PK0-005 Project Management Concepts Practice Question

Answer analysis

Option-by-option breakdown

For each option: why learners choose it and why it is or isn't the right answer here.

• ✗

  Both projects

  Why it's wrong here

  Selecting both ignores the decision rule: a negative NPV destroys value, so Project B should be rejected regardless of Project A. Choosing both suits complementary projects where capital is unconstrained and each independently returns above the discount rate.

• ✗

  Project B

  Why it's wrong here

  Project B's NPV of -$10,000 means its discounted cash inflows fall short of outflows, destroying value. A negative NPV is the criterion for rejection, not selection; Project B would only be chosen on non-financial grounds such as regulatory compliance.

• ✓

  Project A

  Why this is correct

  NPV discounts future cash flows to present value; a positive NPV means the project adds value, while a negative NPV destroys it. Project A's $50,000 exceeds Project B's −$10,000, so selecting A satisfies the NPV-based selection criterion.

• ✗

  Neither project

  Why it's wrong here

  Project A's positive NPV of $50,000 already delivers value, so rejecting both discards a viable investment. Selecting neither is tempting only when every option returns a negative NPV, where capital preservation justifies declining all candidates.