PK0-005 Project Management Concepts Practice Question
An organization is evaluating two potential projects. Project A has an NPV of $50,000 and a payback period of 2 years. Project B has an NPV of $40,000 and a payback period of 1.5 years. The organization's policy is to select projects with the highest NPV. Which project should be selected?
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
✓
Project A because it has a higher NPV
NPV is the primary criterion; Project A has higher NPV despite longer payback.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✓
Project A because it has a higher NPV
Why this is correct
Higher NPV indicates greater profitability.
- ✗
Project A because it has a longer payback period
Why it's wrong here
Longer payback is not beneficial.
- ✗
Project B because it has a shorter payback period
Why it's wrong here
Payback period is not the primary criterion per policy.
- ✗
Project B because it has a lower NPV
Why it's wrong here
Lower NPV is less desirable.
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