Free PMI Project Management Professional (PMP) Practice Question

The correct answer is Project B. The Internal Rate of Return (IRR) is the discount rate that makes the net present value (NPV) of all cash flows equal to zero. When comparing projects, the one with the higher IRR is generally considered more attractive, as it indicates a higher potential return on investment. In this case, Project B has an IRR of 18%, which is higher than both Project A's IRR (15%) and the company's required rate of return (16%). This means that Project B not only outperforms Project A but also exceeds the company's minimum return requirements. It's important to note that while IRR is a valuable metric, it should not be the sole factor in project selection. Other considerations, such as initial investment, project risks, and alignment with strategic goals, should also be taken into account when making a final decision.