CFA Level 1 - Corporate Finance Study Questions with Correct Answers 100% Verified 2024/2025
CFA Level 1 - Corporate Finance Study Questions with Correct Answers 100% Verified 2024/2025 Capital Budgeting process - Correct Answer identifying and evaluating capital projects....projects where the cash flow to the firm will be received over a period longer than a year. Capital Budgeting Steps - Correct Answer 1) idea generation 2) analyzing project proposals 3) create the firm-wide capital budget 4) monitoring decisions and conducing a post-audti Cap Budgeting Principals - Correct Answer 1) decisions based on cash flows, not accounting income 2) Cash flows based on opportunity costs & taxes 3) timing of cash flows is important 4) Cash flows are analyzed on a after-tax basis 5) financing costs are reflected in the projects required rate of return Externalities - Correct Answer effects the acceptance of a project may have on other firm cash flows. Cannibalization - Correct Answer when a new project takes sales from an existing product Conventional Cash Flow Patter - Correct Answer sign on the cash flows changes only once, with one or more cash outflows followed by one or more cash inflows Unconventional Cash flow patter - Correct Answer more than one sign change. NPV decision rule (independent projects) - Correct Answer accept any project with positive NPV and to reject any project with a negative NPV Internal rate of return - Correct Answer discount rate that makes the PV of the expected incremental after-tax cash inflows just equal to the initial cost of the project.
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