PSI Project and Financial Management 4 — Questions and Answers
Question 1: A project's NPV is calculated as -$50,000. What should a project manager recommend?
- Proceed immediately since any NPV is acceptable
- Reject the project because it will destroy value (Correct answer)
- Approve the project because the negative sign indicates profits
- Defer the decision until NPV reaches zero
Correct answer: Reject the project because it will destroy value
A negative NPV means the project's costs exceed its discounted future benefits, indicating it will destroy value and should generally not be pursued.
Question 2: Which change control process step comes immediately after a change request is submitted?
- Implementing the approved change
- Updating the project management plan
- Evaluating the impact of the proposed change (Correct answer)
- Notifying all stakeholders of the change
Correct answer: Evaluating the impact of the proposed change
After submission, a change request must be analyzed for its potential impact on scope, cost, schedule, and quality before any decision is made.
Question 3: What is the Schedule Performance Index (SPI) formula?
- SPI = Planned Value / Actual Cost
- SPI = Earned Value / Planned Value (Correct answer)
- SPI = Actual Cost / Earned Value
- SPI = Budget at Completion / Earned Value
Correct answer: SPI = Earned Value / Planned Value
SPI = EV / PV; a value greater than 1.0 means the project is ahead of schedule, while less than 1.0 means behind schedule.
Question 4: A project manager is using bottom-up estimating. Which characteristic best describes this approach?
- Quick, high-level estimate based on historical data
- Detailed estimate built by aggregating individual work package estimates (Correct answer)
- Estimate derived from a single expert's judgment
- Parametric model using cost per unit of work
Correct answer: Detailed estimate built by aggregating individual work package estimates
Bottom-up estimating develops detailed cost estimates for individual work packages that are then rolled up to produce a total project cost.
Question 5: What is the primary goal of earned value management (EVM)?
- To calculate the team's earned bonuses
- To integrate scope, schedule, and cost measurements to assess project performance (Correct answer)
- To determine how much overtime has been earned
- To allocate project profits among stakeholders
Correct answer: To integrate scope, schedule, and cost measurements to assess project performance
EVM provides an objective measure of project performance by integrating scope, schedule, and cost baselines into a single framework.
Question 6: Which project lifecycle approach is best suited for a project with well-defined, stable requirements?
- Agile
- Scrum
- Predictive (Waterfall) (Correct answer)
- Kanban
Correct answer: Predictive (Waterfall)
Predictive (Waterfall) lifecycle is best when requirements are well-understood and unlikely to change, allowing upfront planning of the full project.
Question 7: What is a project baseline used for?
- Setting minimum quality standards for deliverables
- Providing a reference point to measure and control project performance (Correct answer)
- Establishing the starting salary for project team members
- Defining the minimum acceptable project outcome
Correct answer: Providing a reference point to measure and control project performance
A project baseline (scope, cost, schedule) is the approved plan used as a benchmark to compare actual performance and measure variance.
PSI Project and Financial Management 4
A project's NPV is calculated as -$50,000.
What should a project manager recommend?