Exam CBAP topic 1 question 486 discussion

Ans-A Explanation- The internal rate of return (IRR) is the interest rate at which an investment breaks even, and is usually used to determine if the change, solution or solution approach is worth investing in.(BABOK page-278)

IRR -Internal rate of return

Internal Rate of Return The internal rate of return (IRR) is the interest rate at which an investment breaks even, and is usually used to determine if the change, solution or solution approach is worth investing in. The business analyst may compare the IRR of one solution or solution approach to a minimum threshold that the organization expects to earn from its investments (called the hurdle rate). If the change initiative’s IRR is less than the hurdle rate, then the investment should not be made.

PG 278 & 279 Based on BABOK V3, the most appropriate financial calculation for determining which solution is worth investing in based on its breakeven point is: D. Net Present Value Net Present Value (NPV) is the present value of the benefits minus the original cost of the investment. NPV helps in comparing different investments and different benefit patterns in terms of present-day value. The breakeven point is the point at which the NPV becomes zero, indicating that the benefits equal the costs. Therefore, by calculating the NPV for each solution proposal, the business analyst can determine which one reaches the breakeven point sooner or has a higher NPV, indicating a better investment.

Internal Rate of Return The internal rate of return (IRR) is the interest rate at which an investment breaks even, and is usually used to determine if the change, solution or solution approach is worth investing in.

The break-even point can be calculated in terms of Net Present Value (NPV). The financial break-even occurs at a point when the cash flows are equivalent to the initial investments; this is possible only when the NPV is zero. IRR, on the other hand is the break even rate. My conclusion, question is poorly worded.

The question do not mention to calculate the interest rate, but only do choose the better investment. So, answer D (Net Present Value) is the right one. The higher the NPV, the better the investment (BABOK 10.20.3.5)

Ans A 10.20.3 The internal rate of return (IRR) is the interest rate at which an investment breaks even, and is usually used to determine if the change, solution or solution approach is worth investing in.

although any of the four options can be used, the keyword is the breakeven point. net present value -D is the right answer

ANs is A The internal rate of return (IRR) is the interest rate at which an investment breaks even, and is usually used to determine if the change, solution or solution approach is worth investing in.

Yes, A