CIPS Strategic Programme Leadership L6M5 Dumps in PDF

Free CIPS L6M5 Real Questions (page: 9)

At what stage in a program's lifecycle is an Investment Appraisal conducted?

Answer Options:

  1. Before contracting ­ to ensure the program is viable
  2. At the initiation stage ­ to decide which contractor to hire
  3. During the project ­ to ensure that money is being well spent and the program will be delivered to schedule
  4. After completion ­ to assess whether money was invested wisely

Answer(s): A

Explanation:

Investment Appraisal is performed before a program is approved (p.69). It evaluates whether the project is financially viable and likely to provide a return on investment. Option B relates to procurement, and Options C and D are post-implementation assessments. [P.69]



Fred is comparing two possible projects that will last for different durations. His company can only select one project due to financial constraints. He needs a method to compare the financial benefits of both projects.
Q: Is a payback analysis a useful tool for Fred to use? Answer Options:

  1. Yes ­ this will account for the difference in duration of the two projects
  2. No ­ this will not account for the difference in duration of the two projects
  3. Yes ­ this will provide Fred with a rate of return that is useful to accurately forecast profits
  4. No ­ there is no formula to calculate this, and a discount factor must be used

Answer(s): A

Explanation:

A Payback Analysis (p.72) calculates how long it takes for a project to recover its initial investment. It accounts for project duration but does not provide a rate of return (Option C). Discount factors (Option D) are used in Net Present Value (NPV) analysis, not Payback Analysis. [P.72]



Which of the following statements about investment appraisal techniques are true? (Select all that apply.)

Answer Options:

  1. Non-discounted cash flow methods focus on profit maximization
  2. Return on Capital Employed (ROCE) is expressed as a percentage of the value of assets used to generate profit
  3. Payback analysis ignores cash flow after the business recovers its costs
  4. Internal Rate of Return (IRR) can be used with Net Present Value (NPV)

Answer(s): B,C,D

Explanation:

Option B is correct ­ ROCE is expressed as a percentage (p.87). Option C is correct ­ Payback Analysis only considers the break-even point (p.83). Option D is correct ­ IRR and NPV are often used together (p.82). Option A is incorrect ­ Profit maximization is not the primary focus of non-discounted cash flow methods. [P.82-87]



When is a cost-plus pricing arrangement most likely to be used? Answer Options:

  1. In low-risk, low-value purchases
  2. Where there is a low level of trust between supplier and buyer
  3. In high-risk environments
  4. In international transactions

Answer(s): C

Explanation:

Cost-plus pricing is best suited for high-risk environments (p.93), such as fluctuating commodity markets. It reduces risk for suppliers by allowing cost adjustments based on actual expenses plus a margin. Option A is incorrect because low-risk projects favor fixed pricing. [P.93]



Casper is conducting a Variance Analysis of the company's budget.
What is its main purpose? Answer Options:

  1. To identify which departments have overspent
  2. To identify where cost savings can be made
  3. To minimize inefficiencies
  4. To analyze whether costs are fixed or variable

Answer(s): C

Explanation:

A Variance Analysis (p.95) compares planned vs. actual budget and identifies inefficiencies to enhance financial performance. Option A focuses only on overspending, B on cost-cutting, and D on categorizing costs rather than improving efficiency. [P.95]



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