FINC 3610 Comprehensive Final Exam Practice
Questions & Answers (Verified Update)
This comprehensive study guide covers the core domains tested
on the FINC 3610 Comprehensive Final Exam at Auburn
University. It includes original practice questions with detailed
rationales, organized by the core exam domains: Capital
Budgeting Cash Flows, Capital Asset Pricing Model (CAPM),
Weighted Average Cost of Capital (WACC), and Integrated
Corporate Finance Concepts.
Exam Overview & Blueprint:
Parameter Details
Exam
Multiple-choice, true/false, and calculation-based questions
Format
Capital budgeting cash flow estimation, NPV, IRR, PI, CAPM, WACC, capital structure, working
Core Topics
capital management
Key
NPV = PV(inflows) – Initial Cost; CAPM: E(R) = Rf + β(Rm – Rf); WACC = (E/V)×Re + (D/V)×Rd×(1-Tc)
Formulas
NGN-style application problems, comprehensive calculation problems, multi-step capital
2026 Focus
budgeting and cost of capital scenarios
Exam Blueprint (Based on FINC 3610 Content Outline):
,Content Area Key Focus
Incremental cash flows, sunk costs, opportunity costs, NWC
Capital Budgeting Cash Flows
changes, depreciation, salvage value
Capital Asset Pricing Model Beta, risk-free rate, market risk premium, expected return
(CAPM) calculations
Weighted Average Cost of Cost of debt, cost of equity, cost of preferred stock, capital structure
Capital (WACC) weights, tax shield
Risk analysis, capital rationing, project selection, financial statement
Integrated Concepts
analysis
Section 1: Capital Budgeting Cash Flows
1.1 Incremental Cash Flows Fundamentals
Q1. The key to capital budgeting is to determine the ______
cash flows of a project.
A) Accounting
B) Incremental
C) Sunk
D) Historical
Answer: B
Rationale: The key to capital budgeting is to determine the
,incremental cash flows of a project—the difference between
the firm's cash flows with the project and without the project.
Q2. Which of the following should be excluded from the capital
budgeting analysis?
A) Opportunity costs
B) Side effects
C) Sunk costs
D) Net working capital changes
Answer: C
Rationale: Sunk costs are costs that have already been incurred
and cannot be recovered. They should be excluded from capital
budgeting analysis because they are not affected by the
decision to accept or reject the project.
Q3. A firm spent $50,000 on a marketing study to determine
whether to launch a new product. This cost is an example of a:
A) Sunk cost
B) Opportunity cost
C) Side effect
D) Net working capital change
Answer: A
Rationale: A sunk cost is a cost that has already been incurred
and cannot be recovered. The $50,000 marketing study is a
, sunk cost and should not be included in the capital budgeting
analysis.
Q4. A firm owns a building that could be sold for $200,000.
Instead, the firm uses the building for a new project. The
$200,000 is an example of a(n):
A) Sunk cost
B) Opportunity cost
C) Side effect
D) Net working capital change
Answer: B
Rationale: An opportunity cost is the most valuable alternative
that is given up if a particular investment is undertaken. By
using the building for the new project, the firm gives up the
$200,000 it could have received from selling it.
Q5. A firm introduces a new product that reduces sales of its
existing products. This is an example of a:
A) Sunk cost
B) Opportunity cost
C) Side effect (cannibalization)
D) Net working capital change
Answer: C
Rationale: A side effect (cannibalization) occurs when a new
Questions & Answers (Verified Update)
This comprehensive study guide covers the core domains tested
on the FINC 3610 Comprehensive Final Exam at Auburn
University. It includes original practice questions with detailed
rationales, organized by the core exam domains: Capital
Budgeting Cash Flows, Capital Asset Pricing Model (CAPM),
Weighted Average Cost of Capital (WACC), and Integrated
Corporate Finance Concepts.
Exam Overview & Blueprint:
Parameter Details
Exam
Multiple-choice, true/false, and calculation-based questions
Format
Capital budgeting cash flow estimation, NPV, IRR, PI, CAPM, WACC, capital structure, working
Core Topics
capital management
Key
NPV = PV(inflows) – Initial Cost; CAPM: E(R) = Rf + β(Rm – Rf); WACC = (E/V)×Re + (D/V)×Rd×(1-Tc)
Formulas
NGN-style application problems, comprehensive calculation problems, multi-step capital
2026 Focus
budgeting and cost of capital scenarios
Exam Blueprint (Based on FINC 3610 Content Outline):
,Content Area Key Focus
Incremental cash flows, sunk costs, opportunity costs, NWC
Capital Budgeting Cash Flows
changes, depreciation, salvage value
Capital Asset Pricing Model Beta, risk-free rate, market risk premium, expected return
(CAPM) calculations
Weighted Average Cost of Cost of debt, cost of equity, cost of preferred stock, capital structure
Capital (WACC) weights, tax shield
Risk analysis, capital rationing, project selection, financial statement
Integrated Concepts
analysis
Section 1: Capital Budgeting Cash Flows
1.1 Incremental Cash Flows Fundamentals
Q1. The key to capital budgeting is to determine the ______
cash flows of a project.
A) Accounting
B) Incremental
C) Sunk
D) Historical
Answer: B
Rationale: The key to capital budgeting is to determine the
,incremental cash flows of a project—the difference between
the firm's cash flows with the project and without the project.
Q2. Which of the following should be excluded from the capital
budgeting analysis?
A) Opportunity costs
B) Side effects
C) Sunk costs
D) Net working capital changes
Answer: C
Rationale: Sunk costs are costs that have already been incurred
and cannot be recovered. They should be excluded from capital
budgeting analysis because they are not affected by the
decision to accept or reject the project.
Q3. A firm spent $50,000 on a marketing study to determine
whether to launch a new product. This cost is an example of a:
A) Sunk cost
B) Opportunity cost
C) Side effect
D) Net working capital change
Answer: A
Rationale: A sunk cost is a cost that has already been incurred
and cannot be recovered. The $50,000 marketing study is a
, sunk cost and should not be included in the capital budgeting
analysis.
Q4. A firm owns a building that could be sold for $200,000.
Instead, the firm uses the building for a new project. The
$200,000 is an example of a(n):
A) Sunk cost
B) Opportunity cost
C) Side effect
D) Net working capital change
Answer: B
Rationale: An opportunity cost is the most valuable alternative
that is given up if a particular investment is undertaken. By
using the building for the new project, the firm gives up the
$200,000 it could have received from selling it.
Q5. A firm introduces a new product that reduces sales of its
existing products. This is an example of a:
A) Sunk cost
B) Opportunity cost
C) Side effect (cannibalization)
D) Net working capital change
Answer: C
Rationale: A side effect (cannibalization) occurs when a new
