CORPORATE FINANCE STUDY QUESTIONS
AND ANSWERS FOR EXAM PREP. 2024
UPDATE
1. A project will require an initial outlay of $2000 and will result
in the following cash inflows in the years shown. If the cost of
capital is 3%, what is the NPV of the project?
Yearl :$770 (cash flow)
Year2:$880
Year3:$810
Questionl : Answer
a.$388
b.$321
c.$318
d.$460: The correct answer is: $318
2. Project Beta is a 4-year project which requires an initial outlay
of $2,000. This outlay will be depreciated using straight-line
depreciation over the life of the project. It will generate
incremental revenue of $2000 per year and incremental costs
(excluding depreciation) of $300. The tax rate is 30%.
What is the project's annual tax
payable? Question 2: Answer
a.$210
b.$490
c.$360
d.$840: The correct answer is: $360
3. A project will increase revenue from $2.4 million to $3.3
million. Wages are 60% of revenue. Maintenance on the
machine will be $32,000, the same as it is on the machine that
will be replaced.
, CORPORATE FINANCE STUDY QUESTIONS
AND ANSWERS FOR EXAM PREP. 2024
UPDATE
What is the incremental net revenue (i.e. change in revenue
minus expenses) that will result from accepting this project?
Question 3; Answer
a.$O.360 million
b.$O.392 million
c.$O.328 million
d.$O.900 million: The correct answer is: $0.360 million
4. Which of the following is NOT consistent with the NPV decision
rule?
Question 4SeIect one:
a.
1/4
When choosing between projects, accept the project with the
highest NPV.
b.
When choosing between projects, reject the project with the
lowest NPV and accept all the others.
C. Reject all negative-
NPV projects.
d.
If there is sufficient capital for all projects, accept all positive-NPV
projects.: The correct answer is: When choosing between
projects, reject the project with the lowest NPV and accept all
the others.
5. You are considering two projects for your company, Projects A
and B. The company has enough capital to invest in both of them
AND ANSWERS FOR EXAM PREP. 2024
UPDATE
1. A project will require an initial outlay of $2000 and will result
in the following cash inflows in the years shown. If the cost of
capital is 3%, what is the NPV of the project?
Yearl :$770 (cash flow)
Year2:$880
Year3:$810
Questionl : Answer
a.$388
b.$321
c.$318
d.$460: The correct answer is: $318
2. Project Beta is a 4-year project which requires an initial outlay
of $2,000. This outlay will be depreciated using straight-line
depreciation over the life of the project. It will generate
incremental revenue of $2000 per year and incremental costs
(excluding depreciation) of $300. The tax rate is 30%.
What is the project's annual tax
payable? Question 2: Answer
a.$210
b.$490
c.$360
d.$840: The correct answer is: $360
3. A project will increase revenue from $2.4 million to $3.3
million. Wages are 60% of revenue. Maintenance on the
machine will be $32,000, the same as it is on the machine that
will be replaced.
, CORPORATE FINANCE STUDY QUESTIONS
AND ANSWERS FOR EXAM PREP. 2024
UPDATE
What is the incremental net revenue (i.e. change in revenue
minus expenses) that will result from accepting this project?
Question 3; Answer
a.$O.360 million
b.$O.392 million
c.$O.328 million
d.$O.900 million: The correct answer is: $0.360 million
4. Which of the following is NOT consistent with the NPV decision
rule?
Question 4SeIect one:
a.
1/4
When choosing between projects, accept the project with the
highest NPV.
b.
When choosing between projects, reject the project with the
lowest NPV and accept all the others.
C. Reject all negative-
NPV projects.
d.
If there is sufficient capital for all projects, accept all positive-NPV
projects.: The correct answer is: When choosing between
projects, reject the project with the lowest NPV and accept all
the others.
5. You are considering two projects for your company, Projects A
and B. The company has enough capital to invest in both of them
