2008 CFA Level 1 － Sample 样题(3)－Q46 face, comparing, specific, capital, methods

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46、In comparing the use of the IRR and NPV methods to make decisions on mutually exclusive capital projects for a specific firm, which of the following statements is least accurate?

A. The IRR method can result in multiple values.

B. The NPV rankings depend on the cost of capital.

C. The IRR method has the more appropriate reinvestment rate assumption.

D. The IRR method contains valuable information about a project's "safety margin" by comparing the IRR to the cost of capital.

     

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答案和详解如下：

46、Correct answer is C

"Capital Budgeting," John D. Stowe and Jacques R. Gagné

2008 Modular Level I, Vol. 4, pp. 21-23

Study Session 11-44-d, e

calculate and interpret the results using each of the following methods to evaluate a single capital project: net present value (NPV), internal rate of return (IRR), payback period, discounted payback period, average accounting rate of return (AAR), and profitability index (PI);

explain the NPV profile, compare and contrast the NPV and IRR methods when evaluating independent and mutually exclusive projects, and describe the problems that can arise when using an IRR

The reinvestment rate assumption using the IRR method is the internal rate of return on a particular capital project. The reinvestment rate assumption for the NPV method is the cost of capital for the firm, which is a more appropriate reinvestment rate assumption.

 

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