CORPORATE FINANCIAL MANAGEMENT - EXAM
3 QUESTIONS AND ANSWERS UPDATED 2024 -
2025
capital,budgeting,,,ANS,-,Summary,of,planned,investments,and,long-
term,assets.,How,do,I,take,the,money,I,have,and,apply,it,in,the,best,possible,way,to,meet,my,goals?
Which,long-term,projects,or,investments,should,a,firm,select?
returns,costs,,,ANS,-,You,should,select,a,project,if,the,__________,exceed,the,_________.
long,term,,,ANS,-,Greater,than,or,equal,to,1,year.
incremental,,,ANS,-,Only,consider,______________,cash,flows.
payback,period,,,ANS,-,the,time,required,to,recover,the,initial,investment.
Easy,to,understand,and,frequently,used,,but,not,optimal.
Biased,towards,the,short-term,and,emphasizes,liquidity.
b,,,ANS,-,Which,capital,budgeting,does,not,consider,TVM,or,cash,flows,beyond,the,cut,off?
a),discounted,payback
b),payback,period
c),WACC
less,,,ANS,-
,For,the,payback,period,and,the,discounted,payback,period,,compare,the,result,to,an,arbitrary,cut-
off,period,and,accept,if,(more,,less),than,the,cut,off.
a,,,ANS,-
,Which,capital,budgeting,technique,considers,TVM,but,does,not,consider,cash,flows,beyond,the,cut,off?
a),discounted,payback
, b),payback,period
c),WACC
WACC,,,ANS,-,For,the,discounted,payback,period,,cash,flows,are,discounted,at,_______.
NPV,,,ANS,-,PV,of,expected,cash,flows,of,an,investment,,using,WACC,as,the,discount,rate.
accept,,,ANS,-,If,the,NPC,is,greater,than,0,(positive),you,should,(accept/decline),the,project.
decline,,,ANS,-,If,the,NPC,is,less,than,0,(negative),you,should,(accept/decline),the,project.
positive,higher,,,ANS,-,(Positive/Negative),NPV,will,increase,the,profitability,of,the,firm.
(Higher/Lower),NPV,is,better.
IRR,,,ANS,-,Return,that's,generated,from,estimated,cash,flows.
Enables,an,easy,comparison,to,the,required,return
IRR,,,ANS,-,Return,that,makes,NPV,=,0
greater,,,ANS,-
,Accept,the,project,if,the,IRR,[internal,rate,of,return],is,(greater/less),than,the,WACC,[required,return].
WACC,IRR,,,ANS,-,With,the,MIRR,,cash,flows,are,reinvested,at,_____,rather,than,the,_____.
MIRR,,,ANS,-,Accommodates,nonconventional,cash,flow,series.
a,,,ANS,-,For,an,independent,project:
a),evaluate,each,one,individually
b),select,the,best,project,only
3 QUESTIONS AND ANSWERS UPDATED 2024 -
2025
capital,budgeting,,,ANS,-,Summary,of,planned,investments,and,long-
term,assets.,How,do,I,take,the,money,I,have,and,apply,it,in,the,best,possible,way,to,meet,my,goals?
Which,long-term,projects,or,investments,should,a,firm,select?
returns,costs,,,ANS,-,You,should,select,a,project,if,the,__________,exceed,the,_________.
long,term,,,ANS,-,Greater,than,or,equal,to,1,year.
incremental,,,ANS,-,Only,consider,______________,cash,flows.
payback,period,,,ANS,-,the,time,required,to,recover,the,initial,investment.
Easy,to,understand,and,frequently,used,,but,not,optimal.
Biased,towards,the,short-term,and,emphasizes,liquidity.
b,,,ANS,-,Which,capital,budgeting,does,not,consider,TVM,or,cash,flows,beyond,the,cut,off?
a),discounted,payback
b),payback,period
c),WACC
less,,,ANS,-
,For,the,payback,period,and,the,discounted,payback,period,,compare,the,result,to,an,arbitrary,cut-
off,period,and,accept,if,(more,,less),than,the,cut,off.
a,,,ANS,-
,Which,capital,budgeting,technique,considers,TVM,but,does,not,consider,cash,flows,beyond,the,cut,off?
a),discounted,payback
, b),payback,period
c),WACC
WACC,,,ANS,-,For,the,discounted,payback,period,,cash,flows,are,discounted,at,_______.
NPV,,,ANS,-,PV,of,expected,cash,flows,of,an,investment,,using,WACC,as,the,discount,rate.
accept,,,ANS,-,If,the,NPC,is,greater,than,0,(positive),you,should,(accept/decline),the,project.
decline,,,ANS,-,If,the,NPC,is,less,than,0,(negative),you,should,(accept/decline),the,project.
positive,higher,,,ANS,-,(Positive/Negative),NPV,will,increase,the,profitability,of,the,firm.
(Higher/Lower),NPV,is,better.
IRR,,,ANS,-,Return,that's,generated,from,estimated,cash,flows.
Enables,an,easy,comparison,to,the,required,return
IRR,,,ANS,-,Return,that,makes,NPV,=,0
greater,,,ANS,-
,Accept,the,project,if,the,IRR,[internal,rate,of,return],is,(greater/less),than,the,WACC,[required,return].
WACC,IRR,,,ANS,-,With,the,MIRR,,cash,flows,are,reinvested,at,_____,rather,than,the,_____.
MIRR,,,ANS,-,Accommodates,nonconventional,cash,flow,series.
a,,,ANS,-,For,an,independent,project:
a),evaluate,each,one,individually
b),select,the,best,project,only
