CFIN ACTUAL 2026 STUDY GUIDE QUESTIONS AND
SOLUTIONS RATED A+
✔✔The marginal cost of debt is
Select one:
a. an after-tax concept.
b. a before-tax concept.
c. in effect, subsidized by the government.
d. A and C. - ✔✔d. A and C.
✔✔During a recession, which of the following firms is riskier ?
Select one:
a. a firm with high variable and low fixed costs
b. a firm with high fixed costs and low variable costs
c. a firm with significant manufacturing overhead
d. B and C - ✔✔d. B and C
✔✔The efficient market theory holds that, at any given moment the prices of securities
reflect all that is or can be known about a company's future.
Select one:
a. TRUE
b. FALSE - ✔✔a. true
✔✔The cost of debt is the coupon rate of the bonds used to finance the debt.
Select one:
a. TRUE
b. FALSE - ✔✔b. false
✔✔The call price of a bond is also referred to as
Select one:
a. the sinking fund price
b. the balloon payment price
c. the strike price
d. none of the above - ✔✔c. the strike price
✔✔The Capital Asset Pricing Model relates the historical returns of that company to
Select one:
a. the company's industry
b. the market as a whole
c. the company's future growth
d. none of the above - ✔✔b. the market as a whole
✔✔The market capitalization is obtained by multiplying the number of shares
outstanding by the earnings per share.
, Select one:
a. TRUE
b. FALSE - ✔✔b. False
✔✔Company A has unused production capacity and makes a product similar to
Company B. Company B acquires Company A to obtain the unused production
capacity. This is an example of
Select one:
a. vertical integration downstream
b. vertical integration upstream
c. horizontal integration
d. none of the above - ✔✔c. horizontal integration
✔✔The book value of the firm is a similar concept to the net worth of the individual.
Select one:
a. TRUE
b. FALSE - ✔✔a. True
✔✔There is a difference between cash flow and operating cash flow.
Select one:
a. TRUE
b. FALSE - ✔✔a. True
✔✔The maximum price that a target could hope to obtain, based solely on assets is the
Select one:
a. book value
b. replacement cost
c. liquidation value
d. none of the above - ✔✔b. replacement cost
✔✔The appraised asset value less the firm's liabilities is known as
Select one:
a. the book value
b. the liquidation value
c. the cash flow value
d. none of the above - ✔✔b. liquidation value
✔✔Market capitalization is obtained by multiplying the number of shares outstanding by
the price per share.
Select one:
a. TRUE
b. FALSE - ✔✔a. True
✔✔Residual values tend to be the easiest value to predict.
SOLUTIONS RATED A+
✔✔The marginal cost of debt is
Select one:
a. an after-tax concept.
b. a before-tax concept.
c. in effect, subsidized by the government.
d. A and C. - ✔✔d. A and C.
✔✔During a recession, which of the following firms is riskier ?
Select one:
a. a firm with high variable and low fixed costs
b. a firm with high fixed costs and low variable costs
c. a firm with significant manufacturing overhead
d. B and C - ✔✔d. B and C
✔✔The efficient market theory holds that, at any given moment the prices of securities
reflect all that is or can be known about a company's future.
Select one:
a. TRUE
b. FALSE - ✔✔a. true
✔✔The cost of debt is the coupon rate of the bonds used to finance the debt.
Select one:
a. TRUE
b. FALSE - ✔✔b. false
✔✔The call price of a bond is also referred to as
Select one:
a. the sinking fund price
b. the balloon payment price
c. the strike price
d. none of the above - ✔✔c. the strike price
✔✔The Capital Asset Pricing Model relates the historical returns of that company to
Select one:
a. the company's industry
b. the market as a whole
c. the company's future growth
d. none of the above - ✔✔b. the market as a whole
✔✔The market capitalization is obtained by multiplying the number of shares
outstanding by the earnings per share.
, Select one:
a. TRUE
b. FALSE - ✔✔b. False
✔✔Company A has unused production capacity and makes a product similar to
Company B. Company B acquires Company A to obtain the unused production
capacity. This is an example of
Select one:
a. vertical integration downstream
b. vertical integration upstream
c. horizontal integration
d. none of the above - ✔✔c. horizontal integration
✔✔The book value of the firm is a similar concept to the net worth of the individual.
Select one:
a. TRUE
b. FALSE - ✔✔a. True
✔✔There is a difference between cash flow and operating cash flow.
Select one:
a. TRUE
b. FALSE - ✔✔a. True
✔✔The maximum price that a target could hope to obtain, based solely on assets is the
Select one:
a. book value
b. replacement cost
c. liquidation value
d. none of the above - ✔✔b. replacement cost
✔✔The appraised asset value less the firm's liabilities is known as
Select one:
a. the book value
b. the liquidation value
c. the cash flow value
d. none of the above - ✔✔b. liquidation value
✔✔Market capitalization is obtained by multiplying the number of shares outstanding by
the price per share.
Select one:
a. TRUE
b. FALSE - ✔✔a. True
✔✔Residual values tend to be the easiest value to predict.
