CFA LEVEL I DCF PRACTICE EXAM - (30 QUESTIONS) UP-TO-DATE ACTUAL EXAM
QUESTIONS AND 100% ACCURATE SOLUTIONS | VERIFIED ANSWERS - INSTANT PDF
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Examiner/Administrator: CFA Institute
Candidate Name: ____________________________
Candidate ID: _______________________________
Examination Date: __________________________
Examination Centre: ________________________
Time Allowed: 90 Minutes
Total Questions: 30
Instructions to Candidates:
Read each question carefully and select the best answer. All questions are multiple-
choice with four possible answers. Only one answer is correct. Calculators are permitted.
Show all workings on scratch paper where necessary. There is no penalty for guessing.
Ensure all responses are recorded clearly. This exam reflects the analytical rigor expected
,in professional investment practice, particularly in equity valuation and corporate
finance.
Disclaimer:
This is an original simulation designed for educational purposes. It is inspired by the
format and rigor of the CFA Level I examination but does not contain actual exam
questions.
Core Competency Areas:
Time Value of Money
Discounted Cash Flow (DCF) Valuation
Free Cash Flow Models
Cost of Capital
Equity Valuation Techniques
Financial Statement Interpretation
This assessment evaluates a candidate’s ability to apply discounted cash flow techniques
in valuing securities and investment opportunities. Candidates are expected to
,demonstrate strong analytical reasoning, numerical proficiency, and a deep
understanding of financial concepts. The exam mirrors the structure and rigor typical of
professional certification assessments in finance.
QUESTIONS
Q1. A company is expected to generate free cash flow to the firm (FCFF) of $5 million next
year, growing at 4% perpetually. If the WACC is 10%, what is the firm value?
A. $83.33 million
B. $86.67 million
C. $75.00 million
D. $90.00 million
Correct Answer: 🔴 A. $83.33 million
Explanation: 🟡 Using the Gordon Growth Model: Value = FCFF₁ / (WACC - g) = 5 / (0.10 -
0.04) = .06 = 83.33. Option B miscalculates denominator. C uses incorrect growth. D
assumes wrong FCFF.
, Q2. An analyst discounts FCFE instead of FCFF. Which rate should be used?
A. WACC
B. Cost of equity
C. Cost of debt
D. Risk-free rate
Correct Answer: 🔴 B. Cost of equity
Explanation: 🟡 FCFE represents cash flow to equity holders, so it must be discounted at the
cost of equity. WACC applies to FCFF. Debt and risk-free rates are inappropriate.
Q3. A project has cash flows of $2,000 annually for 3 years. Discount rate is 8%. What is the
PV?
A. $5,154
B. $5,156
C. $5,150
D. $5,200
Correct Answer: 🔴 A. $5,154
Explanation: 🟡 PV = 2000 /1.08 + 2000 /(1.08²) + 2000 /(1.08³) ≈ 5154. Other options are
rounding or computational errors.
QUESTIONS AND 100% ACCURATE SOLUTIONS | VERIFIED ANSWERS - INSTANT PDF
DOWNLOAD
Examiner/Administrator: CFA Institute
Candidate Name: ____________________________
Candidate ID: _______________________________
Examination Date: __________________________
Examination Centre: ________________________
Time Allowed: 90 Minutes
Total Questions: 30
Instructions to Candidates:
Read each question carefully and select the best answer. All questions are multiple-
choice with four possible answers. Only one answer is correct. Calculators are permitted.
Show all workings on scratch paper where necessary. There is no penalty for guessing.
Ensure all responses are recorded clearly. This exam reflects the analytical rigor expected
,in professional investment practice, particularly in equity valuation and corporate
finance.
Disclaimer:
This is an original simulation designed for educational purposes. It is inspired by the
format and rigor of the CFA Level I examination but does not contain actual exam
questions.
Core Competency Areas:
Time Value of Money
Discounted Cash Flow (DCF) Valuation
Free Cash Flow Models
Cost of Capital
Equity Valuation Techniques
Financial Statement Interpretation
This assessment evaluates a candidate’s ability to apply discounted cash flow techniques
in valuing securities and investment opportunities. Candidates are expected to
,demonstrate strong analytical reasoning, numerical proficiency, and a deep
understanding of financial concepts. The exam mirrors the structure and rigor typical of
professional certification assessments in finance.
QUESTIONS
Q1. A company is expected to generate free cash flow to the firm (FCFF) of $5 million next
year, growing at 4% perpetually. If the WACC is 10%, what is the firm value?
A. $83.33 million
B. $86.67 million
C. $75.00 million
D. $90.00 million
Correct Answer: 🔴 A. $83.33 million
Explanation: 🟡 Using the Gordon Growth Model: Value = FCFF₁ / (WACC - g) = 5 / (0.10 -
0.04) = .06 = 83.33. Option B miscalculates denominator. C uses incorrect growth. D
assumes wrong FCFF.
, Q2. An analyst discounts FCFE instead of FCFF. Which rate should be used?
A. WACC
B. Cost of equity
C. Cost of debt
D. Risk-free rate
Correct Answer: 🔴 B. Cost of equity
Explanation: 🟡 FCFE represents cash flow to equity holders, so it must be discounted at the
cost of equity. WACC applies to FCFF. Debt and risk-free rates are inappropriate.
Q3. A project has cash flows of $2,000 annually for 3 years. Discount rate is 8%. What is the
PV?
A. $5,154
B. $5,156
C. $5,150
D. $5,200
Correct Answer: 🔴 A. $5,154
Explanation: 🟡 PV = 2000 /1.08 + 2000 /(1.08²) + 2000 /(1.08³) ≈ 5154. Other options are
rounding or computational errors.
