PMI Agile Certified Practitioner PMI ACP · Free Practice Question Easy
Question 24
Beth uses return on investment (ROI) to calculate the value a potential one-year international project will provide at Metro Corp. The expected revenue is $500,000, with an ROI of 10%. What does this tell Beth about her project?
- A There is an expected return on the investment
- B The expected project costs exceeded the expected project benefit by $50,000
- C The project should be undertaken
- D This project should be chosen ahead of a project where the NPV is $45,000
Reveal correct answer
Correct answer: A
Explanation
ROI (return on investment) is a financial metric that measures the profitability of an investment. It is expressed as a percentage and calculated by dividing the net gain from an investment by the cost of the investment. In this case, the project's expected revenue is $500,000, and the ROI is 10%, so the expected return is $50,000. A positive ROI of $50,000 indicates that the project is expected to generate a profit of $50,000 after accounting for the investment's cost. This means that the investment is likely worthwhile, as the profit generated is greater than the initial investment.The other answer choices are incorrect. A positive ROI does not guarantee that the project should be done, as other projects may provide greater benefit. ROI cannot be directly compared to NPV. A positive ROI indicates that potential costs are expected to be less than the project benefits, not more.Discussion
Think the marked answer is wrong, or have a better explanation? Share it below — comments appear after review.
You must be logged in to post a comment.
