- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 5. Capital Investments and Capital Allocation
- Subject 2. Capital Allocation
CFA Practice Question
Which of the following statements is false?
B. The IRR rule states that accepting a project with an IRR higher than the cost of capital will increase shareholders' wealth.
C. Non-conventional cash flows can result in multiple NPVs for a project.
A. The NPV rule states that accepting a project with positive NPV will increase shareholders' wealth.
B. The IRR rule states that accepting a project with an IRR higher than the cost of capital will increase shareholders' wealth.
C. Non-conventional cash flows can result in multiple NPVs for a project.
Correct Answer: C
Non-conventional cash flows (when cash flows change directions several times in the life of a project) can produce multiple IRRs for a project.
User Contributed Comments 2
| User | Comment |
|---|---|
| johntan1979 | B is because NPV is ALWAYS positive when IRR > cost of capital |
| Inaganti6 | John don't state the obvious id expect you to talk more about why std. Deviation is not an ideal risk measure |