- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 5. Capital Investments and Capital Allocation
- Subject 2. Capital Allocation

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**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

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**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. |