making situation

1.       The expected value associated with the node farthest to the left in a decision tree is the expected value of the overall decision.

1.       EV is an acronym for “expected variable”.

1.       ____ is an approach to project evaluation that can be used to gain a better understanding of how uncertainty affects the outcome of the evaluation by examining how sensitive the outcome is to changes in the uncertain parameters. 

a.       Sensitivity analysis 

1.       The severity of negative consequences in a project’s life span is…

a.       Minimal early in the project’s life.

1.       A project organization can choose to ____ risk.

a.       Accept

b.      Share

c.       Transfer

d.      All of the above (d. Correct Answer)

1.      He knew instinctively that his professor wouldn’t appreciate it if he brought his single scoop of vanilla ice cream into the lecture room with him. He could almost hear the inevitable question, “Did you bring enough for everyone?” To avoid such an embarrassment, he practically inhaled his frozen confection as he raced down the hall. He had eaten ice cream this way before and knew he would soon have an ice cream headache. This is an example of an event that is …

HIGH IN PROBABILITY AND LOW IN CONSEQUENCE

1.       Which of the following is NOT one of the risk management steps?

a.       Planning and scheduling

1.       In determining relevant risks and formulating proactive strategies for their mitigation, the project team can pay a little in terms of extra time and cost initially, or it must be prepared to…

a.       Pay potentially exorbitant amounts of time and money in the future. (a. Correct Answer)

1.       Any number of risks of a relatively minor nature may be present in a project as a matter of course. However, because the likelihood of their occurrence is so small or the consequences of their impact are so minor, they may be judged ____ and ignored.

1.       Many project organizations create relationships with suppliers and customers that include ____requirements for risk to be shared among those involved in the project.

1.       Change is made by _____

a.       People 

1.       There are four classic outcomes from change, which reflect the risks and the ways to avoid them. They are: the disaster, the lost investment, the _______ and the ideal

a.       Partial success

1.       The duration and structure of change initiatives vary significantly, but all have a degree of complexity and…

a.       Are outside the normal daily workload

1.       One significant cost that is often forgotten is the effect on the time of everyone affected by change. Many people in the organisation will need to give up time to …

a.       Explain how things work to those involved in designing changes.

b.      Be consulted on the effectiveness and realism of planned change.

c.       Be trained and have changes explained to them.

d.      All of the above 

1.       Very broadly, change initiatives can be categorized into three main types, which of the following is NOT one of them?

a.       Contingency or crisis change 

1.       This diagram represents:

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a.       The disaster

This diagram represents :

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a.       The ideal 

1.       The diagram represents:

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1.       There are a variety of changes in terms of scope and approach. Change requires a combination of creating ________ which enable the change and change management ______ to encourage change to occur

1.       There are two main dimensions to every change: the ________ dimension dealing with the responses of individuals, and the _______ dimension ensuring the change is compatible with your operations.

1.       An ideal outcome from a change is when the risks from change (or every component of change) are ______and appropriate ___________    ___________are put in place.

1.       One of the most important activities of change management is selecting and prioritizing the optimal change(s) to undertake at any time, balancing ________ term operational needs with _______ term strategic vision.

1.       One of the most important activities of change management is assessing the ___________risks from change, and ensuring ___________ is taken to manage these risks, including the longer-term execution risks.

1.       The following are all typical middle management job titles: plant manager, operations manager, and office manager.

1.       Controlling involves the interactions between managers and their subordinates as they both work to meet the firm’s objective

1.       Concentration, growth, integration, diversification and investment reduction are all examples of different corporate level strategies. 

1.       The following are all typical management job titles: plant manager, operations manager, and office manager

1.       Controlling is the process of _______

a.       Establishing standards

b.      Monitoring a firm’s performance

c.       Assessing if performance matches standards

d.      Adjusting performance standards

e.       All of the above

1.       Crisis management involves 

a.       An organization's plan for dealing with emergencies that require an immediate response. 

1.       Which of the following is NOT a force that shapes corporate culture?

a.       Stock price

1.       Which of the following is NOT a force that shapes corporate culture?

a.       Stock price

1.       If a firm establishes a back-up plan, they are engaging in ________. 

a.       contingency planning 

1.       The shared experiences, stories, beliefs, and norms that characterize an organization are known as :

1.       Management is the process of ______.

a.       Planning

b.      Organizing 

c.       Leading

d.      Controlling

e.       Correct Response                         

f.        All of the above