CFIN EXAM NEWEST 2024 ACTUAL
EXAM TEST BANK COMPLETE
QUESTIONS AND CORRECT DETAILED
ANSWERS ALREADY GRADED A+
As price of a bond increases, coupon rate - Answer-Remains the same
The call price of a bond is also referred to as - Answer-The strike price
For WACC purposes, to calculate the cost of debt, you multiply the interest rate by (1-
tax rate). - Answer-True
Capital Asset Pricing Model (CAPM) relates the historical returns of that company to -
Answer-The market as a whole
As the price of a bond decreases, coupon rate - Answer-Remains the same
A firm may generate equity through
A. Earnings
B. Issuance of stock
C. Both
D. Neither - Answer-C. Both
The cost of equity can be calculated by more that one method. - Answer-True
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
Book value is based on historical cost. - Answer-True
Which of the following items would have greatest impact on the book value of the firm?
A. Depreciation of the assets
B. Current value of the assets
C. Current value of the liabilities
D. None of the above - Answer-A. Depreciation of the assets
There is a difference between cash flow and operating cash flow. - Answer-True
, Earnings dilution considers the income that the target firm would add to the acquirer's
net income and computes the number of shares that could be issued without diluting the
EPS for the existing shareholders. - Answer-True
The target firm determines its liquidation value and present value of its relevant stand
alone cash flows and selects the higher value. This is the targets - Answer-Minimum
acceptable price
The market capitalization is obtained by multiplying the number of shares outstanding
by the earnings per share. - Answer-False
Market capitalization is obtained by multiplying number of shares outstanding by the
price per share. - Answer-True
Discounting the terminal value of the target involves a discount rate that is - Answer-The
targets cost of equity
The appropriate discount rate to use in discounting the cash flow of the target is -
Answer-The targets cost of equity
Debt mitigates the issue of control. - Answer-True
The income step of FRICTO analysis addresses
A. EPS dilution
B. Explicit costs
C. Implicit costs
D. All of the above - Answer-D. All of the above
Risk involves rare, unpredictable events. - Answer-False
Which of the following is not a step in FRICTO?
A. Flexibility
B. Risk
C. Income
D. All are steps - Answer-D. All are steps
The status of the capital markets at the time that finding is needed is the FRICTO step
of - Answer-Timing
Break even EBIT enables a manager to determine the EPS solution that equates debt
with equity. - Answer-True
Value can be created on the liability side of the balance sheet as well as the asset side.
- Answer-True
EXAM TEST BANK COMPLETE
QUESTIONS AND CORRECT DETAILED
ANSWERS ALREADY GRADED A+
As price of a bond increases, coupon rate - Answer-Remains the same
The call price of a bond is also referred to as - Answer-The strike price
For WACC purposes, to calculate the cost of debt, you multiply the interest rate by (1-
tax rate). - Answer-True
Capital Asset Pricing Model (CAPM) relates the historical returns of that company to -
Answer-The market as a whole
As the price of a bond decreases, coupon rate - Answer-Remains the same
A firm may generate equity through
A. Earnings
B. Issuance of stock
C. Both
D. Neither - Answer-C. Both
The cost of equity can be calculated by more that one method. - Answer-True
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
Book value is based on historical cost. - Answer-True
Which of the following items would have greatest impact on the book value of the firm?
A. Depreciation of the assets
B. Current value of the assets
C. Current value of the liabilities
D. None of the above - Answer-A. Depreciation of the assets
There is a difference between cash flow and operating cash flow. - Answer-True
, Earnings dilution considers the income that the target firm would add to the acquirer's
net income and computes the number of shares that could be issued without diluting the
EPS for the existing shareholders. - Answer-True
The target firm determines its liquidation value and present value of its relevant stand
alone cash flows and selects the higher value. This is the targets - Answer-Minimum
acceptable price
The market capitalization is obtained by multiplying the number of shares outstanding
by the earnings per share. - Answer-False
Market capitalization is obtained by multiplying number of shares outstanding by the
price per share. - Answer-True
Discounting the terminal value of the target involves a discount rate that is - Answer-The
targets cost of equity
The appropriate discount rate to use in discounting the cash flow of the target is -
Answer-The targets cost of equity
Debt mitigates the issue of control. - Answer-True
The income step of FRICTO analysis addresses
A. EPS dilution
B. Explicit costs
C. Implicit costs
D. All of the above - Answer-D. All of the above
Risk involves rare, unpredictable events. - Answer-False
Which of the following is not a step in FRICTO?
A. Flexibility
B. Risk
C. Income
D. All are steps - Answer-D. All are steps
The status of the capital markets at the time that finding is needed is the FRICTO step
of - Answer-Timing
Break even EBIT enables a manager to determine the EPS solution that equates debt
with equity. - Answer-True
Value can be created on the liability side of the balance sheet as well as the asset side.
- Answer-True
