Explanation
According to the PMBOK Guide, net present value (NPV) is a financial analysis technique that calculates the present value of future cash flows, discounted at a specified rate. NPV helps to evaluate the profitability and feasibility of a project or an investment by comparing the present value of the expected benefits with the present value of the required costs. A positive NPV indicates that the project is profitable and worth pursuing, while a negative NPV indicates that the project is not profitable and should be rejected. NPV can also be used to compare different project options and select the one that has the highest NPV, as it represents the most value for the organization.
In this question, the project manager has to demonstrate the benefits of three possible options: building a new branch, renting an existing building, or not expanding at all. To do that, the project manager should use NPV as a decision-making tool. The project manager should calculate the costs for each option in each location, including the initial investment, the operating expenses, and the opportunity costs. The project manager should also estimate the future cash flows for each option, based on the expected revenue, market share, and growth potential. Then, the project manager should apply a discount rate to the future cash flows to obtain their present value. The discount rate reflects the time value of money, the inflation rate, and the risk associated with the project. Finally, the project manager should subtract the present value of the costs from the present value of the benefits to obtain the NPV for each option. The option that has the highest NPV should be recommended as the most beneficial one.
The other options are not correct because they do not provide a valid way to demonstrate the benefits of the three options. Option A is wrong because it only focuses on one option (renting) and does not consider the other two (building or not expanding). Moreover, a gap analysis is a technique to identify the difference between the current state and the desired state of a project or a process, not to evaluate the benefits of different options. Option C is wrong because it uses an inappropriate technique for this situation. A Kano analysis is a tool to classify customer requirements into different categories based on their impact on customer satisfaction.
It is not a tool to compare the benefits of different project options. Option D is wrong because it uses an incomplete technique for this situation. A payback period is a financial analysis technique that calculates the time required to recover the initial investment of a project. It does not consider the cash flows after the payback period, the time value of money, or theprofitability of the project. It is not a sufficient tool to demonstrate the benefits of different options. References:
PMBOK Guide, 6th edition, pages 333-334, 440-441
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