PK0-005 Project Management Concepts Practice Question
A project sponsor is reviewing a proposal for a new project. The expected cash flows are: Year 0: -$100,000; Year 1: $30,000; Year 2: $40,000; Year 3: $50,000. The discount rate is 10%. Which of the following is the Net Present Value (NPV) of the project?
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
✓
-$2,103
NPV = -100,000 + 30,000/(1.10)^1 + 40,000/(1.10)^2 + 50,000/(1.10)^3 = -100,000 + 27,273 + 33,058 + 37,566 = -2,103. Negative NPV means the project is not profitable at 10% discount rate.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
-$20,000
Why it's wrong here
Incorrect; the negative NPV is much smaller.
- ✗
$20,000
Why it's wrong here
This ignores the time value of money.
- ✗
$2,103
Why it's wrong here
This is the absolute value but the actual NPV is negative.
- ✓
-$2,103
Why this is correct
Correct calculation gives approximately -$2,103.
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