Principles of Corporate Finance 15th Edition
(Brealey, Myers & Allen, 2026 Release) |
Comprehensive Study Guide & Chapter
Practice Solutions (Chapters 1–34) |
Corporate Finance Exam Preparation
Resource
• This exam covers all 34 chapters of Brealey, Myers & Allen's Principles of
Corporate Finance (15th Ed., 2026), spanning foundational theory to advanced
topics — use it to test and reinforce your understanding chapter by chapter.
• Each question includes five options (A–E), a highlighted correct answer with
EXPERT RATIONALE — work through questions topic by topic, revisit EXPERT
RATIONALE for any you miss, and use patterns in your errors to guide focused
review.
PRINCIPLES OF CORPORATE FINANCE
Comprehensive Examination — Questions
Brealey, Myers & Allen | 15th Edition (2026)
SECTION 1: VALUE, GOALS & FINANCIAL MARKETS (Chapters 1–3)
1. What is the primary financial goal of a corporation?
A. Maximize total revenue
B. Minimize operating costs
C. Maximize employee satisfaction
D. Maximize shareholder wealth (stock price)
E. Achieve the highest possible market share
Correct Answer: D. Maximize shareholder wealth (stock price) EXPERT
RATIONALE: The central goal of corporate finance is to maximize the value of
,shareholders' investment. This is achieved by making decisions that increase the firm's
stock price, reflecting the present value of all future cash flows.
2. Which of the following best describes the separation of ownership and
control in corporations?
A. Shareholders directly manage all daily operations
B. The board of directors owns the majority of shares
C. Managers and shareholders are always the same individuals
D. Professional managers run the firm on behalf of dispersed shareholders
E. Creditors control firm operations on behalf of equity holders
Correct Answer: D. Professional managers run the firm on behalf of
dispersed shareholders EXPERT RATIONALE: In large corporations, ownership is
spread among many shareholders while professional managers make operational
decisions. This creates the principal-agent problem, a core concept in corporate
governance.
3. The agency problem in corporate finance refers to:
A. Government regulatory interference in corporate decisions
B. Conflicts between domestic and foreign investors
C. Disagreements between bondholders and regulators
D. Conflicts of interest between managers and shareholders
E. The difficulty of issuing equity in public markets
Correct Answer: D. Conflicts of interest between managers and
shareholders EXPERT RATIONALE: The agency problem arises when managers
(agents) pursue their own interests rather than maximizing shareholder (principal)
wealth. Mechanisms like performance-based pay and board oversight help mitigate this.
,4. Which financial market allows previously issued securities to be bought and
sold among investors?
A. Primary market
B. Derivatives market
C. IPO market
D. Secondary market
E. Eurobond market
Correct Answer: D. Secondary market EXPERT RATIONALE: The secondary
market is where investors trade previously issued securities. It provides liquidity and
price discovery. The primary market, by contrast, is where new securities are first sold to
investors.
5. The Net Present Value (NPV) rule states that a firm should:
A. Accept all projects with positive accounting profits
B. Accept projects only if payback is under two years
C. Reject projects with IRR above the cost of capital
D. Accept all projects with a positive NPV
E. Accept projects with the highest total cash inflows
Correct Answer: D. Accept all projects with a positive NPV EXPERT
RATIONALE: A positive NPV means the project generates more value than it costs in
present value terms, thereby increasing shareholder wealth. The NPV rule is the gold
standard for capital budgeting decisions.
6. Which of the following is NOT a characteristic of an efficient capital
market?
A. Prices reflect all available information
, B. It is difficult to consistently earn abnormal returns
C. New information is rapidly incorporated into prices
D. Investors can reliably predict future stock prices
E. Securities are fairly priced at all times
Correct Answer: D. Investors can reliably predict future stock prices
EXPERT RATIONALE: In an efficient market, prices already reflect all known information,
making consistent prediction of future prices impossible. This is the Efficient Market
Hypothesis (EMH) as described by Fama.
7. Which form of market efficiency holds that stock prices reflect all publicly
available information?
A. Weak form
B. Allocative form
C. Strong form
D. Semi-strong form
E. Operational form
Correct Answer: D. Semi-strong form EXPERT RATIONALE: Semi-strong form
efficiency states that stock prices reflect all publicly available information, including
financial statements and news. Fundamental analysis cannot consistently yield excess
returns under this form.
8. A firm's real assets include:
A. Common stock and preferred shares
B. Treasury bonds and corporate notes
C. Derivatives and swaps
D. Plant, equipment, patents, and brand value
(Brealey, Myers & Allen, 2026 Release) |
Comprehensive Study Guide & Chapter
Practice Solutions (Chapters 1–34) |
Corporate Finance Exam Preparation
Resource
• This exam covers all 34 chapters of Brealey, Myers & Allen's Principles of
Corporate Finance (15th Ed., 2026), spanning foundational theory to advanced
topics — use it to test and reinforce your understanding chapter by chapter.
• Each question includes five options (A–E), a highlighted correct answer with
EXPERT RATIONALE — work through questions topic by topic, revisit EXPERT
RATIONALE for any you miss, and use patterns in your errors to guide focused
review.
PRINCIPLES OF CORPORATE FINANCE
Comprehensive Examination — Questions
Brealey, Myers & Allen | 15th Edition (2026)
SECTION 1: VALUE, GOALS & FINANCIAL MARKETS (Chapters 1–3)
1. What is the primary financial goal of a corporation?
A. Maximize total revenue
B. Minimize operating costs
C. Maximize employee satisfaction
D. Maximize shareholder wealth (stock price)
E. Achieve the highest possible market share
Correct Answer: D. Maximize shareholder wealth (stock price) EXPERT
RATIONALE: The central goal of corporate finance is to maximize the value of
,shareholders' investment. This is achieved by making decisions that increase the firm's
stock price, reflecting the present value of all future cash flows.
2. Which of the following best describes the separation of ownership and
control in corporations?
A. Shareholders directly manage all daily operations
B. The board of directors owns the majority of shares
C. Managers and shareholders are always the same individuals
D. Professional managers run the firm on behalf of dispersed shareholders
E. Creditors control firm operations on behalf of equity holders
Correct Answer: D. Professional managers run the firm on behalf of
dispersed shareholders EXPERT RATIONALE: In large corporations, ownership is
spread among many shareholders while professional managers make operational
decisions. This creates the principal-agent problem, a core concept in corporate
governance.
3. The agency problem in corporate finance refers to:
A. Government regulatory interference in corporate decisions
B. Conflicts between domestic and foreign investors
C. Disagreements between bondholders and regulators
D. Conflicts of interest between managers and shareholders
E. The difficulty of issuing equity in public markets
Correct Answer: D. Conflicts of interest between managers and
shareholders EXPERT RATIONALE: The agency problem arises when managers
(agents) pursue their own interests rather than maximizing shareholder (principal)
wealth. Mechanisms like performance-based pay and board oversight help mitigate this.
,4. Which financial market allows previously issued securities to be bought and
sold among investors?
A. Primary market
B. Derivatives market
C. IPO market
D. Secondary market
E. Eurobond market
Correct Answer: D. Secondary market EXPERT RATIONALE: The secondary
market is where investors trade previously issued securities. It provides liquidity and
price discovery. The primary market, by contrast, is where new securities are first sold to
investors.
5. The Net Present Value (NPV) rule states that a firm should:
A. Accept all projects with positive accounting profits
B. Accept projects only if payback is under two years
C. Reject projects with IRR above the cost of capital
D. Accept all projects with a positive NPV
E. Accept projects with the highest total cash inflows
Correct Answer: D. Accept all projects with a positive NPV EXPERT
RATIONALE: A positive NPV means the project generates more value than it costs in
present value terms, thereby increasing shareholder wealth. The NPV rule is the gold
standard for capital budgeting decisions.
6. Which of the following is NOT a characteristic of an efficient capital
market?
A. Prices reflect all available information
, B. It is difficult to consistently earn abnormal returns
C. New information is rapidly incorporated into prices
D. Investors can reliably predict future stock prices
E. Securities are fairly priced at all times
Correct Answer: D. Investors can reliably predict future stock prices
EXPERT RATIONALE: In an efficient market, prices already reflect all known information,
making consistent prediction of future prices impossible. This is the Efficient Market
Hypothesis (EMH) as described by Fama.
7. Which form of market efficiency holds that stock prices reflect all publicly
available information?
A. Weak form
B. Allocative form
C. Strong form
D. Semi-strong form
E. Operational form
Correct Answer: D. Semi-strong form EXPERT RATIONALE: Semi-strong form
efficiency states that stock prices reflect all publicly available information, including
financial statements and news. Fundamental analysis cannot consistently yield excess
returns under this form.
8. A firm's real assets include:
A. Common stock and preferred shares
B. Treasury bonds and corporate notes
C. Derivatives and swaps
D. Plant, equipment, patents, and brand value
