PMP Question #914: Real Exam Question with Answer & Explanation

Question

A steering committee has asked the project manager to assist with the decision-making process between build versus buy delivery options. Which value metric should the project manager evaluate to respond to the steering committee's request?

Options

• ANet present value (NPV)
• BEarned value (EV)
• CImpact value
• DExpected monetary value (EMV)

Explanation

To decide between "build versus buy" options, the project manager should evaluate Net Present Value (NPV), as it quantifies the long-term financial viability and profitability of each investment.

Common mistakes.

• B. Earned Value (EV) is a project performance measurement technique used during project execution, not for initial investment decision-making between options.
• C. 'Impact value' is a general term and not a standardized financial metric used for comparing investment options in the same way as NPV.
• D. Expected Monetary Value (EMV) is primarily used in risk management to quantify the average outcome of a decision when uncertainty is present, not as the primary metric for comparing two distinct investment options like build vs. buy which typically have more defined costs and benefits over time.

Concept tested. Financial evaluation of project options

Reference. https://www.pmi.org/pmbok-guide-standards/foundational/pmbok/project-cost-management

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