ICFAI BUSINESS SCHOOL

MBA III
Project Appraisal (Test I)

Select an appropriate option for the following statements:

1. Which of the following statement/s is/are true?

a. A project is an ad hoc activity of the firm.
b. A project should be viewed as the main activity of the firm.
c. A project should be viewed as something that contributes to the
ability of the organization.
d. A project is a thing which contributes to the ability of the
project manager.
e. None of the above.

2. Which of the following statement/s is/are true?

a. People who give brilliant ideas from their knowledge and
experience can very well manage in getting their ideas
implemented.
b. People who give brilliant ideas will always fail in getting
things done.
c. People who are good at handling things will always possess
creative thinking.
d. People who have great ideas are not necessarily good
implementers.
e. Both (b) and (d) above.

3. Which of the following is/are ‘external reasons’ for project failure?

a. Dispute with local people.
b. Non-availability of skilled personnel.
c. Inflation
d. Labor disputes
e. All of the above.

4. In which of the following situation is the bargaining power of buyers

low?
a. The buyers are few and volumes are high.
b. There are alternative sources of supply for the buyers.
c. Backward integration by the buyers is difficult.
d. Value addition made by the seller is low.
e. Both (c) and (d) above.
5. Which of the following is not a component of the life cycle costs?
a. Costs of R & D.
b. Budgeted costs of the entire project.
c. Production, operating and maintenance costs.
d. Construction costs.
e. Phase out costs.

6. Which of the following is not a phase of project life cycle according to

David Cleland?
a. Conceptual
b. Contract
c. Full scale development
d. Production
e. Development

7. Which of the following is not considered while analyzing the business

environment as per PEST Model?
a. Foreign trade regulation
b. Disposable income levels
c. Levels of education
d. Human resource management of the firm
e. Rates of obsolescence

8. In which of the following conditions there is a high likelihood of entry

of competitors into an industry?
a. The economies of scale are high
b. The capital required to set up a venture is high
c. The profitability of an organization depends upon a wide
distribution channels
d. The existing players in the industry have a history of strong
retaliation to any firm attempting to enter the industry
e. There is a low degree of product differentiation in the industry

9. Michael Porter’s five force model is designed to

a. Evaluate various management strategies and to select the
strategy which is suitable to the firm.
b. Analyze the competitive position of a firm.
c. Analyze and review the performance of a project.
d. Allocate the budgets to various departments.
e. None of the above.
10. According to the Porter’s Model the ‘Competitive Advantage’ of a
firm depends, apart from other factors, on:
a. Economies of scale
b. Socio-cultural factors
c. Political factors
d. Business cycles
e. Unemployment.

11. Which of the following statements is/are true as per BCG’s Matrix?
a. Stars produce at lot of surplus but have no potential growth.
b. Question marks have low market growth and low market share.
c. Surpluses can be invested in dogs because they have a high
market growth.
d. Cash cows produce a lot of surplus, but have low potential for
growth.
e. None of the above.

12. The likely outcome of conglomerate diversification in terms of

profitability, growth and risk respectively is
a. High, Moderate, Moderate
b. Moderate, High, Low
c. High, Moderate, High
d. Moderate, Low, High
e. High, High, Low

13. When the raw material to sales ratio in a manufacturing project is low,
we may say that the value is
a. Low
b. Moderate
c. High
d. Insufficient data
e. None of the above

14. Resource allocation at the corporate level is made

a. On the basis of business functions like marketing, finance,
production, etc.
b. On the basis of geographical area
c. On the basis of the importance of the service rendered
d. Both (a) and (c) above
e. All of (a), (b) and (c) above
15. Which of the following statements is/are true?
a. Capital rationing exists when funds available for investment
are inadequate to undertake all projects which are otherwise
acceptable.
b. Internal rationing is caused by a choice of hurdle rate higher
than the cost of capital
c. External rationing arises by setting the limit to capital
expenditure amounts
d. Both (a) and (b) above
e. All of (a), (b) and (c) above

16. A ‘Moving Average’ is

a. An example of time series models
b. An example of cause and effect models
c. Used when the variable being studied is to exhibit a steady
trend over time
d. Both (a) and (c) above
e. Both (b) and (c) above

17. ‘exponential Smoothing’ is

a. Useful only when data for a large number of periods is
available.
b. A variant of weighted moving average
c. Useful when there are seasonal variations
d. Both (a) and (b) above
e. All of (a), (b) and (c) above

18. ‘Multiple Regression’ Model

a. Is used when there is only one independent factor which affects
the variable
b. Can be used to study the degree of association of any number
of independent factors on the variable
c. Is a causal model in which the variable is regressed with many
causative factors in a predetermined sequence
d. Depends on the accuracy with which causative factors have
been identified
e. Both (b) and (c) above

19. Price Elasticity of Demand is

a. The ratio of change in price to current demand
b. The ratio of change in demand to change in price
c. The ratio of change in price to change in demand
d. The ratio of change in price to total demand
e. The ratio of current price to current demand
20. Delphi Method is a
a. Technique in which the executives are asked to forecast
demand subjectively
b. Salesmen of different territories are asked to collect
information regarding buying plans of users
c. Technique in which several experts are asked to give opinion
independently
d. Technique in which a group discussion is conducted to pool up
creative ideas
e. None of the above

21. Last year per capita annual income level of the residents of Bopal was
Rs.96,000 and this year it is expected to be Rs.1,05,600 with a 3%
increase in population. Actual demand of milk was 25,000 liter in the
last year. Considering income elasticity of demand for milk is 1.10,
how much milk (in liter)would be in demand this year?
a. 22,123
b. 22,464
c. 28,597
d. 29,548
e. 30,152

22. Which of the following is the most subjective method of demand

forecasting?
a. Delphi Method
b. Chain Ratio Method
c. Econometric Method
d. Moving Average method
e. Trend Projection Method

23. Which of the following is not a problem in collecting primary data?

a. Part of accuracy is lost due to sampling
b. The reliability tends to be lower when opinions instead of facts
are collected
c. Respondents may either refuse to answer or not reveal the truth
when the information asked is confidential or embarrassing
d. The presence of a third person or the body language of the
interviewer may also affect the responses
e. Analysis may be difficult, as the data specifically required
cannot be collected
24. Matrex Ltd. has sold the following mattresses during 1st quarter of
2005-96.
Month Units
April 20,000
May 25,000
June 28,000
The sales manger forecasted to sell 30,000 mattresses per month
during the 1st quarter. If the adjustment factor is 0.25, the forecast
(in no. of units) as per exponential smoothing method is
a. 28,580
b. 29,500
c. 77,250
d. 85,750
e. 88,500

25. A market analyst believes that the future consumption of a product

can be projected using linear relationship of the firm,
Yt = a + bt
Where Yt = quantity demanded in year t
t = time variable
Which of the following methods can be used to estimate a and b?
a. Visual curve fitting method
b. Exponential smoothing method
c. Least square method
d. Both (a) and (c) above
e. All of (a), (b) and (c) of the above