Oliver F. Lehmann is one of the well known project management trainers. Being a trainer since 1995, he primarily focusses on PMP certification preparation. His 75 free sample questions (PMP® Exam Self-Assessment Test) is very popular. If you have not tried the test yet, please STOP reading this article.

He has given the answers and relevant references for all the 75 questions. He has not given any answer explanations, probably to encourage candidates to research themselves. I do encourage you to think and do a research before reading further on.

Since the cost and duration are the same for both projects, let us ignore those data; we will look into the returns/ benefits of the project only to compare.

Net Present Value (NPV) = FV/(1+r)

FV = Future Value

r = rate of interest

t = time period

So, the NPV of project 1 considering first three years

= 120000 / 1.05 + 120000 / 1.05

= $326790

NPV of project 2 considering first three years

= 15000 / 1.05 + 125000 / 1.05

= $317709

Comparing the two values, project #1 is better. By, what percentage?

= (326790-317709) / 317709

= 0.029

= 2.90% (approximately 3%)

So, the first project is more attractive by approximately 3%.

He has given the answers and relevant references for all the 75 questions. He has not given any answer explanations, probably to encourage candidates to research themselves. I do encourage you to think and do a research before reading further on.

## Question No. 2 from Oliver Lehmann PMP Exam Self Assessment Test

I took question #2 from the sample test to solve here. Read further only if you have failed to solve yourself and really need a guidance.Source: http://www.oliverlehmann.com/pmp-self-test/75-free-questions.htm |

## Answer Key for Oliver Lehmann PMP Exam Question No. 2

There are two projects in the question. We need to choose the project with a better returns based on the Net Present Value (NPV). The below table shows the given data.Project # | Duration | Cost | Returns |
---|---|---|---|

1 | 9 months | $250,000 | $120,000/ year |

2 | 9 months | $250,000 | 1st year: $15,000 2nd year: $125,000 3rd year: $220,000 |

Since the cost and duration are the same for both projects, let us ignore those data; we will look into the returns/ benefits of the project only to compare.

Net Present Value (NPV) = FV/(1+r)

^{t}, whereFV = Future Value

r = rate of interest

t = time period

So, the NPV of project 1 considering first three years

= 120000 / 1.05 + 120000 / 1.05

^{2}+ 120000 / 1.05^{3}= $326790

NPV of project 2 considering first three years

= 15000 / 1.05 + 125000 / 1.05

^{2}+ 220000 / 1.05^{3}= $317709

Comparing the two values, project #1 is better. By, what percentage?

= (326790-317709) / 317709

= 0.029

= 2.90% (approximately 3%)

So, the first project is more attractive by approximately 3%.

Hi, I need explanation for some questions. Can you pls help?

ReplyDeleteThanks

Pancham

Sure Pancham. I will try my best to clear your doubts regarding any PMP exam question. You can leave a comment or drop me a mail. Thanks.

DeleteManick can you explain Q49 in Oliver Lehman 75 Test. My answer is EAC= 550,000 but as per answer sheet it should be 525000

DeleteHi, This was really useful. Where can I get answers for the others? I have a few for which I am unable to figure out the rationale

ReplyDeleteThanks Sunita. You can send me the questions which you cannot figure out. I will try to help you. My mail id is manick.pmp@gmail.com

DeleteComparing the two values, project #1 is better. By, what percentage?

ReplyDelete= (326790-317709) / 317709

= 0.029

= 2.90% (approximately 3%)

why did you divide by the value of project 2 NPV to get the %

thanks

Layar21

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