PK0-005 Project Management Concepts Practice Question
A project manager is reviewing project selection methods. Which method calculates the present value of future cash flows minus the initial investment?
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
✓
Net Present Value (NPV)
Net Present Value (NPV) is the sum of present values of incoming and outgoing cash flows over a period of time.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Internal Rate of Return (IRR)
Why it's wrong here
IRR is the discount rate that makes NPV zero.
- ✗
Payback period
Why it's wrong here
Payback period calculates the time to recover investment.
- ✗
Return on Investment (ROI)
Why it's wrong here
ROI measures profitability relative to investment.
- ✓
Net Present Value (NPV)
Why this is correct
NPV calculates the present value of cash flows minus investment.
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