PK0-005 Project Management Concepts Practice Question
A senior manager is comparing two projects for selection. The manager wants to use a method that considers the time value of money. Which TWO project selection methods incorporate the time value of money?
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
✓
Internal rate of return (IRR)
NPV and IRR both consider the time value of money. Payback period does not; ROI and cost-benefit analysis typically do not discount future cash flows.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
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Payback period
Why it's wrong here
Payback period ignores the time value of money.
- ✓
Internal rate of return (IRR)
Why this is correct
Correct. IRR is the discount rate that makes NPV zero, considering time value.
- ✓
Net present value (NPV)
Why this is correct
Correct. NPV discounts future cash flows to present value.
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Return on investment (ROI)
Why it's wrong here
ROI typically does not consider time value unless adjusted.
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Cost-benefit analysis
Why it's wrong here
Cost-benefit analysis may or may not include discounting; but NPV and IRR are explicit.
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