CFA Practice Question

There are 233 practice questions for this study session.

CFA Practice Question

Which of the following statements is false?

A. The NPV method indicates accepting any investment project with a positive NPV.
B. The IRR method indicates accepting any investment project that has an internal rate of return greater than a firm's cost of capital.
C. The NPV method and IRR method yield correct decisions when cash flows are non-conventional.
D. The NPV method and MIRR method yield correct decisions when cash flows are non-conventional.
Correct Answer: C

The IRR method can lead to a different and incorrect decision when cash flows are non-conventional.

User Contributed Comments 12

User Comment
kalps Surely B is wrong, the IRR must be greater than CoC for a project to be accepted
morpheus918 Read it again. That's what B says.
jaan B is right... read it again its says IRR > CoC
mtcfa B is 100% right. IRR is the rate where NPV = 0. If the cost of capital is less then the IRR, NPV is positive (i.e. the discounting effect is not as great).
Rotigga MIRR method assumes that cashflows from all projects are reinvested at the cost of capital instead of IRR.
neenalisa Why's the answer not D??
czar yes, could someone please help explain, why not D?
thanks!
loisliu88 can anyone tell me what is a MIRR. didn't find it. thanks
loisliu88 well, give a guess. is it Multiple IRR?
LONG MIRR: Modified Internal Rate of Return.
for Reinvestment Rate of the cash inflow
Speer D is a correct statement because MIRR takes into considaration multiple cash flows-it doesnt change like IRR- and gives the same result as NPV.
ashish100 "investopedia.com" ladies and gentlemen.

this is the cfa god damn it. guesses ruin lives out here
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