CFA Practice Question

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CFA Practice Question

Which of the following statements is false?

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
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