ServiceNow CIS-SPM Exam - Topic 3 Question 21 Discussion

According to the ServiceNow documentation1, the discount rate on the demand form impacts the net present value (NPV) of the demand. The NPV is the difference between the present value of the benefits and the present value of the costs of the demand. The discount rate is the rate used to discount future cash flows to their present value. A higher discount rate means that future cash flows are worth less in the present, and vice versa. The other options are incorrect because:

A) ROI: The ROI (return on investment) is the ratio of the net value to the estimated cost of the demand.The discount rate does not affect the ROI, as both the net value and the estimated cost are based on the present value of the cash flows2.

C) Financial Benefit: The financial benefit is the sum of the present value of the benefits of the demand.The discount rate does not affect the financial benefit directly, but only indirectly through the NPV calculation3.

D) Internal Rate of Return %: The internal rate of return % (IRR) is the discount rate that makes the NPV of the demand equal to zero.The discount rate does not affect the IRR, but rather the IRR is derived from the NPV equation4.

1: https://docs.servicenow.com/bundle/vancouver-it-business-management/page/product/demand-management/reference/r_DemandTable.html2: https://docs.servicenow.com/bundle/vancouver-it-business-management/page/product/demand-management/concept/c_DemandRate.html3: https://docs.servicenow.com/bundle/vancouver-it-business-management/page/product/demand-management/concept/c_FinancialBenefit.html4: https://docs.servicenow.com/bundle/vancouver-it-business-management/page/product/demand-management/concept/c_InternalRateOfReturn.html