B. Acy Bachelor of Accountancy Corporate Finance and Financial Management 1

Question 1

Which of the following best describes the primary goal of financial management in a corporation?

Accepted Answer

Maximizing shareholder wealth

Answer

The primary goal of financial management is to maximize shareholder wealth, which is reflected in the market value of the firm's stock.

Question 2

A firm has EBIT of $500,000, interest expense of $80,000, and a tax rate of 25%. What is the firm's net income?

Accepted Answer

$315,000

Answer

EBT = $500,000 - $80,000 = $420,000; Net income = $420,000 × (1 - 0.25) = $315,000.

Question 3

Which capital budgeting method considers the time value of money and measures the dollar value added to a project?

Accepted Answer

Net present value (NPV)

Answer

NPV discounts all cash flows at the required rate of return and measures the dollar amount of value created (positive NPV) or destroyed (negative NPV).

Question 4

The weighted average cost of capital (WACC) is used to:

Accepted Answer

Discount future cash flows to evaluate investment projects

Answer

WACC represents the blended cost of all capital sources and serves as the discount rate for evaluating investment projects in capital budgeting.

Question 5

If a bond has a face value of $1,000, a coupon rate of 6%, and is currently trading at $950, its current yield is approximately:

Accepted Answer

6.3%

Answer

Current yield = Annual coupon / Market price = ($1,000 × 6%) / $950 = $60 / $950 ≈ 6.3%.

B. Acy Bachelor of Accountancy Practice Test

B. Acy Bachelor of Accountancy Practice Test

B. Acy Bachelor of Accountancy Corporate Finance and Financial Management 1