PRINCE2 Practitioner — Question 10

The project is at the end of stage 1. The project manager is preparing the full business case using the PRINCE2 supporting techniques. The investment appraisal includes an assessment of the value of the underground parking space and potential income. This is based on the net present value of the anticipated income from the car park compared with the estimated cost of construction and offset by any associated risks. As the operating costs for the car park are not yet known, the decision has been taken not to include them.
Is this decision an appropriate application of the ‘business case’ practice, and why?

Answer options

• A. Yes, because business justification should be based on the estimated cost of construction against the anticipated benefits offset by any associated risks
• B. Yes, because the value of future benefits from car park income should be based on the current valve of money calculated using a discount rate
• C. No, because the investment appraisal should include the cost of maintaining the car park as well as the cost of its construction
• D. No, because the anticipated income from the car park is uncertain and there is a risk that the benefits may not exceed the cost of construction

Correct answer: C

Explanation

The correct answer is C because an accurate investment appraisal should take into account all relevant costs, including maintenance, to provide a complete picture of the project’s financial viability. Options A and B incorrectly suggest that excluding operating costs is acceptable, while option D, although it addresses risks, does not emphasize the necessity of including all costs in the appraisal.