HPE0-P26 · Question #5
Is this how you should approach a customer who makes purchasing decisions using total cost of ownership (TCO)? Solution: Calculate ROI without NPV because this customer does not care about present…
The correct answer is B. No. B is correct because a TCO-focused customer is explicitly evaluating costs spread across a product's entire lifecycle - which makes the time value of money more relevant, not less. NPV is the standard method for normalizing future cash flows to present value, and omitting it…
Question
Is this how you should approach a customer who makes purchasing decisions using total cost of ownership (TCO)? Solution: Calculate ROI without NPV because this customer does not care about present value.
Options
- AYes
- BNo
How the community answered
(15 responses)- A20% (3)
- B80% (12)
Explanation
B is correct because a TCO-focused customer is explicitly evaluating costs spread across a product's entire lifecycle - which makes the time value of money more relevant, not less. NPV is the standard method for normalizing future cash flows to present value, and omitting it would produce a misleading ROI figure that misrepresents the true economic value of the investment.
Option A is wrong because it validates a flawed assumption: that a long-term cost-conscious buyer somehow doesn't care about present value. In reality, TCO analysis inherently involves multi-year cash flows, so NPV is essential to that calculation, not optional.
Memory tip: Think "TCO = Time → Time value of money matters." Any customer evaluating costs over time needs NPV to make those future dollars comparable - skipping it is like adding apples and oranges across different years.
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