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Basic Question 8 of 29
Which of the following best describes the difference between an investment's market value and its cost?
B. Internal rate of return
C. Payback
A. Net present value
B. Internal rate of return
C. Payback
User Contributed Comments 4
| User | Comment |
|---|---|
| todolist | IRR discounted future cashflows to present values |
| DannyZhou | So MV is PV of future cash flow without taking into consideration of initial cash outflow? |
| robbiecow | MV = PV(future CF) - Initial Outlay |
| stevo | If [MV = PV(FCF) - Initial outlay] and the question is [MV - Cost] then essentially the question is asking [PV(FCF) - initial outlay - cost] ? |
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Learning Outcome Statements
describe the capital allocation process, calculate net present value (NPV), internal rate of return (IRR), and return on invested capital (ROIC), and contrast their use in capital allocation
CFA® 2025 Level I Curriculum, Volume 2, Module 5.