PK0-005 Project Management Concepts Practice Question
A project sponsor is reviewing a project that has a Net Present Value (NPV) of -$15,000. What should the sponsor recommend?
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
✓
Reject the project because NPV is negative
A negative NPV indicates the project is not expected to be profitable; it should be rejected. Positive NPV is profitable. IRR and payback period are different metrics.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Proceed with the project because NPV is negative
Why it's wrong here
Negative NPV indicates loss.
- ✓
Reject the project because NPV is negative
Why this is correct
Negative NPV means the project is not financially viable.
- ✗
Proceed if the IRR is positive
Why it's wrong here
IRR may be positive, but NPV is the primary decision criterion.
- ✗
Reject only if the payback period is too long
Why it's wrong here
Negative NPV is sufficient to reject.
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