FI 3300: CORPORATE FINANCE | 100% VERIFIED EXAM QUESTIONS &
ANSWERS | LATEST 2026/2027 VERSION | PASS GUARANTEE
1. If you invest $1,000 today at an annual interest rate of 8%, what will it be worth
in 5 years (compounded annually)?
A. $1,400.00
B. $1,469.33 ANSWER
C. $1,480.24
D. $1,360.49
2. What is the present value of $5,000 to be received in 3 years if the discount rate
is 10%?
A. $3,756.57 ANSWER
B. $4,000.00
C. $3,500.00
D. $4,545.45
3. An annuity pays $500 per year for 10 years. If the discount rate is 6%, what is
the present value?
A. $3,680.04 ANSWER
B. $4,000.00
C. $5,000.00
D. $3,500.00
4. Which of the following correctly describes the time value of money?
A. Money in the future is worth more than money today
B. A dollar received today is worth more than a dollar received in the
future ANSWER
C. Interest rates have no effect on the value of money
D. Inflation does not affect the present value of cash flows
5. What is the future value of $2,000 invested for 4 years at 5% compounded semi-
annually?
, A. $2,431.01
B. $2,400.00
C. $2,436.19 ANSWER
D. $2,450.00
6. The effective annual rate (EAR) is always ___ the nominal rate when
compounding occurs more than once per year.
A. Equal to
B. Less than
C. Greater than ANSWER
D. Unrelated to
7. A perpetuity pays $200 per year indefinitely. If the discount rate is 8%, what is
the present value?
A. $2,000
B. $2,500 ANSWER
C. $1,600
D. $3,000
8. What is the present value of a growing perpetuity that pays $100 next year,
grows at 3% annually, and has a discount rate of 8%?
A. $2,000 ANSWER
B. $1,667
C. $1,250
D. $3,333
9. If you borrow $10,000 at 12% annual interest for 3 years with equal annual
payments, what is the approximate annual payment?
A. $3,333
B. $4,163 ANSWER
C. $3,600
D. $4,000
10. The discount rate that makes the NPV of all cash flows equal to zero is called
the:
A. Required rate of return
B. Cost of capital
C. Internal rate of return ANSWER
D. Hurdle rate
,11. Which capital budgeting method considers the time value of money AND
provides a dollar measure of value added?
A. Payback period
B. Accounting rate of return
C. Net present value (NPV) ANSWER
D. Profitability index
12. If a project's NPV is positive, this means:
A. The project earns exactly its required rate of return
B. The project destroys shareholder value
C. The project creates value and should be accepted ANSWER
D. The IRR equals the cost of capital
13. A project costs $50,000 and generates cash flows of $15,000 per year for 5
years. What is the payback period?
A. 2.5 years
B. 3.0 years
C. 3.33 years ANSWER
D. 4.0 years
14. Which of the following is a weakness of the payback period method?
A. It is difficult to calculate
B. It ignores cash flows after the payback period ANSWER
C. It requires knowledge of the cost of capital
D. It cannot be used for mutually exclusive projects
15. The NPV profile of a project shows the relationship between:
A. Project cost and cash flows
B. NPV and the discount rate ANSWER
C. IRR and payback period
D. Profitability index and NPV
16. When two mutually exclusive projects have conflicting NPV and IRR rankings,
you should rely on:
A. The project with the higher IRR
B. The project with the shorter payback period
C. The project with the higher NPV ANSWER
D. The project with the higher profitability index
, 17. Which of the following cash flows should NOT be included in a capital
budgeting analysis?
A. Incremental revenues
B. Sunk costs ANSWER
C. Opportunity costs
D. Changes in net working capital
18. Cannibalization in capital budgeting refers to:
A. A project eating up its own resources
B. New projects reducing cash flows of existing products ANSWER
C. Over-investment in fixed assets
D. The tax benefit from depreciation
19. The modified internal rate of return (MIRR) assumes reinvestment of cash
flows at the:
A. Internal rate of return
B. Risk-free rate
C. Cost of capital ANSWER
D. Inflation rate
20. Which capital budgeting technique gives a ratio of the present value of future
cash flows to the initial investment?
A. NPV
B. IRR
C. Payback period
D. Profitability index ANSWER
21. The weighted average cost of capital (WACC) represents:
A. The cost of equity only
B. The average rate of return required by all capital providers
ANSWER
C. The risk-free rate plus a premium
D. The coupon rate on bonds outstanding
22. If a firm has 40% debt and 60% equity, a cost of debt of 6%, a cost of equity of
12%, and a tax rate of 30%, what is the WACC?
A. 8.88% ANSWER
B. 9.00%
C. 7.68%
ANSWERS | LATEST 2026/2027 VERSION | PASS GUARANTEE
1. If you invest $1,000 today at an annual interest rate of 8%, what will it be worth
in 5 years (compounded annually)?
A. $1,400.00
B. $1,469.33 ANSWER
C. $1,480.24
D. $1,360.49
2. What is the present value of $5,000 to be received in 3 years if the discount rate
is 10%?
A. $3,756.57 ANSWER
B. $4,000.00
C. $3,500.00
D. $4,545.45
3. An annuity pays $500 per year for 10 years. If the discount rate is 6%, what is
the present value?
A. $3,680.04 ANSWER
B. $4,000.00
C. $5,000.00
D. $3,500.00
4. Which of the following correctly describes the time value of money?
A. Money in the future is worth more than money today
B. A dollar received today is worth more than a dollar received in the
future ANSWER
C. Interest rates have no effect on the value of money
D. Inflation does not affect the present value of cash flows
5. What is the future value of $2,000 invested for 4 years at 5% compounded semi-
annually?
, A. $2,431.01
B. $2,400.00
C. $2,436.19 ANSWER
D. $2,450.00
6. The effective annual rate (EAR) is always ___ the nominal rate when
compounding occurs more than once per year.
A. Equal to
B. Less than
C. Greater than ANSWER
D. Unrelated to
7. A perpetuity pays $200 per year indefinitely. If the discount rate is 8%, what is
the present value?
A. $2,000
B. $2,500 ANSWER
C. $1,600
D. $3,000
8. What is the present value of a growing perpetuity that pays $100 next year,
grows at 3% annually, and has a discount rate of 8%?
A. $2,000 ANSWER
B. $1,667
C. $1,250
D. $3,333
9. If you borrow $10,000 at 12% annual interest for 3 years with equal annual
payments, what is the approximate annual payment?
A. $3,333
B. $4,163 ANSWER
C. $3,600
D. $4,000
10. The discount rate that makes the NPV of all cash flows equal to zero is called
the:
A. Required rate of return
B. Cost of capital
C. Internal rate of return ANSWER
D. Hurdle rate
,11. Which capital budgeting method considers the time value of money AND
provides a dollar measure of value added?
A. Payback period
B. Accounting rate of return
C. Net present value (NPV) ANSWER
D. Profitability index
12. If a project's NPV is positive, this means:
A. The project earns exactly its required rate of return
B. The project destroys shareholder value
C. The project creates value and should be accepted ANSWER
D. The IRR equals the cost of capital
13. A project costs $50,000 and generates cash flows of $15,000 per year for 5
years. What is the payback period?
A. 2.5 years
B. 3.0 years
C. 3.33 years ANSWER
D. 4.0 years
14. Which of the following is a weakness of the payback period method?
A. It is difficult to calculate
B. It ignores cash flows after the payback period ANSWER
C. It requires knowledge of the cost of capital
D. It cannot be used for mutually exclusive projects
15. The NPV profile of a project shows the relationship between:
A. Project cost and cash flows
B. NPV and the discount rate ANSWER
C. IRR and payback period
D. Profitability index and NPV
16. When two mutually exclusive projects have conflicting NPV and IRR rankings,
you should rely on:
A. The project with the higher IRR
B. The project with the shorter payback period
C. The project with the higher NPV ANSWER
D. The project with the higher profitability index
, 17. Which of the following cash flows should NOT be included in a capital
budgeting analysis?
A. Incremental revenues
B. Sunk costs ANSWER
C. Opportunity costs
D. Changes in net working capital
18. Cannibalization in capital budgeting refers to:
A. A project eating up its own resources
B. New projects reducing cash flows of existing products ANSWER
C. Over-investment in fixed assets
D. The tax benefit from depreciation
19. The modified internal rate of return (MIRR) assumes reinvestment of cash
flows at the:
A. Internal rate of return
B. Risk-free rate
C. Cost of capital ANSWER
D. Inflation rate
20. Which capital budgeting technique gives a ratio of the present value of future
cash flows to the initial investment?
A. NPV
B. IRR
C. Payback period
D. Profitability index ANSWER
21. The weighted average cost of capital (WACC) represents:
A. The cost of equity only
B. The average rate of return required by all capital providers
ANSWER
C. The risk-free rate plus a premium
D. The coupon rate on bonds outstanding
22. If a firm has 40% debt and 60% equity, a cost of debt of 6%, a cost of equity of
12%, and a tax rate of 30%, what is the WACC?
A. 8.88% ANSWER
B. 9.00%
C. 7.68%
