Project Management Professional (PMP) Practice Exam

What is best used to calculate the profit from an internal project?

1. Discounted net revenues from the product over n years minus project costs for internal charges

2. Discounted net savings from the product over n years minus project costs for internal charges

3. The economic value added (EVA) to the organization taking into account taxes and capital costs

4. The reduction in total cost of ownership (TCO) of the current product compared with its predecessor product

The correct answer is: The economic value added (EVA) to the organization taking into account taxes and capital costs

The best method to calculate the profit from an internal project is the economic value added (EVA) to the organization, taking into account taxes and capital costs. This is because EVA provides a more comprehensive measure of profit compared to the other options. Option A, discounted net revenues from the product, only considers revenue and ignores expenses such as taxes and capital costs. Option B, discounted net savings, also focuses on savings rather than overall profit. Option D, reduction in total cost of ownership, only takes into account cost differences and may not accurately reflect the profit earned. Therefore, option C is the most suitable choice for calculating the profit of an internal project.