- CFA Exams
- CFA Level I Exam
- Topic 3. Corporate Issuers
- Learning Module 5. Capital Investments and Capital Allocation
- Subject 3. Capital Allocation Principles and Pitfalls
CFA Practice Question
If a firm uses the same company cost of capital for evaluating all projects, which of the following is likely?
II. Accepting poor high-risk projects
I. Rejecting good low-risk projects
II. Accepting poor high-risk projects
Correct Answer: I and II
User Contributed Comments 4
| User | Comment |
|---|---|
| Rotigga | That's why you have to use your judgment and risk-weight the cost of capital for each project, or you run into I and II above. |
| johntan1979 | Type I and type II errors |
| Shaan23 | Look at johntan. Bringin back Unit 3. Like it. |
| cfastudypl | Good application of type I and II statistical errors. Thumps up johntan1979. |