FINANCIAL MODELING EXAM 1 MULTIPLE CHOICE PREP |
COMPLETE AND GRADED QUESTIONS AND ANSWERS 2026
LATEST UPDATED | 100% GRADED CORRECT | 100%
GUARANTEED TO PASS | GET A+
1. Regarding the value of a project or business, select the single best answer: - (answer)d) The
value of the project is the sum of the present value of the cash flows, including any initial
investment
2. Regarding the discount rate used in project valuation, high-risk projects compared to low-risk
projects, select the single best answer: - (answer)c) If a project is high-risk, then we will use a
higher discount rate (than we would with a low-risk project), which results in a lower NPV (for
the same cash flows).
3. T/F: we can sum up all project cash flows to derive a project's value - (answer)False
4. T/F: we can sum all the present values of project cash flows to derive a project's value -
(answer)True
5. Regarding depreciation of capital investments, select the single best answer: - (answer)c)
Anything except land and land improvements is depreciated
, 6. T/F: a company has negative EBIT, and cannot make use of tax credits elsewhere in the
business, in this case they will receive a tax refund back from the government (or the equivalent
thereof) - (answer)False
7. T/F: for most companies, continued growth requires some reinvestment in the business in the
form of capital expenditures (i.e. CAPEX). - (answer)True
8. At the end of a detailed financial analysis, the final step is called (generically) Terminal Value
(TV), which can be either assuming the business runs in perpetuity or the business is terminated.
Regarding the analysis of a business that will run in perpetuity, select the two true statements: -
(answer)b) The basic concept of TV is to summarize and present value all future free cash flows
(those that occur after the detailed analysis comes to an end), using an assumed constant growth
rate.
d) The formula associated with this valuation is: TV = PV of {Final FCF * (1+g) / (Discount
Rate - g)}
9. At the end of a detailed financial analysis, the final step is called (generically) Terminal Value
(TV), which can be either assuming the business runs in perpetuity or the business is terminated.
Regarding the analysis of a business that will be terminated (which is called the Salvage Value of
COMPLETE AND GRADED QUESTIONS AND ANSWERS 2026
LATEST UPDATED | 100% GRADED CORRECT | 100%
GUARANTEED TO PASS | GET A+
1. Regarding the value of a project or business, select the single best answer: - (answer)d) The
value of the project is the sum of the present value of the cash flows, including any initial
investment
2. Regarding the discount rate used in project valuation, high-risk projects compared to low-risk
projects, select the single best answer: - (answer)c) If a project is high-risk, then we will use a
higher discount rate (than we would with a low-risk project), which results in a lower NPV (for
the same cash flows).
3. T/F: we can sum up all project cash flows to derive a project's value - (answer)False
4. T/F: we can sum all the present values of project cash flows to derive a project's value -
(answer)True
5. Regarding depreciation of capital investments, select the single best answer: - (answer)c)
Anything except land and land improvements is depreciated
, 6. T/F: a company has negative EBIT, and cannot make use of tax credits elsewhere in the
business, in this case they will receive a tax refund back from the government (or the equivalent
thereof) - (answer)False
7. T/F: for most companies, continued growth requires some reinvestment in the business in the
form of capital expenditures (i.e. CAPEX). - (answer)True
8. At the end of a detailed financial analysis, the final step is called (generically) Terminal Value
(TV), which can be either assuming the business runs in perpetuity or the business is terminated.
Regarding the analysis of a business that will run in perpetuity, select the two true statements: -
(answer)b) The basic concept of TV is to summarize and present value all future free cash flows
(those that occur after the detailed analysis comes to an end), using an assumed constant growth
rate.
d) The formula associated with this valuation is: TV = PV of {Final FCF * (1+g) / (Discount
Rate - g)}
9. At the end of a detailed financial analysis, the final step is called (generically) Terminal Value
(TV), which can be either assuming the business runs in perpetuity or the business is terminated.
Regarding the analysis of a business that will be terminated (which is called the Salvage Value of
