PK0-005 Project Management Concepts Practice Question
A company is evaluating two projects. Project A has an NPV of $50,000 and a payback period of 3 years. Project B has an NPV of $40,000 and a payback period of 2 years. Which project should be selected based on NPV?
Answer choices
Why each option matters
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
✓
Project A because it has a higher NPV
NPV is a primary indicator of profitability. Higher NPV is better, regardless of payback period.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Neither project should be selected
Why it's wrong here
Both have positive NPV, so both are viable; but A is better.
- ✗
Project B because it has a shorter payback period
Why it's wrong here
Payback period is secondary; NPV is more important for profitability.
- ✗
Both projects are equally good
Why it's wrong here
NPVs differ.
- ✓
Project A because it has a higher NPV
Why this is correct
A higher NPV indicates greater value.
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