A 5-year project requires $10 million in initial investment and will bring $0.5 million in net annual revenue under a 10% annual interest rate. If you were a project manager, would you proceed with project or would you terminate the project and at which stage?
A)Proceed with the project.
B)Terminate the project at initiation stage.
C)Terminate the project at planning stage.
D)Terminate the project at execution stage.
E)Terminate the project at monitoring and control stage.

Question

Quizplus · Accepted Answer

The project's Net Present Value (NPV) should be calculated to determine its viability. With a $10 million initial investment and $0.5 million in net annual revenue for 5 years at a 10% discount rate, the NPV is negative, indicating the project's returns do not cover its costs when considering the time value of money. Therefore, it's financially prudent to terminate the project at the initiation stage.

A 5-Year Project Requires $10 Million in Initial Investment and Will