Quick Answer
The answer is 3.33 years. This is the correct payback period calculation because payback period is determined by dividing the initial investment by the annual net cash inflow, so $50,000 divided by $15,000 equals 3.33 years. The payback period measures how quickly the project recovers its upfront cost, ignoring the time value of money and any savings beyond the break-even point. On the Certified Associate in Project Management CAPM exam, this concept tests your ability to perform a straightforward cost-benefit analysis, often appearing in questions about project selection methods. A common trap is to mistakenly divide total savings over the project horizon by the initial cost, or to round prematurely—remember, the payback period stops once the initial cost is fully recovered, not at the end of the project. Memory tip: think of it as “cost divided by cash per year” to get the years to break even.
This CAPM practice question tests your understanding of business analysis frameworks. Read the scenario carefully and evaluate each option against the stated constraints before committing to an answer. After answering, compare your reasoning against the explanation and wrong-answer breakdown below. Once you have made your selection, read the full explanation to reinforce the concept and understand why each distractor is designed to mislead on exam day.
A business analyst is performing a cost-benefit analysis for a proposed system upgrade. The upgrade costs $50,000 upfront and saves $15,000 per year in operational costs. The project has a 5-year horizon. What is the payback period in years?
5.00 years
Why wrong: This is the project horizon, not the payback.
4.00 years
Why wrong: This would be if savings were $12,500.
3.33 years
Payback period = Initial investment / Annual savings = 50,000/15,000 = 3.33.
0.33 years
Why wrong: This is the payback if savings were $150,000.
Answer choices
Answer the question above first, then reveal the full breakdown to understand why each option is right or wrong.
Correct answer & explanation
3.33 years
Option A is correct: 50,000/15,000 = 3.33 years. Option B is wrong because it assumes 4 years. Option C is wrong because it miscalculates total savings. Option D is wrong because it ignores initial cost.
Key principle: Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Answer analysis
For each option: why learners choose it and why it is or isn't the right answer here.
5.00 years
Why it's wrong here
This is the project horizon, not the payback.
4.00 years
Why it's wrong here
This would be if savings were $12,500.
3.33 years
Why this is correct
Payback period = Initial investment / Annual savings = 50,000/15,000 = 3.33.
Related concept
Read the scenario before looking for a memorised answer.
0.33 years
Why it's wrong here
This is the payback if savings were $150,000.
Common exam traps
Many certification questions include familiar terms but test a specific constraint. Read the exact wording before choosing an answer that is generally true but wrong for this case.
Detailed technical explanation
This question should be treated as a scenario, not a definition check. Identify the problem, the constraint and the best action. Then compare each option against those facts.
Key takeaway
Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option.
Real-world example
A practitioner preparing for the CAPM exam encounters this exact type of scenario on the job. The correct answer here is not the most general option — it is the best answer for the specific constraint described. Answer the scenario, not the keyword: identify the specific constraint before choosing the most familiar-sounding option. Real exam questions reward reading the full scenario before eliminating options, because the constraint defines which answer fits.
What to study next
Identify which CAPM exam domain this question belongs to, then review the specific concept being tested. Practise related questions in that domain and focus on understanding why each wrong answer is tempting — not just why the correct answer is right.
Business Analysis Frameworks — study guide chapter
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FAQ
Business Analysis Frameworks — This question tests Business Analysis Frameworks — Read the scenario before looking for a memorised answer..
The correct answer is: 3.33 years — Option A is correct: 50,000/15,000 = 3.33 years. Option B is wrong because it assumes 4 years. Option C is wrong because it miscalculates total savings. Option D is wrong because it ignores initial cost.
Identify which CAPM exam domain this question belongs to, then review the specific concept being tested. Practise related questions in that domain and focus on understanding why each wrong answer is tempting — not just why the correct answer is right.
Read the scenario before looking for a memorised answer.
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Last reviewed: Jun 24, 2026
This CAPM practice question is part of Courseiva's free PMI certification practice question bank. Courseiva provides original exam-style practice questions with explanations, topic-based practice, mock exams, readiness tracking, and study analytics to help learners prepare for the CAPM exam.
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