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Basic Question 19 of 29
Which of the following statements is false?
B. A positive NPV signifies that a project's cash flows exceed what is needed to repay the invested capital.
C. A negative NPV signifies that a project's cash flows fall short of repaying the invested capital.
D. Accepting projects with positive NPV increases shareholders' wealth.
A. An NPV of zero signifies that a project's cash flows are zero.
B. A positive NPV signifies that a project's cash flows exceed what is needed to repay the invested capital.
C. A negative NPV signifies that a project's cash flows fall short of repaying the invested capital.
D. Accepting projects with positive NPV increases shareholders' wealth.
User Contributed Comments 3
| User | Comment |
|---|---|
| haarlemmer | C should be stated in this way the project's discounted cash flows fall short from ... since the cash flow may be just enough or more than the initial investment, however, when discounted or NPVed, short to pay back the investment. |
| mtcfa | Yes C should read the project's discounted cash flows. But if they can't cover the cost when undiscounted, it is true nonetheless. |
| DonAnd | by the process of elimination, A is correct |
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Learning Outcome Statements
describe the capital allocation process, calculate net present value (NPV), internal rate of return (IRR), and return on invested capital (ROIC), and contrast their use in capital allocation
CFA® 2024 Level I Curriculum, Volume 2, Module 5.