FIN3601 Final 2026 – NPV, IRR, Portfolio Theory & Risk Analysis | 45 Questions

This FIN3601 Final Study Guide 2026 contains 45 verified exam questions and answers covering capital budgeting, discounted cash flow (DCF) analysis, portfolio theory, risk-return concepts, and market efficiency. The document provides a comprehensive review of Net Present Value (NPV), Internal Rate of Return (IRR), Payback Rule (including pros and cons), Average Accounting Return (AAR), Profitability Index, crossover rate, and capital budgeting decision criteria. The guide thoroughly explains valuation techniques such as discounted cash flow analysis, expected return calculations, capital gains, dividend yield, arithmetic and geometric averages, and risk premiums. It also examines Efficient Markets Hypothesis (EMH), systematic versus unsystematic risk, portfolio expected return, portfolio variance, covariance, beta of a portfolio, and diversification principles. Special emphasis is placed on IRR limitations (multiple IRR problem and mutually exclusive project conflicts) and how the crossover rate determines project selection when NPV profiles intersect. This document is ideal for: Undergraduate finance students MBA students in corporate finance Accounting and economics majors Investment analysis students CFA Level I candidates It is especially relevant for courses such as: Corporate Finance Financial Management Investment Analysis Principles of Finance Capital Budgeting Portfolio Management The structured Q&A format reinforces quantitative finance concepts, capital budgeting decision rules, risk-return tradeoff analysis, portfolio diversification mechanics, and valuation methodologies frequently tested in final finance examinations. Keywords: net present value, discounted cash flow, internal rate of return, payback rule, average accounting return, profitability index, crossover rate, capital budgeting decisions, capital gain calculation, dividend yield formula, risk premium, arithmetic average return, geometric average return, efficient markets hypothesis, expected return formula, portfolio expected return, portfolio variance, covariance formula, systematic risk, unsystematic risk, beta of portfolio, diversification principle