Section 2: Integration Management

QUESTION 151
You have been assigned as the project manager for a construction project that has had two previous project managers, when you discover that a deliverable will be late. Your analysis shows that the item can be purchased from another seller at a higher price without affecting the schedule. What is the BEST thing to do?
A. Evaluate the impact of the decision.
B. Discuss the impact with the customer and ask for a decision.
C. Crash or fast track the project.
D. Change the project management plan to reflect the new due date.
Answer: B

Explanation:
The impact has already been determined, so choice A is not correct. Crashing or fast tracking (choice C) would have already been done to determine the impact. Changing the project management plan (choice D) only hides the problem and is unethical.
Source: PMP® Exam Prep Page: 128

QUESTION 152
A project may be selected based on all of the following EXCEPT:
A. Benefit measurement.
B. Net present value (NPV).
C. The number of resources used.
D. Value analysis.
Answer: D
Explanation:
Value analysis is a way of making sure that the least expensive way is found to do the work.
Source: PMP® Exam Prep Page: 107

QUESTION 153
A company is attempting to select the BEST project from a list of possible choices. If the information they have includes the following benefit cost ratios, which project should they pick?
A. 2.2
B. 1.3
C. 0.8
D. 1.6
Answer: A
Explanation:
The higher the benefit cost ratio, the better.
Source: PMP® Exam Prep Page: 108

QUESTION 154
What does a benefit cost ratio (BCR) of 2.1 mean?
A. The costs are 2.1 times the benefits.
B. The profit is 2.1 times the costs.
C. The payback is 2.1 times the costs.
D. The cost is 2.1 times the profit.
Answer: C
Explanation:
This formula measures benefits to costs, not just profit. Payback is equated to benefits here.
Source: PMP® Exam Prep Page: 108

QUESTION 155
Which factor would NOT be considered when choosing between two projects to undertake?
A. Net present value (NPV)
B. Benefit cost ratio (BCR)
C. Payback period
D. Law of diminishing returns
Answer: D
Explanation:
The law of diminishing returns has nothing to do with choosing between projects. Notice that this question requires you to understand that projects should be systematically selected and that the selection should be based on some formal evaluation of all projects available. Many project managers have little experience or knowledge of the activities such as this that go on during project initiating. Though there are not many questions on the exam on project initiating, a little study can help you get many of these questions right, even if you are not currently involved in initiating projects in your company.
Source: PMP® Exam Prep Page: 106

QUESTION 156
The cost of choosing one project and giving up another is called:
A. Fixed cost.
B. Sunk cost.
C. Net present value (NPV).
D. Opportunity cost.
Answer: D
Explanation:
Choices A and B are types of costs and do not relate to “giving up another.” Choice C is a way to determine today’s value of a future cash flow and does not deal with the quoted phrase. The definition of opportunity cost includes the cost of choosing one project and giving up another, and thus it is the best answer.
Source: PMP® Exam Prep Page: 110

QUESTION 157
If project A has a net present value (NPV) of US $30,000 and project B has an NPV of US $50,000, what is the opportunity cost if project B is selected?
A. $23,000
B. $30,000
C. $20,000
D. $50,000
Answer: B
Explanation:
The opportunity cost is the value of the project that was not selected; the lost opportunity.
Source: PMP® Exam Prep Page: 110

QUESTION 158
Project A has an internal rate of return (IRR) of 21 percent. Project B has an IRR of 7 percent. Project C has an IRR of 31 percent. Project D has an IRR of 19 percent. Which of these would be the BEST project?
A. Project A
B. Project B
C. Project C
D. Project D
Answer: C
Explanation:
Remember, the internal rate of return is similar to the interest rate you get from the bank. The higher the rate is, the better the return.
Source: PMP® Exam Prep Page: 108

QUESTION 159
Four projects have been proposed to management. Project A has a payback period of 16 months. Project B has a payback period of 12 months. Project C has a payback period of eight months. Project D has a payback period of six months. Which project should management choose?
A. Project A
B. Project B
C. Project C
D. Project D
Answer: D
Explanation:
The concept is how long will it take to get back your initial investment from this project. The faster you get your money back, the faster you can reinvest that money in another endeavor. The shorter the time the better, or choice D.
Source: PMP® Exam Prep Page: 108

QUESTION 160
You have four projects from which to choose one. Project A is being done over a six year period and has a net present value (NPV) of US $70,000. Project B is being done over a three year period and has an NPV of US $30,000. Project C is being done over a five year period and has an NPV of US $40,000. Project D is being done over a one year period and has an NPV of US $60,000. Which project would you choose?
A. Project A
B. Project B
C. Project C
D. Project D
Answer: A
Explanation:
The number of years is already included in the calculation of NPV. You simply pick the project with the highest NPV.
Source: PMP® Exam Prep Page: 107