American_Bankers_Association
CTFA · Question #292
CTFA Question #292: Real Exam Question with Answer & Explanation
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Question
Assume that a firm has accurately calculated the net cash flows relating to an investment proposal. If the net present value of this proposal is greater than zero and the firm is not under the constraint of capital rationing, then the firm should:
Options
- Acalculate the IRR of this investment to be certain that the IRR is greater than the cost of capital
- BCompare the profitability index of the investment to those of other possible investments
- CCalculate the payback period to make certain that the initial cash outlay can be recovered within
- DAccept the proposal, since the acceptance of value-creating investments should increase
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