BFM FINAL EXAM QUESTIONS WITH ACCURATE
ANSWERS
___________ is completely ignored in payback period. correct answer TVM (time
value of money)
a legal proceeding for liquidating or reorganizing is ________. correct answer
Bankruptcy
A portfolio made up of all the assets in the market is called? correct answer
market return
A situation where taking on investment prevents the taking of another is
____________. correct answer mutually exclusive
An increase in the tax rate will decrease the after tax cost if debt. (T or F) correct
answer True
An investment is __________ if the IRR exceeds the requires rate of return
correct answer accepted
An investment is worth undertaking if it creates _____ for its owner. correct
answer Value
Another name of diversifiable risk is called? correct answer unique/unsystematic
Beta measures stocks volatility relative to the? correct answer market
, Calculate Cash Flow correct answer (EBIT+DEP-TAXES=OCF)
Capital budgeting is concerned with? correct answer Evaluating investment
alternatives
Capital budgeting is the process by which a company determines whether a
__________ projects are worth pursuing. correct answer Long-term
Equation of a security market line which shows the relationship between
expected return and beta is? correct answer expected return
Group of assets held by an investor is called? correct answer portfolio
How do you maximize wealth with capital structure ________ the WACC. correct
answer minimize
If NPV is negative, an investment should be ___________. correct answer reject
If project B has lower NPV than project A, we should accept _____ if the projects
are mutually exclusive. correct answer A
If required rate of return is increased, the NPV ____________ holding all other
things same. correct answer decreases
ANSWERS
___________ is completely ignored in payback period. correct answer TVM (time
value of money)
a legal proceeding for liquidating or reorganizing is ________. correct answer
Bankruptcy
A portfolio made up of all the assets in the market is called? correct answer
market return
A situation where taking on investment prevents the taking of another is
____________. correct answer mutually exclusive
An increase in the tax rate will decrease the after tax cost if debt. (T or F) correct
answer True
An investment is __________ if the IRR exceeds the requires rate of return
correct answer accepted
An investment is worth undertaking if it creates _____ for its owner. correct
answer Value
Another name of diversifiable risk is called? correct answer unique/unsystematic
Beta measures stocks volatility relative to the? correct answer market
, Calculate Cash Flow correct answer (EBIT+DEP-TAXES=OCF)
Capital budgeting is concerned with? correct answer Evaluating investment
alternatives
Capital budgeting is the process by which a company determines whether a
__________ projects are worth pursuing. correct answer Long-term
Equation of a security market line which shows the relationship between
expected return and beta is? correct answer expected return
Group of assets held by an investor is called? correct answer portfolio
How do you maximize wealth with capital structure ________ the WACC. correct
answer minimize
If NPV is negative, an investment should be ___________. correct answer reject
If project B has lower NPV than project A, we should accept _____ if the projects
are mutually exclusive. correct answer A
If required rate of return is increased, the NPV ____________ holding all other
things same. correct answer decreases
