Project Selection Methods

Question 1

What should be done to a project if its NPV is less than zero?

Answer 1

Reject the project

Question 2

What should be done to a project if its NPV is equal to or more than zero?

Answer 2

Accept the project

Question 3

Which method uses “time value of money” to appraise long-term projects?

Answer 3

Net Present Value (NPV)

Question 4

Among three projects with low, medium and high opportunity costs, which project is most attractive?

Answer 4

Project with the lowest opportunity cost is the most attractive.

Question 5

What are the two categories of project selection methods?

Answer 5

• Benefit Measurement

- Constrained Optimization

Question 6

How do Benefit Measurement methods of project selection work?

Answer 6

They compare the projects based on features and benefits.

Question 7

How do Constrained Optimization methods of project selection work?

Answer 7

They use complex mathematical models and algorithms to predict the success of the project.

Question 8

What are the two main types of accelerated depreciations?

Answer 8

• Declining Balance - Sum of the Years Digit

Question 9

What are the various Benefit Measurement methods of project selection?

Answer 9

• Murder Board - Peer Review - Scoring Models - Economic Models

Question 10

What are the various Constrained Optimization methods of project selection?

Answer 10

• Linear programming - Nonlinear programming - Dynamic programming - Integer programming - Multi-objective programming

Question 11

Which type of project selection method is Murder Board?

Answer 11

Benefit Measurement method

Question 12

Which type of project selection method is Dynamic Programming?

Answer 12

Constrained Optimization method

Question 13

Which type of project selection method uses ROI?

Answer 13

Benefit Measurement method

Question 14

What are the various economic models of project selection?

Answer 14

• Present Value (PV) - Net Present Value (NPV) - Internal Rate of Return (IRR) - Return on Investment (ROI) - Payback Period - Benefit-cost Ratio

Question 15

What are the two forms of depreciation?

Answer 15

• Straight-line - Accelerated

Question 16

Which types of project selection methods use a comparative approach?

Answer 16

Benefit Measurement methods

Question 17

Which types of project selection methods use a mathematical approach?

Answer 17

Constrained Optimization methods

Question 18

Which is better - a project with higher NPV or a project with lower NPV?

Answer 18

The higher the NPV, the better.