CFA Practice Question

There are 294 practice questions for this study session.

CFA Practice Question

Which of the following calculations can be successfully performed without knowing the required rate of return?

I. Net Present Value
II. Internal Rate of Return
III. Modified Internal Rate of Return
IV. Time-weighted Rate of Return
V. Dollar-weighted Rate of Return
VI. Valuing a common stock using the dividend discount model
VII. Valuing a common stock using the free-cash-flow-to-equity model
A. II, IV, V
B. II, V, VI
Explanation: Of the financial figures listed, only the Internal Rate of Return, which is also known as the "Dollar-Weighted Rate of Return," and the Time-Weighted Rate of Return can be calculated without knowing the required rate of return.

User Contributed Comments 2

User Comment
wollogo I would arguee that VII is also correct. They key advantage of using multiplier based models or ratios is that you don't need to estimate the rate of return.
octavianus FCFE is not an equity based multiplier, it is CFO - Capital Expenditures discounted at cost of equity (k).

Thus, discount rate/required rate of return is needed.
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