CAPM Practice Question: Project Management Fundamentals and Core Concepts
A project manager is evaluating two project proposals. Proposal A has a benefit-cost ratio (BCR) of 1.2 and a payback period of 3 years. Proposal B has a BCR of 1.5 and a payback period of 4 years. The organization has limited funds and wants to maximize return on investment. Which proposal should the project manager recommend?
⚠ Common exam trap
CAPM often tests whether candidates default to payback period as the 'safe' choice — the trap is that payback measures speed of recovery, not return magnitude, so it is the wrong metric when the question explicitly asks to maximize ROI.
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
✓
Proposal B, because it has a higher benefit-cost ratio
Proposal B should be recommended because it has a higher benefit-cost ratio (BCR) of 1.5 versus 1.2 for Proposal A. BCR measures the ratio of benefits to costs, so a higher BCR indicates greater return per unit of investment. Since the organization wants to maximize ROI with limited funds, the higher BCR is the decisive metric, even though Proposal A has a shorter payback period.
Answer analysis
Option-by-option breakdown
For each option: why learners choose it and why it is or isn't the right answer here.
- ✗
Neither proposal; the organization should wait for better options
Why it's wrong here
Both proposals exceed a BCR of 1.0, so each returns more than it costs; rejecting both forfeits positive net value the organisation could realise. Waiting is justified only when no proposal clears the minimum acceptable BCR or payback threshold set by the organisation.
- ✗
Proposal A, because it has a shorter payback period
Why it's wrong here
A shorter payback period recovers capital sooner but ignores the magnitude of return; BCR 1.5 delivers more benefit per unit invested, which is what maximising return on investment requires. Payback period is the right criterion when liquidity or capital-recovery speed is the binding constraint, not ROI.
- ✗
Both proposals are equal; select based on non-financial criteria
Why it's wrong here
The proposals are not equal: BCR and payback measure different things, and with limited funds the organisation must weigh B's higher return against A's faster capital recovery. Non-financial criteria become decisive only when financial metrics are genuinely indistinguishable, which these figures are not.
- ✓
Proposal B, because it has a higher benefit-cost ratio
Why this is correct
BCR measures return per unit invested, so Proposal B's 1.5 delivers greater benefit per pound than A's 1.2, directly satisfying the stated goal of maximising return on investment under limited funds. The longer four-year payback is secondary to that constraint.
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Written and reviewed by Johnson Ajibi, MSc IT Security
Senior Network & Security Engineer · founder of Courseiva
Last reviewed September 2026 · checked against the official PMI exam blueprint
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