AI Investment Justification CAIPM Practice Questions (Page 1)

Questions 1–5

1. 1application · medium

   A company is considering an AI project with an initial investment of $400,000. The expected annual cash inflows are $120,000 for the first two years and $80,000 for the next three years. The company's required rate of return is 10%. What is the Net Present Value (NPV) of the project?

   • ANPV is approximately $20,000, so proceed.
   • BNPV is approximately -$27,000, so reject.
   • CNPV is zero, so the decision is indifferent.
   • DNPV is approximately $50,000, so proceed.
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2. 2foundation · easy

   What is the primary purpose of performing a cost-benefit analysis for an AI project?

   • ATo ensure the project complies with data protection regulations
   • BTo select the best machine learning algorithm for the project
   • CTo identify all possible technical risks in the project
   • DTo determine whether the expected benefits justify the expected costs
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4. 3foundation · easy

   Why should intangible benefits be included in an AI investment case?

   • AThey are required by accounting standards for all capital expenditures
   • BThey can be easily converted into precise monetary values
   • CThey replace the need for a detailed financial analysis
   • DThey provide a more complete picture of the project's strategic value
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5. 4expert · hard

   A pharmaceutical company is evaluating an AI system for drug discovery. The system has a high development cost of $10M and uncertain benefits, with a 30% chance of achieving $50M in savings and a 70% chance of achieving only $5M in savings over 5 years. The company's discount rate is 8%. What is the expected NPV of this project?

   • A$8.5M
   • B-$7.41M
   • C$18.5M
   • D$2.59M
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6. 5expert · hard

   A technology company is seeking approval for an AI-powered recommendation engine. The CEO is excited about the innovation potential, but the CFO is concerned about the uncertain ROI and the legal team is worried about data privacy regulations. The project manager needs to secure approval from all three. What is the most effective communication strategy?

   • AAsk the CEO to champion the project and persuade the CFO and legal team
   • BFocus on the innovation potential and defer financial and legal discussions until after approval
   • CPresent the innovation potential to the CEO and address the CFO's and legal team's concerns in a separate meeting
   • DPresent a unified business case that highlights innovation potential, provides a range of ROI scenarios, and includes a data privacy compliance plan
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