CBA Capital Budgeting & Investment Analysis Flashcards
6 cards from real CBA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 6 CBA Capital Budgeting & Investment Analysis flashcards as text
Which federal law established requirements for agencies to develop capital programming guidance and evaluate major capital investments?
Answer: Clinger-Cohen Act of 1996
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.
In federal capital investment analysis, 'Earned Value Management' (EVM) is used to:
Answer: Integrate scope, schedule, and cost data to measure project performance and forecast final cost and schedule
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).
What is the 'payback period' method in capital investment analysis?
Answer: The time required for an investment's cumulative net benefits to recover the initial capital cost
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.
In a federal lease-versus-purchase analysis, which factor is MOST critical to consider?
Answer: The net present value of total costs under each option over the full period of need
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.
What is a 'should-cost' analysis in the context of federal capital budgeting?
Answer: An independent estimate of what an acquisition should cost based on technical requirements and market conditions, used to evaluate vendor proposals
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.
Which FASAB standard governs the accounting and reporting of general property, plant, and equipment (PP&E) for federal agencies?
Answer: SFFAS No. 6, Accounting for Property, Plant, and Equipment
FASAB's Statement of Federal Financial Accounting Standards No. 6 establishes the recognition, measurement, and reporting requirements for general PP&E held by federal agencies.