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CFA Level 1 - Corporate Issuers Exam Questions and Answers 2024( A+ GRADED 100% VERIFIED).
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CFA Level 1 - Corporate Issuers Exam Questions and Answers 2024( A+ GRADED 100% VERIFIED).
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CFA Level 1 - Corporate IssuersPrivate placement memorandum (PPR) - ANS information about the company and the risks of
investing in it for private companies
Residual claim - ANS company's owners have claim to company assets
Principal-agent conflict - ANS an agent's interests may not coincide exactly with those of the
principal
Special resolutions - ANS require a supermajority vote for passage in a shareholder meeting
Extraordinary general meetings - ANS shareholder meeting that can be called anytime when
there is a resolution about a matter that requires a vote of the shareholders.
Proxy fight - ANS seek the proxies of shareholders to vote in favor of their alternative proposals
Bond indenture - ANS a legal document that specifies the rights of bondholders and the
company's obligations when a company issues a bond
Covenants - ANS take certain actions or restrict it from taking certain actions
Creditor committees - ANS Formed among bondholders to protect their interests when an
issuer experiences financial distress. Some countries require such committees when a company
files for bankruptcy.
Common-law system - ANS judges' rulings become law in some instances
Civil law system - ANS judges are bound to rule-based only on specifically enacted laws
Tiered pricing - ANS based on volume of purchases
Dynamic pricing - ANS depending on the time of day or day of the week
Razors-and-blades - ANS profitable to sell a piece of equipment for a relatively low price (low
margins) and make profits by selling a consumable used with the equipment. Printers and ink
cartridges and an e-reader and e-books are common examples.
, Penetration pricing - ANS offers a product at low margins or even at a loss for a period of time
to grow market share and achieve greater scale of operations. Netflix has followed this strategy
to grow its subscriber base rapidly
Value chain - ANS how the firm executes its value proposition
Aggregators - ANS provide a marketplace but sell products and services under its own brand
name. Spotify is an example.
Lean start-ups - ANS a firm "rents" its employees, outsourcing as much work as possible to
reduce fixed employment costs.
Operating leverage - ANS higher percentages of fixed costs, relative to variable costs, in a
firm's cost structure
Business maintenance investments (name 2) - ANS 1. Going concern projects
2. Regulatory/compliance projects
4 steps of the capital allocation process - ANS 1. idea generation
2. analyzing project proposals (accept or reject)
3. create the firm-wide capital budget (prioritize profitable projects)
4. monitoring decisions and conducting a post-audit (follow-up)
Incremental cash flows - ANS changes in cash flows that will occur if the project is undertaken
Conventional cash flow pattern - ANS sign on the cash flows changes only once
Unconventional cash flow pattern - ANS more than one sign change
You should accept the project if the IRR is ... than than the required rate of return - ANS greater
NPV calculation
Ex. compute the NPV and IRR of the project and determine whether it should be accepted or
rejected
cost of capital is 9%
Year 0, CF = -100
Year 1, CF = 25
Year 2, CF = 50
Year 3, CF =75 - ANS Step 1: clear memory (CF, 2nd, CLR Work)
Step 2: add cashflows (press ENTER for numbers to stay, then press down)
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