A project manager is reviewing the project charter and notices that the business case includes a cost-benefit analysis with a Net Present Value (NPV) of $50,000 and an Internal Rate of Return (IRR) of 12%. The company's required rate of return is 10%. What should the project manager conclude about this project?
Trap 1: The project's payback period is acceptable.
Payback period is not provided; NPV and IRR indicate viability.
Trap 2: The project is expected to break even.
A positive NPV indicates profit, not break-even.
Trap 3: The project is not financially viable.
The IRR exceeds the required rate of return, indicating viability.
- A
The project is financially viable.
IRR (12%) > required rate (10%) and positive NPV indicate financial viability.
- B
The project's payback period is acceptable.
Why wrong: Payback period is not provided; NPV and IRR indicate viability.
- C
The project is expected to break even.
Why wrong: A positive NPV indicates profit, not break-even.
- D
The project is not financially viable.
Why wrong: The IRR exceeds the required rate of return, indicating viability.