CFI FMVA Final Exam 2025/2026 | Complete
Questions, Verified Correct Solutions &
Detailed Explanations – Latest Updated
Version
CFI FMVA FINAL EXAM
Complete Questions | Verified Correct Solutions & Detailed Explanations – Latest
Updated Version
Q1. Which financial statement shows a company's revenues and expenses over a
specific period?
A) Balance Sheet B) Statement of Cash Flows C) Statement of Retained Earnings D)
Income Statement ✓ CORRECT E) Statement of Stockholders' Equity
RATIONALE: The Income Statement (also called Profit & Loss Statement) reports
revenues, expenses, and net income over a defined accounting period (monthly,
quarterly, or annually).
Q2. What does EBITDA stand for?
A) Earnings Before Income, Tax, Depreciation & Amortization B) Earnings Before
Interest, Taxes, Depreciation & Amortization ✓ CORRECT C) Earnings Before
Investment, Taxes, Debt & Assets D) Equity Before Interest, Taxes, Dividends &
Adjustments E) Earnings Before Interest, Trading, Depreciation & Amortization
RATIONALE: EBITDA = Earnings Before Interest, Taxes, Depreciation & Amortization.
It is widely used as a proxy for operating cash flow and profitability.
Q3. Which of the following best describes Free Cash Flow to the Firm (FCFF)?
A) Net income minus capital expenditures B) Operating cash flow minus dividends C)
Cash flow available to all capital providers after operating expenses and
investments ✓ CORRECT D) Revenue minus cost of goods sold E) EBITDA minus
taxes
RATIONALE: FCFF represents the cash available to all capital providers (debt and
equity holders) after covering operating expenses, taxes, and capital expenditures.
Formula: EBIT(1-t) + D&A – ΔWorking Capital – CapEx.
,Q4. In a DCF model, which rate is used to discount future cash flows?
A) Return on Equity (ROE) B) Dividend Yield C) Weighted Average Cost of Capital
(WACC) ✓ CORRECT D) Internal Rate of Return (IRR) E) Cost of Debt
RATIONALE: In a DCF model, future cash flows (FCFF) are discounted using WACC,
which represents the blended cost of capital from both debt and equity financing.
Q5. What is the formula for WACC?
A) (Debt/Total Capital × Cost of Debt) + (Equity/Total Capital × Cost of Equity) B) (E/V ×
Re) + (D/V × Rd × (1 – Tax Rate)) ✓ CORRECT C) Cost of Equity + Cost of Debt / 2 D)
Risk-Free Rate + Beta × Market Premium E) Net Income / Total Assets × (1 – Debt
Ratio)
RATIONALE: WACC = (E/V × Re) + (D/V × Rd × (1–T)), where E = equity value, D =
debt value, V = total value, Re = cost of equity, Rd = cost of debt, and T = tax rate.
Q6. Which model is most commonly used to calculate the Cost of Equity?
A) Gordon Growth Model B) Dividend Discount Model C) Capital Asset Pricing Model
(CAPM) ✓ CORRECT D) Arbitrage Pricing Theory E) Fama-French Three-Factor Model
RATIONALE: CAPM is the most widely used model for estimating Cost of Equity: Re =
Rf + β × (Rm – Rf), where Rf is risk-free rate, β is beta, and (Rm – Rf) is the equity risk
premium.
Q7. What does Beta measure in finance?
A) A company's total risk B) A company's credit risk C) A stock's volatility relative to
the overall market ✓ CORRECT D) The rate of return on equity E) A company's
leverage ratio
RATIONALE: Beta measures a stock's systematic risk relative to the market. A beta of 1
means the stock moves in line with the market. Beta > 1 indicates more volatility; Beta <
1 indicates less volatility.
Q8. Which of the following is a non-cash charge that reduces taxable income?
,A) Accounts Payable B) Depreciation ✓ CORRECT C) Capital Expenditure D)
Dividends E) Interest Expense
RATIONALE: Depreciation is a non-cash accounting charge that reduces taxable
income (creating a tax shield) but does not involve an actual cash outflow in the current
period.
Q9. In financial modeling, what does the acronym "CapEx" refer to?
A) Capital Exchange B) Capital Expenses recorded on the Income Statement C)
Capital Expenditures – money spent on acquiring or maintaining fixed assets ✓
CORRECT D) Capitalized Expenses written off immediately E) Cash Payments for
Extraordinary items
RATIONALE: Capital Expenditures (CapEx) refer to funds used by a company to
acquire, upgrade, or maintain physical assets such as property, plants, and equipment.
CapEx appears on the Cash Flow Statement under investing activities.
Q10. What is the Terminal Value in a DCF model?
A) The value of debt at the end of the projection period B) The residual value of fixed
assets C) The value of all cash flows beyond the explicit forecast period ✓
CORRECT D) The final year's net income discounted to present value E) The book
value of equity at the end of the model
RATIONALE: Terminal Value captures the present value of all cash flows beyond the
explicit forecast period (typically 5–10 years). It is calculated using either the Gordon
Growth Model or Exit Multiple Method.
Q11. Which formula represents the Gordon Growth Model for Terminal Value?
A) TV = FCF × Exit Multiple B) TV = FCFn × (1+g) / (WACC – g) ✓ CORRECT C) TV =
EBITDA × Industry Multiple D) TV = Net Income / Discount Rate E) TV = Free Cash
Flow / (1 + WACC)^n
RATIONALE: The Gordon Growth Model (Perpetuity Growth Method) calculates
Terminal Value as: TV = FCFn × (1+g) / (WACC – g), where g = perpetuity growth rate
and FCFn = final year free cash flow.
, Q12. In Excel, which shortcut is used to apply an Absolute Cell Reference?
A) Ctrl + A B) Shift + F4 C) F4 ✓ CORRECT D) Ctrl + $ E) Alt + F4
RATIONALE: Pressing F4 in Excel toggles between relative, absolute ($A$1), mixed
($A1 or A$1), and back to relative references. This is essential in financial modeling to
lock specific cells.
Q13. What Excel function is used to search for a value in a table and return a
corresponding value from another column?
A) INDEX B) MATCH C) VLOOKUP ✓ CORRECT D) HLOOKUP E) SUMIF
RATIONALE: VLOOKUP (Vertical Lookup) searches for a value in the leftmost column
of a table and returns a value in the same row from a specified column. Syntax:
=VLOOKUP(lookup_value, table_array, col_index_num, [range_lookup]).
Q14. Which Excel function combines the capabilities of both INDEX and MATCH?
A) VLOOKUP B) HLOOKUP C) LOOKUP D) INDEX + MATCH combination ✓
CORRECT E) XLOOKUP
RATIONALE: INDEX/MATCH is more flexible than VLOOKUP because it can look up
values in any column (not just the leftmost), handle left-lookups, and is less prone to
breaking when columns are inserted.
Q15. In Excel, what is the shortcut for inserting the current date?
A) Ctrl + D B) Ctrl + T C) Ctrl + ; ✓ CORRECT D) Ctrl + Shift + D E) Alt + D
RATIONALE: Ctrl + ; inserts the current static date in Excel. Ctrl + Shift + ; inserts the
current time. Unlike the TODAY() function, these shortcuts insert a fixed date that does
not update automatically.
Q16. What does the Excel function IFERROR do?
A) Returns an error message when a formula fails B) Skips cells with errors during
calculations C) Returns a specified value if a formula evaluates to an error,
otherwise returns the formula result ✓ CORRECT D) Converts error values to zero
automatically E) Highlights cells that contain errors
Questions, Verified Correct Solutions &
Detailed Explanations – Latest Updated
Version
CFI FMVA FINAL EXAM
Complete Questions | Verified Correct Solutions & Detailed Explanations – Latest
Updated Version
Q1. Which financial statement shows a company's revenues and expenses over a
specific period?
A) Balance Sheet B) Statement of Cash Flows C) Statement of Retained Earnings D)
Income Statement ✓ CORRECT E) Statement of Stockholders' Equity
RATIONALE: The Income Statement (also called Profit & Loss Statement) reports
revenues, expenses, and net income over a defined accounting period (monthly,
quarterly, or annually).
Q2. What does EBITDA stand for?
A) Earnings Before Income, Tax, Depreciation & Amortization B) Earnings Before
Interest, Taxes, Depreciation & Amortization ✓ CORRECT C) Earnings Before
Investment, Taxes, Debt & Assets D) Equity Before Interest, Taxes, Dividends &
Adjustments E) Earnings Before Interest, Trading, Depreciation & Amortization
RATIONALE: EBITDA = Earnings Before Interest, Taxes, Depreciation & Amortization.
It is widely used as a proxy for operating cash flow and profitability.
Q3. Which of the following best describes Free Cash Flow to the Firm (FCFF)?
A) Net income minus capital expenditures B) Operating cash flow minus dividends C)
Cash flow available to all capital providers after operating expenses and
investments ✓ CORRECT D) Revenue minus cost of goods sold E) EBITDA minus
taxes
RATIONALE: FCFF represents the cash available to all capital providers (debt and
equity holders) after covering operating expenses, taxes, and capital expenditures.
Formula: EBIT(1-t) + D&A – ΔWorking Capital – CapEx.
,Q4. In a DCF model, which rate is used to discount future cash flows?
A) Return on Equity (ROE) B) Dividend Yield C) Weighted Average Cost of Capital
(WACC) ✓ CORRECT D) Internal Rate of Return (IRR) E) Cost of Debt
RATIONALE: In a DCF model, future cash flows (FCFF) are discounted using WACC,
which represents the blended cost of capital from both debt and equity financing.
Q5. What is the formula for WACC?
A) (Debt/Total Capital × Cost of Debt) + (Equity/Total Capital × Cost of Equity) B) (E/V ×
Re) + (D/V × Rd × (1 – Tax Rate)) ✓ CORRECT C) Cost of Equity + Cost of Debt / 2 D)
Risk-Free Rate + Beta × Market Premium E) Net Income / Total Assets × (1 – Debt
Ratio)
RATIONALE: WACC = (E/V × Re) + (D/V × Rd × (1–T)), where E = equity value, D =
debt value, V = total value, Re = cost of equity, Rd = cost of debt, and T = tax rate.
Q6. Which model is most commonly used to calculate the Cost of Equity?
A) Gordon Growth Model B) Dividend Discount Model C) Capital Asset Pricing Model
(CAPM) ✓ CORRECT D) Arbitrage Pricing Theory E) Fama-French Three-Factor Model
RATIONALE: CAPM is the most widely used model for estimating Cost of Equity: Re =
Rf + β × (Rm – Rf), where Rf is risk-free rate, β is beta, and (Rm – Rf) is the equity risk
premium.
Q7. What does Beta measure in finance?
A) A company's total risk B) A company's credit risk C) A stock's volatility relative to
the overall market ✓ CORRECT D) The rate of return on equity E) A company's
leverage ratio
RATIONALE: Beta measures a stock's systematic risk relative to the market. A beta of 1
means the stock moves in line with the market. Beta > 1 indicates more volatility; Beta <
1 indicates less volatility.
Q8. Which of the following is a non-cash charge that reduces taxable income?
,A) Accounts Payable B) Depreciation ✓ CORRECT C) Capital Expenditure D)
Dividends E) Interest Expense
RATIONALE: Depreciation is a non-cash accounting charge that reduces taxable
income (creating a tax shield) but does not involve an actual cash outflow in the current
period.
Q9. In financial modeling, what does the acronym "CapEx" refer to?
A) Capital Exchange B) Capital Expenses recorded on the Income Statement C)
Capital Expenditures – money spent on acquiring or maintaining fixed assets ✓
CORRECT D) Capitalized Expenses written off immediately E) Cash Payments for
Extraordinary items
RATIONALE: Capital Expenditures (CapEx) refer to funds used by a company to
acquire, upgrade, or maintain physical assets such as property, plants, and equipment.
CapEx appears on the Cash Flow Statement under investing activities.
Q10. What is the Terminal Value in a DCF model?
A) The value of debt at the end of the projection period B) The residual value of fixed
assets C) The value of all cash flows beyond the explicit forecast period ✓
CORRECT D) The final year's net income discounted to present value E) The book
value of equity at the end of the model
RATIONALE: Terminal Value captures the present value of all cash flows beyond the
explicit forecast period (typically 5–10 years). It is calculated using either the Gordon
Growth Model or Exit Multiple Method.
Q11. Which formula represents the Gordon Growth Model for Terminal Value?
A) TV = FCF × Exit Multiple B) TV = FCFn × (1+g) / (WACC – g) ✓ CORRECT C) TV =
EBITDA × Industry Multiple D) TV = Net Income / Discount Rate E) TV = Free Cash
Flow / (1 + WACC)^n
RATIONALE: The Gordon Growth Model (Perpetuity Growth Method) calculates
Terminal Value as: TV = FCFn × (1+g) / (WACC – g), where g = perpetuity growth rate
and FCFn = final year free cash flow.
, Q12. In Excel, which shortcut is used to apply an Absolute Cell Reference?
A) Ctrl + A B) Shift + F4 C) F4 ✓ CORRECT D) Ctrl + $ E) Alt + F4
RATIONALE: Pressing F4 in Excel toggles between relative, absolute ($A$1), mixed
($A1 or A$1), and back to relative references. This is essential in financial modeling to
lock specific cells.
Q13. What Excel function is used to search for a value in a table and return a
corresponding value from another column?
A) INDEX B) MATCH C) VLOOKUP ✓ CORRECT D) HLOOKUP E) SUMIF
RATIONALE: VLOOKUP (Vertical Lookup) searches for a value in the leftmost column
of a table and returns a value in the same row from a specified column. Syntax:
=VLOOKUP(lookup_value, table_array, col_index_num, [range_lookup]).
Q14. Which Excel function combines the capabilities of both INDEX and MATCH?
A) VLOOKUP B) HLOOKUP C) LOOKUP D) INDEX + MATCH combination ✓
CORRECT E) XLOOKUP
RATIONALE: INDEX/MATCH is more flexible than VLOOKUP because it can look up
values in any column (not just the leftmost), handle left-lookups, and is less prone to
breaking when columns are inserted.
Q15. In Excel, what is the shortcut for inserting the current date?
A) Ctrl + D B) Ctrl + T C) Ctrl + ; ✓ CORRECT D) Ctrl + Shift + D E) Alt + D
RATIONALE: Ctrl + ; inserts the current static date in Excel. Ctrl + Shift + ; inserts the
current time. Unlike the TODAY() function, these shortcuts insert a fixed date that does
not update automatically.
Q16. What does the Excel function IFERROR do?
A) Returns an error message when a formula fails B) Skips cells with errors during
calculations C) Returns a specified value if a formula evaluates to an error,
otherwise returns the formula result ✓ CORRECT D) Converts error values to zero
automatically E) Highlights cells that contain errors
