FIN 341 FINAL UPDATED ACTUAL MOCK EXAM
WITH ANSWER RATIONALES 2026
◉ T/F: EVA is highly correlated with stock price.
Answer: T
◉ T/F: EVA is good for measuring management performance in
specific divisions.
Answer: T
◉ T/F: MVA is good for measuring management performance in
specific divisions.
Answer: F
◉ Old Dividend Exclusion Rules.
Answer: 70/80/100
◉ New Dividend Exclusion Rules.
Answer: 50/65/100
◉ T/F: The higher the tax bracket an individual is in, the more
attractive municipal bonds are.
,Answer: T
◉ T/F: Dividend income received by individuals used to be taxed as
ordinary income.
Answer: T
◉ T/F: You can reduce annual ordinary income by 3000 when
dealing with capital losses.
Answer: T
◉ If debt ratio increases, EM _____________________.
Answer: increases
◉ T/F: If a firm maximizes ROE, it's quite probable it has taken on
too much debt.
Answer: T
◉ T/F: Firms have learned that using ROE for bonuses can be
problematic, and are increasingly turning to EVA to determine
bonuses.
Answer: T
, ◉ T/F: A number of companies use ROE to determine executives'
bonuses, but it can entice an executive to turn down a project that is
profitable but brings down the average ROE for the year.
Answer: T
◉ T/F: When two projects of different size/investment are
compared using ROE, the one with the lower ROE adds less value ($)
to the firm than the other one.
Answer: F
◉ T/F: A firm's ROA can equal its ROE only if the firm has no debt in
its capital structure.
Answer: T
◉ DR =.
Answer: 1-(1/EM)
◉ EM =.
Answer: 1/(1-DR)
◉ T/F: A benefit of focusing on ROE is that it ensures that all
profitable projects will be accepted so that the average ROE of the
firm will be boosted.
Answer: F
WITH ANSWER RATIONALES 2026
◉ T/F: EVA is highly correlated with stock price.
Answer: T
◉ T/F: EVA is good for measuring management performance in
specific divisions.
Answer: T
◉ T/F: MVA is good for measuring management performance in
specific divisions.
Answer: F
◉ Old Dividend Exclusion Rules.
Answer: 70/80/100
◉ New Dividend Exclusion Rules.
Answer: 50/65/100
◉ T/F: The higher the tax bracket an individual is in, the more
attractive municipal bonds are.
,Answer: T
◉ T/F: Dividend income received by individuals used to be taxed as
ordinary income.
Answer: T
◉ T/F: You can reduce annual ordinary income by 3000 when
dealing with capital losses.
Answer: T
◉ If debt ratio increases, EM _____________________.
Answer: increases
◉ T/F: If a firm maximizes ROE, it's quite probable it has taken on
too much debt.
Answer: T
◉ T/F: Firms have learned that using ROE for bonuses can be
problematic, and are increasingly turning to EVA to determine
bonuses.
Answer: T
, ◉ T/F: A number of companies use ROE to determine executives'
bonuses, but it can entice an executive to turn down a project that is
profitable but brings down the average ROE for the year.
Answer: T
◉ T/F: When two projects of different size/investment are
compared using ROE, the one with the lower ROE adds less value ($)
to the firm than the other one.
Answer: F
◉ T/F: A firm's ROA can equal its ROE only if the firm has no debt in
its capital structure.
Answer: T
◉ DR =.
Answer: 1-(1/EM)
◉ EM =.
Answer: 1/(1-DR)
◉ T/F: A benefit of focusing on ROE is that it ensures that all
profitable projects will be accepted so that the average ROE of the
firm will be boosted.
Answer: F
