Chapter 5 Initiating and Planning Systems Development Projects 1) Proper and insightful project planning, including determining project scope as well as identifying project activities, can easily reduce time in later project phases. Answer: True 2) The objective of project initiation and planning is to transform a vague system request document into a tangible project description. Answer: True 3) Project initiation focuses on activities that will help organize a team to conduct project planning. Answer: True 4) Project planning focuses on defining clear, discrete activities and the work needed to complete each task. Answer: True 5) The objective of the project planning process is the development of a Baseline Project Plan and a Statement of Work. Answer: False 6) The major outcomes and deliverables from project initiation and planning are the Baseline Project Plan and the Project Scope Statement. Answer: True 7) The Project Scope Statement clearly outlines the objectives and constraints of the project for the development group. Answer: False 8) The Systems Service Request reflects the best estimate of the project's scope, benefits, costs, risks, and resource requirements, given the current understanding of the project. Answer: False 9) The Explanation of Services is a short document prepared for the customer that describes what the project will deliver and outlines all work required to complete the project. Answer: False 10) The Statement of Work is a document prepared for the customer during project initiation and planning that describes what the project will deliver and outlines generally at a high level all work required to complete the project. Answer: False 11) The Project Scope Statement can be used as the basis of a formal contractual agreement outlining firm deadlines, costs, and specifications. Answer: True 12) Assessing project feasibility is a required activity for all information systems projects. Answer: True 13) The culmination of the feasibility analyses form the business case that justifies the expenditure of resources on the project. Answer: True 14) Economic feasibility is the process of identifying the financial benefits and costs associated with a development project. Answer: True 15) During project initiation and planning, you should precisely define all benefits and costs related to a particular project. Answer: False 16) Opening new markets and increasing sales opportunities is a tangible benefit. Answer: True 17) Increased flexibility is an intangible benefit. Answer: False 18) Improvement of management planning and control is a tangible benefit. Answer: True 19) Competitive necessity, more timely information, and improved organizational planning are intangible benefits. Answer: True 20) Site preparation is an example of a one-time cost. Answer: True 21) During project initiation and planning, potential tangible benefits may have to be considered intangible. Answer: True 22) Disruption to the rest of the organization is an example of a procurement cost. Answer: False 23) Management, operation, and planning personnel are examples of start-up costs. Answer: False 24) Intangible benefits are benefits associated with project start-up, development, or system start-up. Answer: False 25) Variable costs are costs resulting from the ongoing evolution and use of a system. Answer: False 26) Fixed costs are costs that are billed or incurred at a regular interval and usually at a fixed rate. Answer: True 27) The time value of money compares present cash outlays to future expected returns. Answer: True 28) Because many projects may be competing for the same investment dollars and may have different useful life expectancies, all costs and benefits must be viewed in relation to their present rather than future value when comparing investment options. Answer: True 29) Using a discount rate of 10%, the present value of a $2,500 benefit received 5 years from now is $1,552.30. Answer: True 30) Using a discount rate of 14%, the present value of a $10,000 benefit received 5 years from now is $5,500.49. Answer: False 31) Using a discount rate of 12%, the present value of a $50,500 benefit received 2 years from now is $39,859.69. Answer: False 32) The objective of ROI analysis is to discover at what point cumulative benefits equal costs. Answer: False 33) If the NPV of all costs is $100,000 and the NPV of all benefits is $170,000, then the ROI would be 35%. Answer: False 34) If the NPV of all benefits is $150,000 and the NPV of all costs is $125,000, then the ROI is 15%. Answer: False 35) If the NPV of all benefits is $2,500,000 and the NPV of all costs are $1,000,000 then the ROI is 10%. Answer: False 36) Most techniques for analyzing economic feasibility employ the time value of money concept. Answer: True 37) Fulfillment feasibility is the process of assessing the development organization's ability to construct a proposed system. Answer: False 38) The purpose of operational feasibility is to understand the degree to which a proposed system will likely solve the business problems or take advantage of opportunities. Answer: True 39) Generally speaking, legal and contractual feasibility is a greater consideration if your organization has historically used an outside organization for specific systems or services that you now are considering handling yourself. Answer: True 40) The construction of an information system can have political ramifications. Answer: True 41) All information collected during project initiation and planning is collected and organized into a document called the Baseline Project Plan. Answer: True 42) Referencing the Management Issues section of the Baseline Project Plan, the communication plan provides a description of the team member roles and reporting relationships. Answer: False 43) A walkthrough is a peer group review of any product created during the systems development process. Answer: True 44) Referencing a walkthrough, the coordinator reviews the work product in terms of future maintenance activities. Answer: False 45) Referencing a walkthrough, the maintenance oracle ensures that the work product adheres to organizational technical standards. Answer: False 46) Referencing a walkthrough, the user makes sure that the work product meets the needs of the project's customers. Answer: True 47) The project initiation and planning process for an Internet-based electronic commerce application is similar to the process followed for other applications. Answer: True 48) Walkthroughs are a common occurrence in most system development groups. Answer: True 49) The least amount of project planning effort is typically expended on the feasibility assessment activities. Answer: False 50) As a rule of thumb estimate, what percentage of the entire development effort should be devoted to the project initiation and planning process? A) between 10 and 20 percent B) less than 5 percent C) less than 10 percent D) between 20 and 30 percent Answer: A 51) Activities designed to assist in organizing a team to conduct project planning is the focus of: A) project planning B) project identification and selection C) project initiation D) analysis Answer: C 52) How is project planning distinct from general information systems planning? A) General information systems planning focuses on assessing the information systems needs of the entire organization. B) Project planning focuses on assessing the information systems needs of the entire organization. C) General information systems planning focuses on defining clear, discrete activities and the work needed to complete each activity within a single project. D) Project planning focuses on defining discrete activities needed to complete all projects. Answer: A 53) Which of the following is not an element of project initiation? A) establishing management procedures B) dividing the project into manageable tasks C) establishing a relationship with the customer D) establishing the project initiation team Answer: B 54) The objective of the project planning process is: A) the development of a Baseline Project Plan and Project Scope Statement B) the development of a Systems Service Request C) the development of entity relationship diagrams D) the development of transitional operations plans Answer: A 55) Which of the following is an element of project planning? A) establishing management procedures B) establishing a relationship with the customer C) estimating resources and creating a resource plan D) establishing the project management environment and project workbook Answer: B 56) The Baseline Project Plan: A) contains all information collected and analyzed during project initiation and planning B) specifies detailed project activities for the next life cycle phase, analysis, and less detail for subsequent project phases C) is used by the project selection committee to help decide if the project should be accepted, redirected, or canceled D) all of the above Answer: D 57) A major outcome and deliverable from the project initiation and planning phase that contains the best estimate of a project's scope, benefits, costs, risks, and resource requirements defines the: A) Baseline Project Plan B) Information Systems Plan C) Mission Statement D) Statement of Work Answer: A 58) The justification for an information system, presented in terms of the tangible and intangible economic benefits and costs and the technical and organizational feasibility of the proposed system best defines the: A) Baseline Project Plan B) Information Systems Plan C) Business Case D) Statement of Work Answer: C 59) The Project Scope Statement: A) is a short document prepared for the customer that describes what the project will deliver and outlines all work required to complete the project B) is useful for ensuring that both you and your customer gain a common understanding of the project C) is a very easy document to create because it typically consists of a high-level summary of the BPP information D) all of the above Answer: D 60) A document prepared for the customer during project initiation and planning that describes what the project will deliver and outlines generally at a high level all work required to complete the project is the: A) Information Systems Plan B) Project Scope Statement C) Mission Statement D) Baseline Project Plan Answer: B 61) To identify the financial benefits and costs associated with the development project is the purpose of: A) economic feasibility B) technical feasibility C) operational feasibility D) schedule feasibility Answer: A 62) Cost reduction and avoidance, error reduction, and increased flexibility are examples of: A) intangible benefits B) qualitative benefits C) tangible benefits D) legal and contractual benefits Answer: C 63) A savings of $3,000 resulting from a data entry error correction would most likely be classified as a(n): A) intangible benefit B) qualitative benefit C) tangible benefit D) operational benefit Answer: C 64) A benefit derived from the creation of an information system that can be measured in dollars and with certainty is a(n): A) intangible benefit B) qualitative benefit C) tangible benefit D) operational benefit Answer: C 65) Tangible benefits would include: A) improved organizational planning B) ability to investigate more alternatives C) improved asset control utilization D) lower transaction costs Answer: D 66) The reduction of waste creation is an example of a(n): A) intangible benefit B) qualitative benefit C) tangible benefit D) operational benefit Answer: A 67) A cost associated with an information system that can be measured in dollars and with certainty is referred to as a(n): A) economic cost B) tangible cost C) intangible cost D) one-time cost Answer: B 68) Which of the following would be classified as a tangible cost? A) loss of customer goodwill B) cost of hardware C) employee morale D) operational inefficiency Answer: B 69) Capital costs, management and staff time, and consulting costs are examples of: A) project-related costs B) operating costs C) start-up costs D) procurement costs Answer: D 70) Infrastructure replacement/improvements, system maintenance costs, and user training and support are examples of: A) project-related costs B) operating costs C) start-up costs D) procurement costs Answer: B 71) Which of the following would be classified as an intangible cost? A) hardware costs B) labor costs C) employee morale D) operational costs Answer: C 72) A cost associated with an information system that cannot be easily measured in terms of dollars or with certainty refers to: A) economic cost B) tangible cost C) intangible cost D) one-time cost Answer: C 73) A cost associated with project start-up and development or system start-up refers to a(n): A) recurring cost B) one-time cost C) incremental cost D) infrequent cost Answer: B 74) A cost resulting from the ongoing evolution and use of a system refers to a(n): A) recurring cost B) one-time cost C) incremental cost D) frequent cost Answer: A 75) Application software maintenance, new software and hardware leases, and incremental communications are examples of: A) recurring costs B) one-time costs C) incremental costs D) frequent costs Answer: A 76) The concept of comparing present cash outlays to future expected returns best defines: A) cost/benefit analysis B) internal rate of return C) time value of money D) investment return analysis Answer: C 77) The rate of return used to compute the present value of future cash flows refers to: A) discount rate B) investment rate C) transfer rate D) future cash flow rate Answer: A 78) The current value of a future cash flow is referred to as its: A) future value B) present value C) investment value D) discount rate Answer: B 79) The analysis technique that uses a discount rate determined from the company's cost of capital to establish the present value of a project is commonly called: A) return on investment (ROI) B) break-even analysis (BEA) C) net present value (NPV) D) future value (FV) Answer: C 80) The ratio of the net cash receipts of the project divided by the cash outlays of the project, enabling tradeoff analysis to be made between competing projects is often referred to as: A) return on investment (ROI) B) break-even analysis (BEA) C) net present value (NPV) D) future value (FV) Answer: A 81) The analysis technique that finds the amount of time required for the cumulative cash flow from a project to equal its initial and ongoing investment is referred to as: A) return on investment (ROI) B) break-even analysis (BEA) C) net present value (NPV) D) future value (FV) Answer: B 82) To gain an understanding of the organization's ability to construct the proposed system is the purpose of: A) operational feasibility B) schedule feasibility C) technical feasibility D) political feasibility Answer: C 83) An assessment of the development group's understanding of the possible target hardware, software, and operating environments, system size, complexity, and the group's experience with similar systems should be included as part of: A) technical feasibility B) political feasibility C) operational feasibility D) schedule feasibility Answer: A 84) When conducting a technical risk assessment, which of the following is true? A) A project has a greater likelihood of experiencing unforeseen technical problems when the development group lacks knowledge related to some aspect of the technology environment. B) Large projects are riskier than small projects. C) Successful IS projects require active involvement and cooperation between the user and development groups. D) All of the above. Answer: D 85) A new system or the renovation of existing systems, user perceptions, and management commitment to the system are examples of which of the following risk factors? A) development group B) project structure C) project size D) user group Answer: B 86) The number of members on the project team, project duration, and the number of organizational departments involved in the project are examples of which of the following risk factors? A) development group B) project structure C) project size D) user group Answer: C 87) To gain an understanding of the likelihood that all potential time frame and completion date schedules can be met and that meeting these dates will be sufficient for dealing with the needs of the organization is the purpose of: A) schedule feasibility B) operational feasibility C) technical feasibility D) political feasibility Answer: A 88) The process of assessing the degree to which a proposed system solves business problems or takes advantage of business opportunities refers to: A) schedule feasibility B) operational feasibility C) technical feasibility D) political feasibility Answer: B 89) The process of assessing potential legal and contractual ramifications due to the construction of a system refers to: A) technical feasibility B) legal and contractual feasibility C) economic feasibility D) operational feasibility Answer: B 90) To gain an understanding of how key stakeholders within the organization view the proposed system is the purpose of: A) technical feasibility B) legal and contractual feasibility C) political feasibility D) operational feasibility Answer: C 91) The following are elements of project planning: A) describing the physical design statement B) describing the project scope, alternatives, and feasibility C) describing the identification of the business mission D) describing the logical design statement Answer: B 92) A peer group review of any product created during the system development process refers to: A) walkthrough B) feasibility assessment C) joint application discussion D) product evaluation Answer: A 93) At a walkthrough meeting, the person who plans the meetings and facilitates a smooth meeting process is referred to as the: A) presenter B) coordinator C) standards bearer D) maintenance oracle Answer: B 94) At a walkthrough meeting, the person (or group) who ensures that the work product meets the needs of the project's customers is referred to as the: A) coordinator B) user C) maintenance oracle D) standards bearer Answer: B 95) At a walkthrough meeting, the person who ensures that the work product adheres to organizational technical standards is referred to as the: A) coordinator B) user C) maintenance oracle D) standards bearer Answer: D 96) At a walkthrough meeting, the person who reviews the work product in terms of future maintenance activities is referred to as the: A) coordinator B) user C) maintenance oracle D) standards bearer Answer: C 97) At walkthrough meetings, there is a need to have individuals play specific roles such as: A) operating system manager B) presenter C) DBA D) top management Answer: B 98) Which of the following is NOT a role at a walkthrough meeting? A) coordinator B) user C) secretary D) support staff Answer: D 99) Which of the following is NOT a major section of the Baseline Project Plan? A) design issues B) introduction C) system description D) feasibility assessment Answer: A 100) A ________ is the justification for an information system, presented in terms of the tangible and intangible economic benefits and costs and the technical and organizational feasibility of the proposed system. Answer: business case 101) The ________ is the major outcome and deliverable from the project initiation and planning phase that contains the best estimate of the project's scope, benefits, costs, risks, and resource requirements. Answer: Baseline Project Plan 102) The ________ is a document prepared for the customer during project initiation and planning that describes what the project will deliver and outlines generally at a high level all work required to complete the project. Answer: Project Scope Statement 103) ________ is the process of identifying the financial benefits and costs associated with a development project. Answer: Economic feasibility 104) A ________ is a benefit derived from the creation of an information system that can be measured in dollars and with certainty. Answer: tangible benefit 105) An ________ is a benefit derived from the creation of an information system that cannot be easily measured in dollars or with certainty. Answer: intangible benefit 106) A ________ is a cost associated with an information system that can be easily measured in dollars and with certainty. Answer: tangible cost 107) An ________ is a cost associated with an information system that cannot be easily measured in terms of dollars or with certainty. Answer: intangible cost 108) ________ are costs associated with project start-up and development, or system start-up. Answer: One-time costs 109) ________ are costs resulting from the ongoing evolution and use of a system. Answer: Recurring costs 110) The ________ is the concept of comparing present cash outlays to future expected returns. Answer: time value of money 111) The ________ is the rate of return used to compute the present value of future cash flows. Answer: discount rate 112) ________ is the current value of a future cash flow. Answer: Present value 113) ________ finds the amount of time required for the cumulative cash flow from a project to equal its initial and ongoing investment. Answer: Break-even analysis 114) ________ is the ratio of the net cash receipts of the project divided by the cash outlays of the project. Answer: Return on investment 115) ________ uses a discount rate determined from the company's cost of capital to establish the present value of the project. Answer: Net present value 116) ________ is the process of assessing the development organization's ability to construct a proposed system. Answer: Technical feasibility 117) ________ is the process of assessing the degree to which a proposed system solves business problems or takes advantage of business opportunities. Answer: Operational feasibility 118) ________ is the process of assessing the degree to which the potential time frame and completion dates for all major activities within a project meet organizational deadlines and constraints for affecting change. Answer: Schedule feasibility 119) ________ is the process of assessing potential legal and contractual ramifications due to the construction of a system. Answer: Legal and contractual feasibility 120) ________ is the process of evaluating how key stakeholders within the organization view the proposed system. Answer: Political feasibility 121) A ________ is a peer group review of any product created during the systems development process. Answer: walkthrough 122) Referencing a walkthrough meeting, the ________ plans the meeting and facilitates a smooth meeting process. Answer: coordinator 123) Referencing a walkthrough meeting, the ________ ensures that the work product adheres to organizational technical standards. Answer: standards bearer 124) Referencing a walkthrough meeting, the ________, reviews the work product in terms of future maintenance activities. Answer: maintenance oracle 125) Briefly identify and define the six major categories of feasibility. Answer: The six feasibility categories are economic, technical, operational, schedule, legal and contractual, and political. The specifics of a particular project will determine the emphasis placed on each of the feasibility criteria. Economic feasibility seeks to identify the financial benefits and costs associated with the project. Technical feasibility seeks to determine if the organization is capable of developing the new system. Operational feasibility examines the degree of likelihood that the candidate system will be able to solve the business problem or take advantage of opportunities. Schedule feasibility examines the likelihood that all potential time frame and completion date schedules can be met. Legal and contractual feasibility tries to assess the potential legal ramifications due to the construction of the new system. Determining stakeholder's views of the candidate system is the intent of political feasibility. 126) Briefly identify three commonly used economic cost-benefit analysis techniques. Answer: Break-even analysis (BEA) is the process of finding the amount of time required for the cumulative cash flow from a project to equal its initial and ongoing investment. Net present value (NPV) uses a discount rate determined from the company's cost of capital to establish the present value of a project. Return on investment (ROI) is the ratio of the net cash receipts of the project divided by the cash outlays of the project. A tradeoff analysis can be made between competing projects. 127) What is a Project Scope Statement and Baseline Project Plan? How are they different? Answer: The Baseline Project Plan and the Project Scope Statement are the major outcomes and deliverables for the project initiation and planning phase. All information collected and analyzed during this phase is contained in the BP. This plan reflects the best estimate of the project's scope, benefits, costs, risks, and resource requirements. It also specifies detailed project activities for the following phase and more general specifications for the remaining phases. The BPP can be used by the project selection committee to determine the project worth - accept, reject, or modify. The project Scope Statement is a document prepared for the customer during project initiation and planning that describes what the project will deliver and outlines generally at a high level all work required to complete the project. The PSS consists of a high-level summary of the BP. While the actual role of the PSS can vary, the PSS can be used by the analyst and the customer to gain an understanding of the project. 128) Describe the differences between tangible and intangible benefits and costs, and between one-time and recurring benefits and costs. Answer: A tangible benefit refers to a benefit derived from the creation of an information system that can be measured in dollars and with certainty. Examples include reduced personnel expenses, lower transaction costs, and higher profit margins. Intangible benefit refers to a benefit derived from the creation of an information system that cannot be easily measured in dollars or with certainty. Examples include competitive necessity, promotion of organizational learning and understanding, and improved asset utilization. While tangible costs are costs associated with an information system that can be measured in dollars and with certainty, intangible costs are costs associated with an information system that cannot be easily measured in terms of dollars or with certainty. Hardware costs, labor costs, and operational costs are tangible costs. Loss of customer goodwill, employee morale, and operational inefficiency are intangible costs. One-time costs are costs associated with project start-up and development or system start-up. This type of cost includes hardware and software purchases, user training, and site preparation. Recurring costs are costs resulting from the ongoing evolution and use of a system. New software and hardware leases, incremental communications, and incremental data storage expense are recurring costs. 129) Briefly define walkthrough and describe the role of each participant. Answer: A walkthrough is a peer group review of any product created during the systems development process. During the review users, management, and the development group participate through various roles. These roles are coordinator, presenter, user, secretary, standards bearer, and maintenance oracle. The coordinator is the person who plans the meeting and facilitates a smooth meeting process. The presenter is the individual who describes the work product to the group. Ensuring that the work product meets the needs of the project's customers is the role fulfilled by the user. The person taking notes and recording decisions or recommendations made by the group is the secretary. The standards bearer role is to ensure that the work product adheres to organizational technical standards. The maintenance oracle is the individual who reviews the work product in terms of future maintenance activities. 130) Assume a proposed system has a useful life of 5 years, one-time costs of $50,000, recurring costs of $25,000 per year, and tangible benefits of $45,000 per year. If the cost of capital is 10%, what is the overall NPV? Overall ROI? Break-even point? Answer: The overall NPV is $25,816; the overall ROI is 18, and break-even occurs in year 4. 131) Assume a proposed system has a useful life of 5 years, one-time costs of $250,000, recurring costs of $80,000 per year, and tangible benefits of $175,000 per year. If the cost of capital is 12%, what is the overall NPV? Overall ROI? Break-even point? Answer: The overall NPV is $92,454; the overall ROI is 17, and break-even occurs in year 4. 132) Assume a proposed system has a useful life of 5 years, one-time costs of $1,000,000, recurring costs of $250,000 per year, and tangible benefits of $750,000 per year. If the cost of capital is 10%, what is the overall NPV? Overall ROI? Break-even point? Answer: The overall NPV is $895,393; the overall ROI is 46, and break-even occurs in year 3. 133) Assume a proposed system has a useful life of 5 years, one-time costs of $50,000, recurring costs of $25,000 per year, and tangible benefits of $35,000 per year. If the cost of capital is 10%, what is the overall NPV? Overall ROI? Break-even point? Answer: The overall NPV is $12,092, and the overall ROI is negative. Based on the information given, this project will not break-even during its useful life. 134) Assume a proposed system has a useful life of 5 years, one-time costs of $1,000,000, recurring costs of $250,000 per year, and tangible benefits of $750,000 per year. If the cost of capital is 10%, what is the overall NPV? Overall ROI? Break-even point? Answer: The overall NPV is $895,393 and the overall ROI is 46. The project breaks even in year 3. Test Bank for Modern Systems Analysis and Design Jeffrey A. Hoffer, Joey George, Joseph S. Valacich, Joe Valacich, Jeffrey Slater 9780132991308, 9780134204925, 9780135172759, 9780136088219
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