University of Pennsylvania Wharton School Corporate Finance Final Exam
questions with answers and rationales 2026
Corporate Finance Practice Questions
Question 1
Concept: Capital Budgeting (NPV vs. IRR)
A project requires an initial investment of
500
,
000
a
n
d
i
s
e
,x
p
e
c
t
e
d
t
o
g
e
n
e
r
a
t
e
500,000andisexpectedtogenerate150,000 annually for 5 years. If the weighted
average cost of capital (WACC) is 10%, what is the Net Present Value (NPV), and
should the firm accept the project?
,A) -$68,618; Reject
B) $68,618; Accept
C) $250,000; Accept
D) -$50,000; Reject
Answer: B) $68,618; Accept
Rationale: The Net Present Value (NPV) is calculated as the Present Value of cash
inflows minus the Present Value of outflows. Using the PV of an annuity formula,
the inflows are worth
150
,
000
×
[
1
, −
(
1.10
)
−
5
]
/
0.10
≈
150,000×[1−(1.10)
−5
]/0.10≈150,000 × 3.7908 =
568
,
620.
S
u
b
questions with answers and rationales 2026
Corporate Finance Practice Questions
Question 1
Concept: Capital Budgeting (NPV vs. IRR)
A project requires an initial investment of
500
,
000
a
n
d
i
s
e
,x
p
e
c
t
e
d
t
o
g
e
n
e
r
a
t
e
500,000andisexpectedtogenerate150,000 annually for 5 years. If the weighted
average cost of capital (WACC) is 10%, what is the Net Present Value (NPV), and
should the firm accept the project?
,A) -$68,618; Reject
B) $68,618; Accept
C) $250,000; Accept
D) -$50,000; Reject
Answer: B) $68,618; Accept
Rationale: The Net Present Value (NPV) is calculated as the Present Value of cash
inflows minus the Present Value of outflows. Using the PV of an annuity formula,
the inflows are worth
150
,
000
×
[
1
, −
(
1.10
)
−
5
]
/
0.10
≈
150,000×[1−(1.10)
−5
]/0.10≈150,000 × 3.7908 =
568
,
620.
S
u
b
