- CFA Exams
- CFA Exam: Level I 2021
- Study Session 10. Corporate Finance (1)
- Reading 32. Capital Budgeting
- Subject 3. Investment Decision Criteria
CFA Practice Question
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
Correct Answer: A
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] ? |