ICAEW – FM TEST QUESTIONS WITH
VERIFIED ANSWERS [ GRADED A+]
Accounting Rate of Return - ✔✔Average Profit/Average investment
Internal Rate of Return - ✔✔a + NPVa/NPVa-NPVb x (b-a)
Money cost of capital - ✔✔(1 + money coc) = (1 + real coc%) x (1 + inflation %)
Equivalent annual cost (EAC) - ✔✔PV of 1 cycle/AF^n of cycle
Profitability index (for divisible projects) - ✔✔NPV/Investment in yr of rationing
©morren2024/2025.Year published 2024.
, Sensitivity to sales volume - ✔✔NPV/PV of net contribution (after tax)
Interest Rate Parity - ✔✔SPOT x (1 + o/seas interest %)/(1+ home interest %).
Used to work out forward rates
Purchasing power parity - ✔✔SPOT x (1 + o/seas inflation %)/(1 + home inflation
%)
TERP - ✔✔MV shares before + new funds / total number of shares post issue
Dividend yield - ✔✔Dividend per share/share price
Earnings per share (PAT) - ✔✔Earnings/No of shares
PE Ratio - ✔✔Share price/ EPS or...Mve/earnings
©morren2024/2025.Year published 2024.
VERIFIED ANSWERS [ GRADED A+]
Accounting Rate of Return - ✔✔Average Profit/Average investment
Internal Rate of Return - ✔✔a + NPVa/NPVa-NPVb x (b-a)
Money cost of capital - ✔✔(1 + money coc) = (1 + real coc%) x (1 + inflation %)
Equivalent annual cost (EAC) - ✔✔PV of 1 cycle/AF^n of cycle
Profitability index (for divisible projects) - ✔✔NPV/Investment in yr of rationing
©morren2024/2025.Year published 2024.
, Sensitivity to sales volume - ✔✔NPV/PV of net contribution (after tax)
Interest Rate Parity - ✔✔SPOT x (1 + o/seas interest %)/(1+ home interest %).
Used to work out forward rates
Purchasing power parity - ✔✔SPOT x (1 + o/seas inflation %)/(1 + home inflation
%)
TERP - ✔✔MV shares before + new funds / total number of shares post issue
Dividend yield - ✔✔Dividend per share/share price
Earnings per share (PAT) - ✔✔Earnings/No of shares
PE Ratio - ✔✔Share price/ EPS or...Mve/earnings
©morren2024/2025.Year published 2024.
