CFA Practice Question

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CFA Practice Question

Choose one of the following to best quantify, in dollar terms, how stockholder wealth will be affected by undertaking a project under consideration.

A. The average accounting return
B. Net present value
C. Payback analysis
D. The profitability index
E. The internal rate of return
Correct Answer: B

User Contributed Comments 5

User Comment
DonAnd Huh? I thought it was D-the profitability index??
poomie83 PI is only used NPV is determined. The decision to undertake a project is at the NPV level - positive NPV indicates cash inflows which influences share price thereby affecting stockholder wealth
thekobe dollar terms is the key
davcer Only npv is in dollar terms
ascruggs92 PI is the PV of 1 dollar invested in said project. It's useful but required NPV to be calculated, making NPV more useful.
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