True-False Questions
1.
A steering committee is likely to bring a more diverse perspective than
user groups, development teams, or top management when it comes to selecting
systems development projects.
Answer: True Page Reference: 95 Difficulty: Moderate
2.
A project initiative stemming from a business unit or an IS development
group is considered to have a bottom-up source.
Answer: True Page Reference: 95 Difficulty: Moderate
3.
Value chain analysis is concerned with determining the extent to which
a project contributes to the strategic objectives of the organization.
Answer: False Page Reference: 96 Difficulty: Moderate
4.
An accept, reject, or delay decision is an input to the project
selection process.
Answer: False Page Reference: 96 Difficulty: Moderate
5.
All feasibility assessment efforts will be completed before the project
identification and selection decisions are made.
Answer: False Page Reference: 97 Difficulty: Moderate
6.
A project’s BPP is usually NOT shared with customers.
Answer: True Page Reference: 100 Difficulty: Moderate
7.
Identifying and assessing project risk is an activity normally
completed during project initiation.
Answer: False Page Reference: 100 Difficulty: Moderate
8.
The report that provides justification for an information systems
project is called a business case.
Answer: True Page Reference: 100 Difficulty: Easy
9.
An project charter is considerably less detailed than a BPP.
Answer: True Page Reference: 100 Difficulty: Moderate
10.
Cost-benefit analysis is a type of operational feasibility assessment.
Answer: False Page Reference: 104 Difficulty: Moderate
11.
Increasing employee morale is a tangible benefit that can accrue from a
well-developed information system.
Answer: False Page Reference: 105 Difficulty: Moderate
12.
When taking into account the time value of money, a lump sum payment up
front may be as valuable as a series of installment payments that add up to a
greater number of dollars than the lump sum payment.
Answer: True Page Reference: 107 Difficulty: Moderate
13.
If you will receive $1000 from a customer in a future payment, then the
present value of that payment is more than $1000.
Answer: False Page Reference: 107-108 Difficulty: Moderate
14.
Calculating a net present value requires knowledge of a discount rate.
Answer: True Page Reference: 107-108 Difficulty: Moderate
15.
Project risk assessment is typically conducted as part of the technical
feasibility analysis.
Answer: True Page Reference: 110 Difficulty: Moderate
16.
Identification of stakeholders’ concerns and the likelihood of
acceptance or rejection of a new information system is the main task in
political feasibility assessment.
Answer: True Page Reference: 112 Difficulty: Easy
17.
A project charter between a consulting firm and a client company is
likely to be more formal and contractual than a project scope statement between
an internal development group and a user group within the same company.
Answer: True Page Reference: 115 Difficulty: Moderate
18.
A statement of project scope is an integral part of a baseline project
plan’s introduction section.
Answer: True Page Reference: 113 Difficulty: Easy
19.
A structured walkthrough should be conducted before the baseline plan
is developed.
Answer: False Page Reference: 117 Difficulty: Moderate
20.
The incremental commitment approach typically bases decisions on
whether to continue a project on the results of a structured walkthrough.
Answer: True Page Reference: 121 Difficulty: Moderate
Multiple-Choice Questions
21.
Which individual or group is likely to focus mostly on integration with
existing systems when selecting a systems development project?
a.
Top management
b.
Steering committee
c.
User department
d.
Development group
Answer: d Page
Reference: 95 Difficulty: Moderate
22.
Value chain analysis is a common procedure used for:
a.
ranking and classifying potential systems projects.
b.
constructing a baseline project plan.
c.
comparing present cash outlays to future expected returns.
d.
assessing the technical feasibility of the project.
Answer: a Page
Reference: 95-96 Difficulty: Moderate
23.
The systems analysis strategy in which the project is reviewed after
each stage in order to decide whether or not to continue work on the project is
called:
a.
committee steering.
b.
incremental commitment.
c.
value-chain analysis.
d.
feasibility assessment.
Answer: b Page
Reference: 97 Difficulty: Moderate
24.
The common rule of thumb is that ____________ percent of the total
project development effort should be expended on project planning and
management.
a.
1-2
b.
5-8.
c.
10-20.
d.
25-40.
Answer: c Page
Reference: 97 Difficulty: Moderate
25.
The systems analyst uses communication skills and inputs from the
proposed system’s customers and the technical staff to translate a vague
request into a:
a.
tangible project description.
b.
return on investment.
c.
cross-functional system view.
d.
structured system walkthrough.
Answer: a Page
Reference: 98 Difficulty: Moderate
26.
The business case is a document that describes the:
a.
detailed breakdown and sequence of project activities.
b.
descriptions of project deliverables for the customer.
c.
justification, benefits, and feasibility of the project.
d.
user’s problem and request for a new system.
Answer: c Page
Reference: 100 Difficulty: Moderate
27.
The ____________ is a detailed, internal document created for the
development team during project initiation and planning, and continuously
revised during execution of the project.
a.
Project Charter
b.
System Service Request
c.
Walkthrough Review Form
d.
Baseline Project Plan
Answer: d Page
Reference: 100-101 Difficulty: Moderate
28.
Which of the following would be considered a tangible benefit
justifying a systems development project?
a.
Reduction of transaction costs
b.
Increased organizational flexibility
c.
Data/system conversion effort
d.
Price of new hardware leases
Answer: a Page
Reference: 104 Difficulty: Moderate
29.
Monetary outlays required for maintaining the application software is
considered to be a type of:
a.
intangible cost.
b.
one-time benefit.
c.
tangible benefit.
d.
recurring cost.
Answer: d Page
Reference: 105 Difficulty: Moderate
30.
Suppose you are considering investing a lump sum of money at 10% annual
interest rate and will collect a total of $1000 after three years. What is the
approximate present value for this investment?
a.
approximately $500
b.
approximately $675
c.
approximately $750
d.
approximately $825
Answer: c Page
Reference: 107-108 Difficulty: Hard
31.
The yearly NPV cash flow is $10,000. The overall NPV cash flow is
$5000. What is the break-even ratio?
a.
0.3
b.
0.5
c.
0.7
d.
0.9
Answer: b Page
Reference: 109 Difficulty: Moderate
32.
Which of the following is a financial technique contributing to
cost-benefit analysis?
a.
Economic feasibility
b.
Net present value
c.
Risk assessment
d.
Project scope calculation
Answer: b Page
Reference: 109 Difficulty: Moderate
33.
The ratio of the net cash receipts of a project divided by its cash
outlays is called:
a.
time value of money.
b.
net present value.
c.
break-even analysis.
d.
return on investment.
Answer: d Page
Reference: 109 Difficulty: Moderate
34.
Issues such as project size, ease of requirements attainment, degree of
standardization, and developer expertise all should be considered when
performing:
a.
operational feasibility evaluation.
b.
cost-benefit analysis.
c.
technical risk assessment.
d.
political feasibility studies.
Answer: c Page
Reference: 110-111 Difficulty: Moderate
35.
Of the following scenarios, which implies the greatest risk for a
project?
a.
High familiarity with application area, high structure, small project
b.
Low familiarity with application area, low structure, large project
c.
High familiarity with application area, low structure, small project
d.
Low familiarity with application area, high structure, large project
Answer: b Page
Reference: 111-112 Difficulty: Moderate
36.
The baseline project plan’s ____________ section should include a
comparison of the alternative system configurations along with a narrative of
the recommended solution.
a.
Introduction
b.
system description
c.
feasibility assessment
d.
configuration section
Answer: b Page
Reference: 114 Difficulty: Moderate
37.
The primary intended audience for the Project Scope Statement document
is the:
a.
project manager.
b.
customer.
c.
development team.
d.
steering committee.
Answer: b Page
Reference: 115 Difficulty: Moderate
38.
Gantt or network charts displaying the overall project schedule should
be placed in the baseline project plan’s ____________ section.
a.
introduction
b.
system description
c.
feasibility assessment
d.
management issues
Answer: c Page
Reference: 116 Difficulty: Moderate
39.
Team configurations and communications plans are part of the baseline
project plan’s ____________ section.
a.
introduction
b.
system description
c.
feasibility assessment
d.
management issues
Answer: d Page
Reference: 116-117 Difficulty: Moderate
40.
A peer group review of a product created during the systems development
process is called a:
a.
structured walkthrough.
b.
feasibility study.
c.
methodology review.
d.
peer group overview.
Answer: a Page
Reference: 117 Difficulty: Moderate
Essay and Problem-Solving
Questions
41.
Compare and contrast the four most common stakeholder groups that are
involved in identifying and selecting potential information systems development
projects. For each group identified, what is the focus that the group brings to
bear in its selection decision, and what are the characteristics of the project
with respect to cost, duration, complexity and system size? Which of these
approaches are considered to be top-down, and which are bottom-up?
Answer:
The
process of identifying and selecting information systems for development is
typically initiated by one of four possible constituencies: top management, an
IS steering committee, an individual user group or department, or members of
the IS staff. Top management tends to have a strategic focus, aligning the
system directly to organizational goals and objectives. Projects initiated by
top management tend to be very large, highly complex, extend over long
durations, and quite costly. A steering committee has a cross-functional focus,
bringing to bear opinions and insights from a diverse range of personnel. These
systems are also large and complex requiring long, costly project commitment,
although typically not as much as the projects initiated by top management.
User departments tend to have a much narrower and tactical focus, and the
development efforts required for meeting their needs are typically less
expensive and involve shorter duration, resulting in simpler and smaller
systems. The IS development group’s primary focus is technical, specifically
related to integration of the new system with existing systems used by the
organization. Their efforts range from low to high in cost, complexity, duration
and size. Top-down approaches are those initiated by top management or the
steering committee, whereas those initiated by a user department or the IS
staff are considered bottom-up.
Page Reference: 93-95 Difficulty: Moderate
42.
List and describe the criteria commonly used to evaluate and rank
potential information systems development projects. As you describe each
criterion, relate it to its analogous feasibility analyses that will be
performed during project planning.
Answer:
The
most commonly used evaluation criteria pertain to value chain, strategic
alignment, potential benefits, resource availability, project size and
duration, and technical difficulty and risk. Value chain analysis examines the
extent to which the project activities add value or cost to the organization;
this is analogous to economic feasibility and in particular cost-benefit
analysis. Strategic alignment refers to the extent to which a project is viewed
as helping the organization achieve its goals and objectives, and is analogous
to political, operational, and perhaps legal feasibility analysis. Potential
benefits measuring the extent to which the project is perceived to improve
profits, customer service, etc., and is analogous to economic feasibility and
cost-benefit analysis. Resource availability is an assessment of whether the
amount and type of resources is available to the organization; this is relevant
for both schedule and technical feasibility. Project size and duration
addresses how long the project is expected to take, and is related to schedule
feasibility. The technical difficulty and risk criterion is, of course, most
directly tied to technical feasibility and risk assessment.
Page Reference: 95-96, Difficulty: Moderate
43.
List and describe the different types of feasibility considered during
a feasibility analysis, and identify techniques and/or considerations involved
in each of these types of feasibility assessment.
Answer:
Feasibility
analysis involves assessing likelihood of project success with regard to economic,
operational, technical, schedule, legal and political factors. Economic
feasibility assessment involves performing a cost-benefit analysis identifying
both tangible and intangible costs and benefits. Common techniques for the
tangible cost and benefit examinations include net present value, return on
investment, and break-even analyses. Operational feasibility analysis assesses
the likelihood that the proposed system will solve the problems that motivate
the project in the first place, and requires a clear understanding of how the
information system will fit into the current day-to-day operations of the
organization. Technical feasibility addresses the question of whether the
proposed system can be successfully constructed given the organization’s current
technological status. This involves identifying potential technical risks
related to project size, ease of requirements attainment, type of technology
required, and the technical expertise of the development staff. Schedule
feasibility considers the likelihood that a project can be completed in a
timely manner based on knowledge of the required project deadlines and
milestones. Legal feasibility examines the effect on the project and system of
regulatory constraints and requirements, such as copyright issues, foreign
trade restrictions, labor laws, and contractual issues. Finally, political
feasibility examines the degree to which the new system will be welcomed or
resisted by personnel in the organization.
Page Reference: 102-112 Difficulty: Moderate
44.
When performing a cost-benefit analysis, it is important to consider
the tangible and intangible benefits, the tangible and intangible costs, and to
recognize the difference between one-time and recurring costs. Briefly define
each of these terms and give examples that you think would be typical for
systems development projects.
Answer:
The
term “tangible” refers to costs or benefits that can be directly measured in
dollars and cents, whereas “intangible” means costs and benefits that have no
direct monetary translation. With this in mind, tangible benefits from a new
information system include items such as transaction cost reduction, error
reduction, increased operational speed, and increased sales opportunities.
Intangible benefits include organizational flexibility, employee morale,
improved customer relations, and promotion of organizational learning and
understanding. Tangible costs include hardware, labor, and operational costs,
whereas intangible costs include political resistance, operational
inefficiencies, and loss of employee morale. One-time costs are those involved
in project initiation, systems development, and the start-up of the system, and
include development costs, new hardware and software purchases, site
preparation, system conversion, installation and user training. Recurring costs
exist for the ongoing life and use of the system, and include application
maintenance, incremental data storage and communications costs, new hardware
and software leases, and consumable supplies.
Page Reference: 104-107 Difficulty: Moderate
45.
Identify three common financial techniques for conducting economic
feasibility, particularly as it relates to analyzing tangible costs and
benefits. Also, discuss time value of money and how this relates to the
economic feasibility assessment. Be sure to include in this discussion the
names of the three techniques, a description of their mathematical formulas, a
discussion of what information each provides, and an identification of which
techniques rely on outputs from which others.
Answer:
The
three techniques are called net present value (NPV), return on investment
(ROI), and break-even analysis (BEA). NPV is the starting point on which both
ROI and BEA depend. NPV is directly related to time value of money (TVM), which
compares present cash outlays to future expected returns based on an expected
discount rate. The NPV is calculated by combining present values (PV) for each
year. The PV uses the discount rate in this formula: PVn = Y * (1/ (1 + i) n) where Y is
the monetary amount in today’s dollars, i
is the discount rate, and n is the
number of years for realization of the investment or loan. NPV is a sum of all
PVs for the duration of the loan or investment. The NPV is used to determine
the present value of both costs and benefits of a system.
Based
on NPVs for the costs and benefits, you can calculate ROI, which is the ratio
of net cash receipts divided by cash outlays. In other mathematical terms, ROI
= (NPVbenefits – NPVcosts) / NPVcosts. ROI is a useful number for comparing the
value of different alternative projects in order to select the most
cost-effective solution. In essence, the ROI gives an idea of the degree of
profitability you can expect at the end of the project time horizon.
The
BEA is also calculated using PV and NPV results. BEA determines the amount of
time required for the cumulative cash inflow from a project to equal its
initial and ongoing costs. To determine this, you calculate PV and NPV costs
and benefits for each year of the project until you reach a year where the NPV
benefits are higher than the NPV costs. At this point, you can obtain the
specific point in time of the year in question by calculating that year’s
break-even ratio. The break-even ratio is calculated by subtracting the overall
NPV cash flow at that year from one-year cash flow for that year, and then
dividing the result by the one-year sash flow for that year. In mathematical
terms, it looks like this: Break-even ratio =
((PVbenefits – PVcosts) – (NPVbenefits
– NPVcosts)) / (PVbenefits – PVcosts).
That
ratio, when added to the previous year number, gives the total number of years
to the break-even point. In essence, the break-even analysis gives you an idea
of how long it takes before you begin to turn a profit for the project efforts.
Page Reference: 106-110 Difficulty: Hard
46.
Consider the following scenario of tangible costs and benefits for a
systems development project. Estimated development time is one year, and the
one-time development cost is $9000. Each year after that, maintenance and usage
costs are $4000. The estimated benefits after the system is developed are $8000
per year. Note that these estimates are based on today’s dollar values. Assume
a discount rate of 10% per year on the time value of money.
Based
on the above scenario, calculate the net present value for benefits and costs
over a five year time horizon (calculate NPV for each year). Then determine the
return on investment after this time period. Finally, determine the break-even
point. Show your work.
Answer:
NPV
Costs:
Year 0: $9000 (one-time development cost)
Year 1: 9000 +
4000 * (1/ (1 + .1) 1) = 9000 + 3636 = $12,636
Year 2: 12,636
+ 4000 * (1/ (1 + .1) 2) = 12,636 + 3306 = $15,942
Year 3: 15942 +
4000 * (1/ (1 + .1) 3) = 15942 + 3005 = $18,947
Year 4: $21,679
Year 5: $24,163
NPV
Benefits
Year 0:
$0
Year 1:
8000 * (1/ (1 + .1) 1) = $7273
Year 2:
7273 + 8000 * (1/ (1 + .1) 2) = 7273 + 6612 = $13,884
Year 3:
13884 + 8000 * (1/ (1 + .1) 3) = 13884 + 6011 = $19,895
Year 4:
$25,359
Year 5:
$30,326
Overall
NPV: $6163
ROI: 6163/24163 = 25.5%
Break-Even
between year 2 and 3.
Break-Even
Ratio (year 3): ((6011 – 3005) – (19895
– 18947)) / (6011 – 3005) =
(3006 – 948)/3006 = 0.685
Break-even
point is year 2.685
Page Reference: 106-110 Difficulty: Hard
47.
Discuss the project risk factors that a project manager must be
concerned with when planning the project. How do these factors influence the
likelihood of project success? At which point in the planning process are these
factors evaluated? What are some consequences of neglecting to address these
risk factors?
Answer:
Project
risk is most directly affected by (a) the size and scope of the project, (b)
the level of structure of the requirements process, (c) the degree of
standardization of the technology involved, and (d) the level of familiarity
and expertise of the technical staff and user community. As a general rule of
thumb, large projects are riskier than small projects, low structure is riskier
than high structure, low standardization is riskier than high standardization,
and low familiarity is riskier than high familiarity. Projects will vary in each of these factors,
so it is important that the project manager carefully assess each of these factors;
this is typically done as part of the feasibility assessment. If project risk
factors are not considered during the planning process, this could lead to
inaccurate cost and duration estimates, or a poorly developed system that does
not meet performance and integration requirements. In sum, the project will be
less likely to attain its desired benefits.
Page Reference: 110-111 Difficulty: Moderate
48.
Describe the structure of a baseline project plan as discussed in
Chapter 4. List all the sections, indicate their purposes, and briefly describe
the contents of each section.
Answer:
The
baseline project plan consists of an introduction, a systems description, a
feasibility analysis, and a discussion of management-related issues. The
introduction’s purpose is to provide an overview of the entire plan document,
and to succinctly state the recommended course of action. The purpose of the
system description section is to provide a detailed discussion of the
alternative system solutions and a justification for the selected one. The
feasibility assessment is supposed to outline the costs, benefits, and risks
involved in the project, and to outline the tasks and schedule required for
completing the project. The management issues section outlines management concerns,
particularly with respect to unique characteristics that are not shared with
other projects.
The
introduction is composed of a project overview, including a statement of the
problem, project scope, and a statement of feasibility. In addition, the recommendation
is briefly described. The system description section presents each alternative
solution, and then discusses the recommended solution, together with required
inputs, outputs, configuration, processes and tasks. The feasibility assessment
includes economic, technical, operational, legal/contractual, and political
analyses. In addition, Gantt, network, PERT, WBS, and resource allocation
analyses are presented to indicate schedule feasibility. Management issues
include discussions of team configuration, a communication plan, project
standards and procedures, and any other relevant issues pertaining to the
management of the project.
Page Reference: 113-117 Difficulty: Moderate
49.
What is a project scope statement (PSS)? Who are the intended audience
of a PSS, and what purpose does it serve? How does the PSS relate to the
baseline project plan? How does the PSS
affect the relationship between the systems developers and the customer?
Answer:
The
project scope statement is a short document, prepared primarily for the
customer. The PSS outlines the objectives and constraints for the project. It
is basically a high-level description of the baseline project plan.
Specifically, it describes what the project will deliver, and the work that is
required to complete the project. Therefore, the PSS is a useful communication
tool which ensures that the developers and the customer have a common
understanding of the project size, duration, and outcome. The PSS may serve as
a formal contract between developer and customer, or may simply be an informal
communication vehicle, depending on the nature of the relationship.
Page Reference: 115 Difficulty: Moderate
50.
What is a structured walkthrough? What purpose does it serve in the
planning process? Which work products in a systems project can benefit from a
walkthrough? How is the walkthrough process implemented? List and describe the
participant roles involved in a typical walkthrough.
Answer:
A
structured walkthrough is a peer group review of any product created during the
systems development process. The purpose is to assure that the system conforms
to organizational standards and that all stakeholders have a common
understanding and agreement regarding the product being reviewed. Walkthroughs
are useful for assessing the deliverables from each phase of the systems
development process, including the baseline project plan, system
specifications, logical and physical designs, code and program segments, test
procedures and results, and manuals and documentation.
A
walkthrough typically takes place as one or more meetings attended by different
stakeholder representatives. The work product is presented, and then
stakeholders are polled to see if they have any recommendations for
improvement. Typical roles include (1) a coordinator who plans the meeting and
facilitates discussion, (2) a presenter who describes the work product to the
group, (3) a user representative who evaluates the product based on the
customer perspective, (4) a secretary to keep notes on the meeting, (5) a
standard-bearer who ensures that technical standards are being satisfied, and
(6) a maintenance oracle who evaluates the product with the goal of making
maintenance as easy as possible.
Page Reference: 117-119 Difficulty: Moderate
True-False Questions
1.
A steering committee is likely to bring a more diverse perspective than
user groups, development teams, or top management when it comes to selecting
systems development projects.
Answer: True Page Reference: 95 Difficulty: Moderate
2.
A project initiative stemming from a business unit or an IS development
group is considered to have a bottom-up source.
Answer: True Page Reference: 95 Difficulty: Moderate
3.
Value chain analysis is concerned with determining the extent to which
a project contributes to the strategic objectives of the organization.
Answer: False Page Reference: 96 Difficulty: Moderate
4.
An accept, reject, or delay decision is an input to the project
selection process.
Answer: False Page Reference: 96 Difficulty: Moderate
5.
All feasibility assessment efforts will be completed before the project
identification and selection decisions are made.
Answer: False Page Reference: 97 Difficulty: Moderate
6.
A project’s BPP is usually NOT shared with customers.
Answer: True Page Reference: 100 Difficulty: Moderate
7.
Identifying and assessing project risk is an activity normally
completed during project initiation.
Answer: False Page Reference: 100 Difficulty: Moderate
8.
The report that provides justification for an information systems
project is called a business case.
Answer: True Page Reference: 100 Difficulty: Easy
9.
An project charter is considerably less detailed than a BPP.
Answer: True Page Reference: 100 Difficulty: Moderate
10.
Cost-benefit analysis is a type of operational feasibility assessment.
Answer: False Page Reference: 104 Difficulty: Moderate
11.
Increasing employee morale is a tangible benefit that can accrue from a
well-developed information system.
Answer: False Page Reference: 105 Difficulty: Moderate
12.
When taking into account the time value of money, a lump sum payment up
front may be as valuable as a series of installment payments that add up to a
greater number of dollars than the lump sum payment.
Answer: True Page Reference: 107 Difficulty: Moderate
13.
If you will receive $1000 from a customer in a future payment, then the
present value of that payment is more than $1000.
Answer: False Page Reference: 107-108 Difficulty: Moderate
14.
Calculating a net present value requires knowledge of a discount rate.
Answer: True Page Reference: 107-108 Difficulty: Moderate
15.
Project risk assessment is typically conducted as part of the technical
feasibility analysis.
Answer: True Page Reference: 110 Difficulty: Moderate
16.
Identification of stakeholders’ concerns and the likelihood of
acceptance or rejection of a new information system is the main task in
political feasibility assessment.
Answer: True Page Reference: 112 Difficulty: Easy
17.
A project charter between a consulting firm and a client company is
likely to be more formal and contractual than a project scope statement between
an internal development group and a user group within the same company.
Answer: True Page Reference: 115 Difficulty: Moderate
18.
A statement of project scope is an integral part of a baseline project
plan’s introduction section.
Answer: True Page Reference: 113 Difficulty: Easy
19.
A structured walkthrough should be conducted before the baseline plan
is developed.
Answer: False Page Reference: 117 Difficulty: Moderate
20.
The incremental commitment approach typically bases decisions on
whether to continue a project on the results of a structured walkthrough.
Answer: True Page Reference: 121 Difficulty: Moderate
Multiple-Choice Questions
21.
Which individual or group is likely to focus mostly on integration with
existing systems when selecting a systems development project?
a.
Top management
b.
Steering committee
c.
User department
d.
Development group
Answer: d Page
Reference: 95 Difficulty: Moderate
22.
Value chain analysis is a common procedure used for:
a.
ranking and classifying potential systems projects.
b.
constructing a baseline project plan.
c.
comparing present cash outlays to future expected returns.
d.
assessing the technical feasibility of the project.
Answer: a Page
Reference: 95-96 Difficulty: Moderate
23.
The systems analysis strategy in which the project is reviewed after
each stage in order to decide whether or not to continue work on the project is
called:
a.
committee steering.
b.
incremental commitment.
c.
value-chain analysis.
d.
feasibility assessment.
Answer: b Page
Reference: 97 Difficulty: Moderate
24.
The common rule of thumb is that ____________ percent of the total
project development effort should be expended on project planning and
management.
a.
1-2
b.
5-8.
c.
10-20.
d.
25-40.
Answer: c Page
Reference: 97 Difficulty: Moderate
25.
The systems analyst uses communication skills and inputs from the
proposed system’s customers and the technical staff to translate a vague
request into a:
a.
tangible project description.
b.
return on investment.
c.
cross-functional system view.
d.
structured system walkthrough.
Answer: a Page
Reference: 98 Difficulty: Moderate
26.
The business case is a document that describes the:
a.
detailed breakdown and sequence of project activities.
b.
descriptions of project deliverables for the customer.
c.
justification, benefits, and feasibility of the project.
d.
user’s problem and request for a new system.
Answer: c Page
Reference: 100 Difficulty: Moderate
27.
The ____________ is a detailed, internal document created for the
development team during project initiation and planning, and continuously
revised during execution of the project.
a.
Project Charter
b.
System Service Request
c.
Walkthrough Review Form
d.
Baseline Project Plan
Answer: d Page
Reference: 100-101 Difficulty: Moderate
28.
Which of the following would be considered a tangible benefit
justifying a systems development project?
a.
Reduction of transaction costs
b.
Increased organizational flexibility
c.
Data/system conversion effort
d.
Price of new hardware leases
Answer: a Page
Reference: 104 Difficulty: Moderate
29.
Monetary outlays required for maintaining the application software is
considered to be a type of:
a.
intangible cost.
b.
one-time benefit.
c.
tangible benefit.
d.
recurring cost.
Answer: d Page
Reference: 105 Difficulty: Moderate
30.
Suppose you are considering investing a lump sum of money at 10% annual
interest rate and will collect a total of $1000 after three years. What is the
approximate present value for this investment?
a.
approximately $500
b.
approximately $675
c.
approximately $750
d.
approximately $825
Answer: c Page
Reference: 107-108 Difficulty: Hard
31.
The yearly NPV cash flow is $10,000. The overall NPV cash flow is
$5000. What is the break-even ratio?
a.
0.3
b.
0.5
c.
0.7
d.
0.9
Answer: b Page
Reference: 109 Difficulty: Moderate
32.
Which of the following is a financial technique contributing to
cost-benefit analysis?
a.
Economic feasibility
b.
Net present value
c.
Risk assessment
d.
Project scope calculation
Answer: b Page
Reference: 109 Difficulty: Moderate
33.
The ratio of the net cash receipts of a project divided by its cash
outlays is called:
a.
time value of money.
b.
net present value.
c.
break-even analysis.
d.
return on investment.
Answer: d Page
Reference: 109 Difficulty: Moderate
34.
Issues such as project size, ease of requirements attainment, degree of
standardization, and developer expertise all should be considered when
performing:
a.
operational feasibility evaluation.
b.
cost-benefit analysis.
c.
technical risk assessment.
d.
political feasibility studies.
Answer: c Page
Reference: 110-111 Difficulty: Moderate
35.
Of the following scenarios, which implies the greatest risk for a
project?
a.
High familiarity with application area, high structure, small project
b.
Low familiarity with application area, low structure, large project
c.
High familiarity with application area, low structure, small project
d.
Low familiarity with application area, high structure, large project
Answer: b Page
Reference: 111-112 Difficulty: Moderate
36.
The baseline project plan’s ____________ section should include a
comparison of the alternative system configurations along with a narrative of
the recommended solution.
a.
Introduction
b.
system description
c.
feasibility assessment
d.
configuration section
Answer: b Page
Reference: 114 Difficulty: Moderate
37.
The primary intended audience for the Project Scope Statement document
is the:
a.
project manager.
b.
customer.
c.
development team.
d.
steering committee.
Answer: b Page
Reference: 115 Difficulty: Moderate
38.
Gantt or network charts displaying the overall project schedule should
be placed in the baseline project plan’s ____________ section.
a.
introduction
b.
system description
c.
feasibility assessment
d.
management issues
Answer: c Page
Reference: 116 Difficulty: Moderate
39.
Team configurations and communications plans are part of the baseline
project plan’s ____________ section.
a.
introduction
b.
system description
c.
feasibility assessment
d.
management issues
Answer: d Page
Reference: 116-117 Difficulty: Moderate
40.
A peer group review of a product created during the systems development
process is called a:
a.
structured walkthrough.
b.
feasibility study.
c.
methodology review.
d.
peer group overview.
Answer: a Page
Reference: 117 Difficulty: Moderate
Essay and Problem-Solving
Questions
41.
Compare and contrast the four most common stakeholder groups that are
involved in identifying and selecting potential information systems development
projects. For each group identified, what is the focus that the group brings to
bear in its selection decision, and what are the characteristics of the project
with respect to cost, duration, complexity and system size? Which of these
approaches are considered to be top-down, and which are bottom-up?
Answer:
The
process of identifying and selecting information systems for development is
typically initiated by one of four possible constituencies: top management, an
IS steering committee, an individual user group or department, or members of
the IS staff. Top management tends to have a strategic focus, aligning the
system directly to organizational goals and objectives. Projects initiated by
top management tend to be very large, highly complex, extend over long
durations, and quite costly. A steering committee has a cross-functional focus,
bringing to bear opinions and insights from a diverse range of personnel. These
systems are also large and complex requiring long, costly project commitment,
although typically not as much as the projects initiated by top management.
User departments tend to have a much narrower and tactical focus, and the
development efforts required for meeting their needs are typically less
expensive and involve shorter duration, resulting in simpler and smaller
systems. The IS development group’s primary focus is technical, specifically
related to integration of the new system with existing systems used by the
organization. Their efforts range from low to high in cost, complexity, duration
and size. Top-down approaches are those initiated by top management or the
steering committee, whereas those initiated by a user department or the IS
staff are considered bottom-up.
Page Reference: 93-95 Difficulty: Moderate
42.
List and describe the criteria commonly used to evaluate and rank
potential information systems development projects. As you describe each
criterion, relate it to its analogous feasibility analyses that will be
performed during project planning.
Answer:
The
most commonly used evaluation criteria pertain to value chain, strategic
alignment, potential benefits, resource availability, project size and
duration, and technical difficulty and risk. Value chain analysis examines the
extent to which the project activities add value or cost to the organization;
this is analogous to economic feasibility and in particular cost-benefit
analysis. Strategic alignment refers to the extent to which a project is viewed
as helping the organization achieve its goals and objectives, and is analogous
to political, operational, and perhaps legal feasibility analysis. Potential
benefits measuring the extent to which the project is perceived to improve
profits, customer service, etc., and is analogous to economic feasibility and
cost-benefit analysis. Resource availability is an assessment of whether the
amount and type of resources is available to the organization; this is relevant
for both schedule and technical feasibility. Project size and duration
addresses how long the project is expected to take, and is related to schedule
feasibility. The technical difficulty and risk criterion is, of course, most
directly tied to technical feasibility and risk assessment.
Page Reference: 95-96, Difficulty: Moderate
43.
List and describe the different types of feasibility considered during
a feasibility analysis, and identify techniques and/or considerations involved
in each of these types of feasibility assessment.
Answer:
Feasibility
analysis involves assessing likelihood of project success with regard to economic,
operational, technical, schedule, legal and political factors. Economic
feasibility assessment involves performing a cost-benefit analysis identifying
both tangible and intangible costs and benefits. Common techniques for the
tangible cost and benefit examinations include net present value, return on
investment, and break-even analyses. Operational feasibility analysis assesses
the likelihood that the proposed system will solve the problems that motivate
the project in the first place, and requires a clear understanding of how the
information system will fit into the current day-to-day operations of the
organization. Technical feasibility addresses the question of whether the
proposed system can be successfully constructed given the organization’s current
technological status. This involves identifying potential technical risks
related to project size, ease of requirements attainment, type of technology
required, and the technical expertise of the development staff. Schedule
feasibility considers the likelihood that a project can be completed in a
timely manner based on knowledge of the required project deadlines and
milestones. Legal feasibility examines the effect on the project and system of
regulatory constraints and requirements, such as copyright issues, foreign
trade restrictions, labor laws, and contractual issues. Finally, political
feasibility examines the degree to which the new system will be welcomed or
resisted by personnel in the organization.
Page Reference: 102-112 Difficulty: Moderate
44.
When performing a cost-benefit analysis, it is important to consider
the tangible and intangible benefits, the tangible and intangible costs, and to
recognize the difference between one-time and recurring costs. Briefly define
each of these terms and give examples that you think would be typical for
systems development projects.
Answer:
The
term “tangible” refers to costs or benefits that can be directly measured in
dollars and cents, whereas “intangible” means costs and benefits that have no
direct monetary translation. With this in mind, tangible benefits from a new
information system include items such as transaction cost reduction, error
reduction, increased operational speed, and increased sales opportunities.
Intangible benefits include organizational flexibility, employee morale,
improved customer relations, and promotion of organizational learning and
understanding. Tangible costs include hardware, labor, and operational costs,
whereas intangible costs include political resistance, operational
inefficiencies, and loss of employee morale. One-time costs are those involved
in project initiation, systems development, and the start-up of the system, and
include development costs, new hardware and software purchases, site
preparation, system conversion, installation and user training. Recurring costs
exist for the ongoing life and use of the system, and include application
maintenance, incremental data storage and communications costs, new hardware
and software leases, and consumable supplies.
Page Reference: 104-107 Difficulty: Moderate
45.
Identify three common financial techniques for conducting economic
feasibility, particularly as it relates to analyzing tangible costs and
benefits. Also, discuss time value of money and how this relates to the
economic feasibility assessment. Be sure to include in this discussion the
names of the three techniques, a description of their mathematical formulas, a
discussion of what information each provides, and an identification of which
techniques rely on outputs from which others.
Answer:
The
three techniques are called net present value (NPV), return on investment
(ROI), and break-even analysis (BEA). NPV is the starting point on which both
ROI and BEA depend. NPV is directly related to time value of money (TVM), which
compares present cash outlays to future expected returns based on an expected
discount rate. The NPV is calculated by combining present values (PV) for each
year. The PV uses the discount rate in this formula: PVn = Y * (1/ (1 + i) n) where Y is
the monetary amount in today’s dollars, i
is the discount rate, and n is the
number of years for realization of the investment or loan. NPV is a sum of all
PVs for the duration of the loan or investment. The NPV is used to determine
the present value of both costs and benefits of a system.
Based
on NPVs for the costs and benefits, you can calculate ROI, which is the ratio
of net cash receipts divided by cash outlays. In other mathematical terms, ROI
= (NPVbenefits – NPVcosts) / NPVcosts. ROI is a useful number for comparing the
value of different alternative projects in order to select the most
cost-effective solution. In essence, the ROI gives an idea of the degree of
profitability you can expect at the end of the project time horizon.
The
BEA is also calculated using PV and NPV results. BEA determines the amount of
time required for the cumulative cash inflow from a project to equal its
initial and ongoing costs. To determine this, you calculate PV and NPV costs
and benefits for each year of the project until you reach a year where the NPV
benefits are higher than the NPV costs. At this point, you can obtain the
specific point in time of the year in question by calculating that year’s
break-even ratio. The break-even ratio is calculated by subtracting the overall
NPV cash flow at that year from one-year cash flow for that year, and then
dividing the result by the one-year sash flow for that year. In mathematical
terms, it looks like this: Break-even ratio =
((PVbenefits – PVcosts) – (NPVbenefits
– NPVcosts)) / (PVbenefits – PVcosts).
That
ratio, when added to the previous year number, gives the total number of years
to the break-even point. In essence, the break-even analysis gives you an idea
of how long it takes before you begin to turn a profit for the project efforts.
Page Reference: 106-110 Difficulty: Hard
46.
Consider the following scenario of tangible costs and benefits for a
systems development project. Estimated development time is one year, and the
one-time development cost is $9000. Each year after that, maintenance and usage
costs are $4000. The estimated benefits after the system is developed are $8000
per year. Note that these estimates are based on today’s dollar values. Assume
a discount rate of 10% per year on the time value of money.
Based
on the above scenario, calculate the net present value for benefits and costs
over a five year time horizon (calculate NPV for each year). Then determine the
return on investment after this time period. Finally, determine the break-even
point. Show your work.
Answer:
NPV
Costs:
Year 0: $9000 (one-time development cost)
Year 1: 9000 +
4000 * (1/ (1 + .1) 1) = 9000 + 3636 = $12,636
Year 2: 12,636
+ 4000 * (1/ (1 + .1) 2) = 12,636 + 3306 = $15,942
Year 3: 15942 +
4000 * (1/ (1 + .1) 3) = 15942 + 3005 = $18,947
Year 4: $21,679
Year 5: $24,163
NPV
Benefits
Year 0:
$0
Year 1:
8000 * (1/ (1 + .1) 1) = $7273
Year 2:
7273 + 8000 * (1/ (1 + .1) 2) = 7273 + 6612 = $13,884
Year 3:
13884 + 8000 * (1/ (1 + .1) 3) = 13884 + 6011 = $19,895
Year 4:
$25,359
Year 5:
$30,326
Overall
NPV: $6163
ROI: 6163/24163 = 25.5%
Break-Even
between year 2 and 3.
Break-Even
Ratio (year 3): ((6011 – 3005) – (19895
– 18947)) / (6011 – 3005) =
(3006 – 948)/3006 = 0.685
Break-even
point is year 2.685
Page Reference: 106-110 Difficulty: Hard
47.
Discuss the project risk factors that a project manager must be
concerned with when planning the project. How do these factors influence the
likelihood of project success? At which point in the planning process are these
factors evaluated? What are some consequences of neglecting to address these
risk factors?
Answer:
Project
risk is most directly affected by (a) the size and scope of the project, (b)
the level of structure of the requirements process, (c) the degree of
standardization of the technology involved, and (d) the level of familiarity
and expertise of the technical staff and user community. As a general rule of
thumb, large projects are riskier than small projects, low structure is riskier
than high structure, low standardization is riskier than high standardization,
and low familiarity is riskier than high familiarity. Projects will vary in each of these factors,
so it is important that the project manager carefully assess each of these factors;
this is typically done as part of the feasibility assessment. If project risk
factors are not considered during the planning process, this could lead to
inaccurate cost and duration estimates, or a poorly developed system that does
not meet performance and integration requirements. In sum, the project will be
less likely to attain its desired benefits.
Page Reference: 110-111 Difficulty: Moderate
48.
Describe the structure of a baseline project plan as discussed in
Chapter 4. List all the sections, indicate their purposes, and briefly describe
the contents of each section.
Answer:
The
baseline project plan consists of an introduction, a systems description, a
feasibility analysis, and a discussion of management-related issues. The
introduction’s purpose is to provide an overview of the entire plan document,
and to succinctly state the recommended course of action. The purpose of the
system description section is to provide a detailed discussion of the
alternative system solutions and a justification for the selected one. The
feasibility assessment is supposed to outline the costs, benefits, and risks
involved in the project, and to outline the tasks and schedule required for
completing the project. The management issues section outlines management concerns,
particularly with respect to unique characteristics that are not shared with
other projects.
The
introduction is composed of a project overview, including a statement of the
problem, project scope, and a statement of feasibility. In addition, the recommendation
is briefly described. The system description section presents each alternative
solution, and then discusses the recommended solution, together with required
inputs, outputs, configuration, processes and tasks. The feasibility assessment
includes economic, technical, operational, legal/contractual, and political
analyses. In addition, Gantt, network, PERT, WBS, and resource allocation
analyses are presented to indicate schedule feasibility. Management issues
include discussions of team configuration, a communication plan, project
standards and procedures, and any other relevant issues pertaining to the
management of the project.
Page Reference: 113-117 Difficulty: Moderate
49.
What is a project scope statement (PSS)? Who are the intended audience
of a PSS, and what purpose does it serve? How does the PSS relate to the
baseline project plan? How does the PSS
affect the relationship between the systems developers and the customer?
Answer:
The
project scope statement is a short document, prepared primarily for the
customer. The PSS outlines the objectives and constraints for the project. It
is basically a high-level description of the baseline project plan.
Specifically, it describes what the project will deliver, and the work that is
required to complete the project. Therefore, the PSS is a useful communication
tool which ensures that the developers and the customer have a common
understanding of the project size, duration, and outcome. The PSS may serve as
a formal contract between developer and customer, or may simply be an informal
communication vehicle, depending on the nature of the relationship.
Page Reference: 115 Difficulty: Moderate
50.
What is a structured walkthrough? What purpose does it serve in the
planning process? Which work products in a systems project can benefit from a
walkthrough? How is the walkthrough process implemented? List and describe the
participant roles involved in a typical walkthrough.
Answer:
A
structured walkthrough is a peer group review of any product created during the
systems development process. The purpose is to assure that the system conforms
to organizational standards and that all stakeholders have a common
understanding and agreement regarding the product being reviewed. Walkthroughs
are useful for assessing the deliverables from each phase of the systems
development process, including the baseline project plan, system
specifications, logical and physical designs, code and program segments, test
procedures and results, and manuals and documentation.
A
walkthrough typically takes place as one or more meetings attended by different
stakeholder representatives. The work product is presented, and then
stakeholders are polled to see if they have any recommendations for
improvement. Typical roles include (1) a coordinator who plans the meeting and
facilitates discussion, (2) a presenter who describes the work product to the
group, (3) a user representative who evaluates the product based on the
customer perspective, (4) a secretary to keep notes on the meeting, (5) a
standard-bearer who ensures that technical standards are being satisfied, and
(6) a maintenance oracle who evaluates the product with the goal of making
maintenance as easy as possible.
Page Reference: 117-119 Difficulty: Moderate
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