AMP Capital Investment & Decision Making Flashcards

Which document formally authorizes a capital project to proceed and defines its scope, budget, and timeline?

Answer: Capital Appropriation Request (CAR)

A Capital Appropriation Request (CAR) formally authorizes a specific capital project, outlining its justification, scope, cost estimate, and expected benefits for management approval.

Sensitivity analysis in capital investment planning is used to:

Answer: Assess how changes in key assumptions affect the outcome of an investment decision

Sensitivity analysis tests how variations in key inputs—such as cost, demand, or interest rates—affect the NPV or IRR of an investment, highlighting the assumptions that matter most.

An asset management organization uses a 'make vs. buy' decision framework primarily to:

Answer: Compare the cost and risk of performing a capability in-house versus outsourcing it

A make vs. buy analysis compares the total costs, risks, and strategic implications of performing a function internally versus contracting it to an external provider.

Which capital investment decision criterion is most appropriate when an organization faces strict capital rationing?

Answer: Rank projects by profitability index and fund in descending order

When capital is limited, the profitability index (NPV per dollar invested) allows organizations to maximize total value by ranking and selecting projects with the highest return per unit of capital.

Benchmarking in asset investment decision-making helps organizations by:

Answer: Comparing asset performance and investment practices against industry peers to identify gaps

Benchmarking compares an organization's asset investment levels, maintenance costs, and performance outcomes against industry peers to identify best practices and improvement opportunities.

In asset investment planning, 'optimized decision-making' as described in ISO 55001 means:

Answer: Balancing costs, risks, performance, and sustainability to achieve organizational objectives

ISO 55001 defines optimized decision-making as the process of balancing competing factors—cost, risk, performance, and sustainability—to achieve the best overall outcome aligned with organizational goals.