CFA Practice Question

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CFA Practice Question

If a firm uses the same company cost of capital for evaluating all projects, which of the following is likely?

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.
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