CFIN ACTUAL EXAM QUESTIONS WITH CORRECT ANSWERS
Which of the following is a qualitative factor of the company? - Answer- fixed cost, product users & marketing strategies
Which of the following is a qualitative factor of the industry? - Answer- general economic conditions, fixed costs & varia...
CFIN ACTUAL EXAM QUESTIONS
WITH CORRECT ANSWERS
Which of the following is a qualitative factor of the company? - Answer- fixed cost,
product users & marketing strategies
Which of the following is a qualitative factor of the industry? - Answer- general economic
conditions, fixed costs & variable costs
Management has two methods by which it can add value to the firm through
components on either side of the accounting equality. - Answer- TRUE
The present value equation is a rearrangement of the future value equation. - Answer-
TRUE
Which of the following decreases the present value? - Answer- increasing discount rate
If stockholders perceive that the financial risk of a firm has decreased and all other
factors are the same, then the stock price will probably rise. - Answer- TRUE
By selecting the proportions of debt and equity in the most efficient way, a manager can
add value to the firm. - Answer- TRUE
Compounding is the opposite of discounting. - Answer- TRUE
An increase in risk should carry with it an increase in return. - Answer- TRUE
The present value index accounts for the present value of annual cash flows and the
initial investment. - Answer- TRUE
Which of the following items is a cost in a capital budgeting incremental analysis? -
Answer- major overhaul
NPV reports in present dollar terms how much value will be added to a company as a
result of making a particular investment. - Answer- TRUE
The internal rate of return is the discount factor necessary to make an investment's NPV
greater than one. - Answer- FALSE
Which of the following techniques does not account for the time value of money? -
Answer- payback
, In a capital budgeting analysis, taxes may be - Answer- a cost & a benefit
To determine cash flow depreciation is - Answer- added to net income
The ITC in capital budgeting analysis is - Answer- a benefit
Payback is often referred to as a break-even analysis. - Answer- TRUE
The payback method accounts for the time value of money. - Answer- FALSE
The efficient market theory holds that, at any given moment the prices of securities
reflect all that is or can be known about a company's future. - Answer- TRUE
The yield to maturity is calculated from the - Answer- investor's perspective
The cost of debt is equal to a firm's - Answer- after tax cost
If market interest rates increase, corporations issuing bonds with low (less than market)
coupon rates will issue their bonds at discounts. - Answer- TRUE
A bond which is valued at par has a yield to maturity which is - Answer- equal to its
coupon rate
Higher dividends do not necessarily result in higher costs of equity. - Answer- TRUE
The cost of equity can be calculated by more than one method. - Answer- TRUE
As the price of a bond increases, the coupon rate - Answer- remains the same
A firm's cost of equity is equal to the return that its equity holders expect in return for the
use of their capital. - Answer- TRUE
The marginal cost of debt is - Answer- an after-tax concept & in effect, subsidized by the
government
Company A has unused production capacity and makes a product similar to Company
B. Company B acquires Company A to obtain the unused production capacity. This is
an example of - Answer- horizontal integration
The appropriate discount rate to use in discounting the cash flow of the target is -
Answer- the target's cost of equity
Which of the following items would have the greatest impact on the book value of the
firm ? - Answer- depreciation of the assets
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