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CFA Analyst Prep Corporate Finance Exam Questions and Answers
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  • FIN701
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  • FIN701

The 4 decisions that financial managers make are_____. These most important of them being _____ . - Answer-investment (capital budgeting), financing, working capital, and returning capital decisions; capital budgeting decisions Types of capital projects - Answer-replacement, expansion, growth (...

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  • August 23, 2024
  • 2
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers

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  • cfa analyst prep corporate finance exam questions
  • the 4 decisions that financial managers make are

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  • FIN701
  • FIN701

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CFA Analyst Prep Corporate Finance
Exam Questions and Answers
The 4 decisions that financial managers make are_____. These most important of them
being _____ . - Answer-investment (capital budgeting), financing, working capital, and
returning capital decisions;
capital budgeting decisions

Types of capital projects - Answer-replacement, expansion, growth (into new markets),
regulatory, and merger/acquisitions

incremental cash flows - Answer-additional cash flows

Project Sequencing - Answer-Taking in consideration your capacity for starting projects.
Its difficult to start projects that are not related to each other. You will want to consider
this when deciding projects that might affect your capacity for other projects in the future

Cashflows are analyzed on an _______. Financing costs are kept separate from
________. - Answer-after-tax basis; operating cash flows

The three primary capital budgeting techniques are ___? The most realistic of the three
being ____? - Answer-payback period, net present value and internal rate of return;
NPV or WACC

NPV assumes CFs are reinvested at ______, while IRR assumes they are ______. -
Answer-WACC; reinvested at the IRR

The cost of capital reflects the _____. - Answer-expected average cost of funds from
these sources over the long run

Three subdivisions of equity - Answer-preferred stock, common stock, and retained
earnings

When a company wants to make an acquisition, it is assumed that the capital structure
will _____. On the other hand, if it is an expansion or an addition of a business line to an
existing project, it is assumed that the capital structure will_____. - Answer-be unique
from the acquirer; be the same as the acquirer's wacc

CAPM can be used to get us the cost of _______. The cost of debt must always be
______ adjusted. - Answer-equity capital; tax


Total Market Value - Answer-Market value of debt + MV Preferred + MV common

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