CBA CBA Capital Budgeting & Investment Analysis 2

Question 1

Which federal law established requirements for agencies to develop capital programming guidance and evaluate major capital investments?

Accepted Answer

Clinger-Cohen Act of 1996

Answer

The Clinger-Cohen Act (also known as the Information Technology Management Reform Act) required agencies to implement capital programming processes and select and manage IT investments based on return on investment.

Question 2

In federal capital investment analysis, 'Earned Value Management' (EVM) is used to:

Accepted Answer

Integrate scope, schedule, and cost data to measure project performance and forecast final cost and schedule

Answer

EVM is a project management tool that integrates technical, schedule, and cost performance, providing early warning of cost overruns and schedule slippage through metrics like cost performance index (CPI) and schedule performance index (SPI).

Question 3

What is the 'payback period' method in capital investment analysis?

Accepted Answer

The time required for an investment's cumulative net benefits to recover the initial capital cost

Answer

The payback period measures how long it takes for an investment's benefits to equal its initial cost, providing a simple liquidity-focused metric for comparing investment alternatives.

Question 4

In a federal lease-versus-purchase analysis, which factor is MOST critical to consider?

Accepted Answer

The net present value of total costs under each option over the full period of need

Answer

OMB Circular A-11 requires agencies to compare the NPV of total costs under leasing versus purchasing alternatives over the full period of need to identify the most cost-effective option.

Question 5

What is a 'should-cost' analysis in the context of federal capital budgeting?

Accepted Answer

An independent estimate of what an acquisition should cost based on technical requirements and market conditions, used to evaluate vendor proposals

Answer

A should-cost analysis is an independent government estimate that models expected costs based on technical scope, labor, materials, and market data, used to evaluate the reasonableness of contractor proposals.

(CBA) Certified Budget Analyst Practice Test

(CBA) Certified Budget Analyst Practice Test

CBA CBA Capital Budgeting & Investment Analysis 2