- 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
If an investment project has an internal rate of return equal to its WACC, the NPV for that project is ______.
B. positive
C. zero
A. negative
B. positive
C. zero
Correct Answer: C
User Contributed Comments 7
| User | Comment |
|---|---|
| armanaziz | How is "interest rate" defined here? Interest rate not necessarily equal a company's Cost of Capital. A company may decide to invest liquid fund in some interest generating bond.. or loan out to some company for fixed interest. That's why the answer is D. |
| sarath | If teh company cost of capital is equal to the internal rate of return of a project then the NPV will be ZERO... |
| americade | Interest Rate here is the market rate that may be either more or less than the company COC. |
| dipuo | Isnt IRR always producing NPV=0? |
| MattNYC | the question should stipulate whether or not the project is independent or mutually exclusive too. I was confused by this one. |
| MattNYC | Nevermind the earlier comment. The IRR is the rate that sets NPV = 0 |
| fabsan | WACC=Weighted Average Cost of Capital is your Required Rate of Return. When IRR is equal to RRR, NPV=0. |