PK0-005 Project Management Concepts Practice Question
A project manager is selecting a project from several proposals. The project with the highest Net Present Value (NPV) also has the longest payback period. Which TWO factors should the project manager consider when recommending this project? (Select TWO).
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
✓
The high NPV indicates strong long-term profitability
NPV indicates long-term profitability; a high NPV is favorable. However, a long payback period increases risk of uncertainty. Both factors should be balanced.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
The project has the shortest payback period
Why it's wrong here
The scenario states it has the longest payback period, which is not an advantage.
- ✓
The high NPV indicates strong long-term profitability
Why this is correct
High NPV is a positive indicator of value.
- ✓
The project aligns with organizational strategy
Why this is correct
Strategic alignment is a key criterion for project selection.
- ✗
The project has the lowest initial cost
Why it's wrong here
NPV and payback period do not directly indicate lowest initial cost.
- ✗
The project requires minimal resources
Why it's wrong here
Resource requirements are not directly given by NPV or payback period.
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