CFA — Certificate in Financial Analysis Investment Practice Questions

A company is evaluating its investment in a new project. If the project has an expected return of 12% and the company's cost of capital is 10%, what should the company do?

• AA. Invest in another project
• BB. Accept the project
• CC. Delay the project
• DD. Reject the project

An investment has a beta of 1.2. If the market return is expected to be 10% and the risk-free rate is 2%, what is the expected return on the investment according to the CAPM?

• AA. 10.80%
• BB. 11.60%
• CC. 12.40%
• DD. 13.00%

Company Z is planning to invest in a new production facility. The NPV of the investment is negative. What is the best course of action?

• AA. Increase project duration
• BB. Delay the investment
• CC. Proceed with the investment
• DD. Seek alternatives