FINANCIAL MODELING BOARD
EVALUATION 2026 GUARANTEED PASS
ANSWERS GRADED A+
● The effect of future value of a single cash flow when you increase the
PV Answer: an increase in the FV
● The effect of future value when you increase the discount rate
Answer: an increase in FV
● The effect of future value when you increase the number of periods
Answer: an increase in the FV
● Fully explain the formula used for calculating the FV of each cash
flow Answer: Each cash flow is compounded at the Discount Rate for
the remaining periods
● What is the name of the term that the Present Value is divided by to
get the Payment. Why does this formula give the Payment amount?
Answer: Present Value Interest Factor of Annuity. APV = PMT X
PVIFA. So, dividing by the Present Value Interest Factor undo's the
product, and gives you the PMT.
, ● Show the formula for calculating the Annuity Present Value using the
Annuity Future Value, Discount Rate, and # of Periods in Excel Notation
Answer: APV = AFV/(1+r)^t
● State the effect of increasing the payment amount on the APV and
AFV Answer: APV = increase in FV
AFV = increase in FV
● Can the constant discount rate method be used to calculate NPV in the
general case where the discount rate changes over time? Why/Why not?
Answer: No, because the NPV function & constant discount formula
only allow for one constant discount rate.
● Fully explain the NPV function used to calculate the NPV in cell b21
Answer: The NPV function in Excel assumes that Year 0 cash flow
occurs at the end of the year instead of the beginning, so you add it to
the NPV of the remaining years using the NPV function. The NPV
function takes the cash flows from each year, discounts it by the nominal
discount rate (which is found by compounding the inflation rate & the
real discount rate) and summing them up (including the initial
investment)
● Is the NPV of the project shown acceptable for investment?
Why/Why not Answer: A project is acceptable if the NPV is positive
EVALUATION 2026 GUARANTEED PASS
ANSWERS GRADED A+
● The effect of future value of a single cash flow when you increase the
PV Answer: an increase in the FV
● The effect of future value when you increase the discount rate
Answer: an increase in FV
● The effect of future value when you increase the number of periods
Answer: an increase in the FV
● Fully explain the formula used for calculating the FV of each cash
flow Answer: Each cash flow is compounded at the Discount Rate for
the remaining periods
● What is the name of the term that the Present Value is divided by to
get the Payment. Why does this formula give the Payment amount?
Answer: Present Value Interest Factor of Annuity. APV = PMT X
PVIFA. So, dividing by the Present Value Interest Factor undo's the
product, and gives you the PMT.
, ● Show the formula for calculating the Annuity Present Value using the
Annuity Future Value, Discount Rate, and # of Periods in Excel Notation
Answer: APV = AFV/(1+r)^t
● State the effect of increasing the payment amount on the APV and
AFV Answer: APV = increase in FV
AFV = increase in FV
● Can the constant discount rate method be used to calculate NPV in the
general case where the discount rate changes over time? Why/Why not?
Answer: No, because the NPV function & constant discount formula
only allow for one constant discount rate.
● Fully explain the NPV function used to calculate the NPV in cell b21
Answer: The NPV function in Excel assumes that Year 0 cash flow
occurs at the end of the year instead of the beginning, so you add it to
the NPV of the remaining years using the NPV function. The NPV
function takes the cash flows from each year, discounts it by the nominal
discount rate (which is found by compounding the inflation rate & the
real discount rate) and summing them up (including the initial
investment)
● Is the NPV of the project shown acceptable for investment?
Why/Why not Answer: A project is acceptable if the NPV is positive
