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
In federal investment analysis, 'sensitivity analysis' is performed to:
Answer: Test how changes in key assumptions affect the investment's NPV or cost estimate, identifying which variables drive results
Sensitivity analysis systematically varies key input assumptions (such as discount rate, benefit estimates, or cost projections) to show how robust the investment analysis is to uncertainty.
When evaluating competing capital investment proposals, what does the 'Internal Rate of Return' (IRR) represent?
Answer: The discount rate at which the NPV of an investment equals zero, indicating the investment's effective rate of return
The IRR is the discount rate that makes the NPV of an investment's cash flows equal to zero; an investment is generally worthwhile if its IRR exceeds the required hurdle rate or cost of capital.
Which federal oversight body reviews and approves major IT investment plans submitted by agencies through the OMB Exhibit 300 process?
Answer: The Office of Management and Budget (OMB) Office of the Federal Chief Information Officer
OMB's Office of the Federal CIO reviews Exhibit 300 submissions and publishes agency IT portfolio data on the Federal IT Dashboard to ensure accountability for major investments.
What is the significance of the 'capital budget' being separate from the 'operating budget' in federal budget analysis?
Answer: Separating capital from operating costs allows analysts to evaluate long-term investment returns separately from annual program operations
A separate capital budget highlights long-term investments whose benefits extend beyond the budget year, enabling more informed analysis of ROI and lifecycle costs apart from routine operational spending.
Which cost element is typically the largest component of a federal IT capital investment's total life-cycle cost?
Answer: Operations and maintenance costs over the asset's full operational life
Operations and maintenance (O&M) costs—including staffing, licensing, support contracts, and upgrades—typically account for 60–80% of an IT system's total lifecycle cost, far exceeding initial acquisition costs.
In OMB capital programming guidance, what is a 'program baseline'?
Answer: The approved cost, schedule, and performance parameters against which actual investment execution is measured
A program baseline establishes the approved cost, schedule, and technical performance goals for a capital investment, serving as the benchmark for EVM and progress reporting throughout execution.