CPP Project Initiation & Business Case Development 2 — Questions and Answers
Question 1: An executive sponsor wants to know the expected return on a $500,000 project investment. Which financial metric expresses the return as a percentage of the original investment?
- Net Present Value (NPV)
- Internal Rate of Return (IRR)
- Return on Investment (ROI) (Correct answer)
- Payback Period
Correct answer: Return on Investment (ROI)
ROI expresses the net benefit of an investment as a percentage of its cost, making it easy to compare the return against the original investment amount.
Question 2: What distinguishes a project constraint from a project assumption during the initiation phase?
- Constraints are identified after planning; assumptions are identified before
- Constraints are known limiting factors; assumptions are believed-to-be-true conditions not yet verified (Correct answer)
- Constraints only apply to budget; assumptions only apply to schedule
- Constraints are external; assumptions are always internal
Correct answer: Constraints are known limiting factors; assumptions are believed-to-be-true conditions not yet verified
Constraints are definite limitations (budget caps, fixed deadlines) while assumptions are conditions the team believes to be true but has not confirmed, and carry risk if wrong.
Question 3: A project sponsor is preparing a benefits realization plan. Which element is MOST critical to include?
- Detailed task assignments for each team member
- Measurable benefit metrics, timing of realization, and responsible owners (Correct answer)
- A full risk register with probability and impact scores
- The project's work breakdown structure
Correct answer: Measurable benefit metrics, timing of realization, and responsible owners
A benefits realization plan must define specific, measurable benefits, when they will be achieved, and who is accountable for delivering them to ensure benefits are actually tracked post-project.
Question 4: Which project selection method calculates the discount rate at which the present value of future cash flows equals the initial investment?
- Net Present Value
- Payback Period
- Internal Rate of Return (IRR) (Correct answer)
- Cost-Benefit Ratio
Correct answer: Internal Rate of Return (IRR)
IRR is the discount rate that makes the NPV of all cash flows from a project equal to zero, representing the project's expected rate of return.
Question 5: A project manager is initiating a project under a PMO that uses a project portfolio management (PPM) framework. What is the PRIMARY role of the PPM framework during initiation?
- To assign project managers to projects based on skill
- To ensure proposed projects align with organizational strategy and resource capacity (Correct answer)
- To define the technical architecture for each project
- To establish individual project budgets independently
Correct answer: To ensure proposed projects align with organizational strategy and resource capacity
PPM frameworks prioritize and select projects based on their strategic alignment, expected value, and the organization's capacity to execute them simultaneously.
Question 6: During initiation, who is PRIMARILY responsible for developing the business case for a proposed project?
- The project manager
- The project team
- The project sponsor or requesting business unit (Correct answer)
- The PMO director
Correct answer: The project sponsor or requesting business unit
The business case is owned by the project sponsor or requesting business unit, as they understand the business need and are accountable for delivering the expected benefits.
Question 7: A feasibility study concludes a project is financially viable but operationally infeasible. What should the project sponsor do NEXT?
- Proceed with the project and address operational issues during execution
- Abandon the project immediately without further review
- Investigate whether operational barriers can be resolved or the approach modified before committing (Correct answer)
- Escalate to the portfolio board for immediate approval
Correct answer: Investigate whether operational barriers can be resolved or the approach modified before committing
When one feasibility dimension fails, the sponsor should explore whether the operational barriers are surmountable through redesign, additional investment, or phased delivery before making a go/no-go decision.
CPP Project Initiation & Business Case Development 2
An executive sponsor wants to know the expected return on a $500,000 project investment.
Which financial metric expresses the return as a percentage of the original investment?