[Anonymous]

I just came across this question on the WTB and the way I’m reading it, their explanation seems to conflict with the answer they’re saying is correct. Am I just reading it wrong?

A multiperiod project has a positive net present value. Which of the following statements is correct regarding its required rate of return?

A. Less than the company’s weighted-average cost of capital.

B. Less than the project’s internal rate of return.

C. Greater than the company’s weighted-average cost of capital.

D. Greater than the project’s internal rate of return.

This answer (B) is correct. If the project has a positive net present value it has a return greater than the required return.

[Anonymous]

It is B. Since it has a positive NPV, the companies RoR < this projects IRR. It's not a well worded question though, as it says which of the following is correct regarding its (it should say ‘the companys') required rate of return.

[Anonymous]

Yeah, it definitely could be better worded. I was assuming “it's” meant the project, so I selected D as the correct answer. I've noticed quite a few Wiley questions on this new test bank that are worded pretty badly.

[M.O.D.]

This same question is in Gleim. It may have been an AICPA question at one time.

There are many AICPA/CMA released questions that are included in the Gleim test bank.

BA Mathematics, UC Berkeley
Certificates in CPA and EA preparation, College of San Mateo
CMA I 420, II 470
FAR 91, AUD Feb 2015 (Gleim self-study)

[Author]

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