GSLC · Question #186
You have been hired as a project manager for a project. The initial project planning predicts a benefitcost ratio (BCR) of the project as 3.5. What does this figure mean?
The correct answer is D. A payback of $3.5 for each dollar expended. A benefit-cost ratio of 3.5 means the project returns $3.50 in benefits for every $1.00 invested, indicating a strongly favorable outcome.
Question
You have been hired as a project manager for a project. The initial project planning predicts a benefitcost ratio (BCR) of the project as 3.5. What does this figure mean?
Options
- AA loss of 3.5 percent
- BA profit of 3.5 percent
- CA loss of $3.5 for each dollar expended
- DA payback of $3.5 for each dollar expended
How the community answered
(60 responses)- A2% (1)
- B8% (5)
- C3% (2)
- D87% (52)
Why each option
A benefit-cost ratio of 3.5 means the project returns $3.50 in benefits for every $1.00 invested, indicating a strongly favorable outcome.
A BCR below 1.0 indicates a loss; a BCR of 3.5 represents a strongly positive return that far exceeds the amount invested.
BCR is a dimensionless dollar-to-dollar ratio, not a percentage; interpreting 3.5 as a percentage misrepresents how the metric is defined and scaled.
A net loss per dollar expended requires a BCR less than 1.0; a BCR of 3.5 represents a gain of $3.50 per dollar, the opposite of a loss.
BCR is calculated by dividing total expected benefits by total expected costs; a ratio of 3.5 means each dollar spent yields $3.50 in return, far exceeding the break-even value of 1.0. Any BCR greater than 1.0 confirms that benefits outweigh costs and the project is financially justified.
Concept tested: Benefit-cost ratio interpretation in project management
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