Medium Principles of Finance Practice Questions

250 free medium-difficulty Principles of Finance questions, drawn live from KomFi's calibrated bank. The exam backbone: the difficulty band where most scoring happens.

1. What is the project's Profitability Index (PI) at a 10% discount rate?
2. If the cost of capital is 10%, what is the Net Present Value (NPV) of the project?
3. A firm has FCFF of $100M, interest expense of $20M, a tax rate of 25%, and net new borrowing of $10M. Calculat
4. What is the Profitability Index (PI) and what does it indicate for capital rationing?
5. What is the Payback Period of the project?
6. If the cost of capital is 10%, what is the project's Profitability Index (PI)?
7. If the cost of capital is 10%, how do the Internal Rate of Return (IRR) and the Modified Internal Rate of Retu
8. If the cost of capital is 10%, what is the project's Net Present Value (NPV)?
9. An investor executes a 'bull call spread' by buying a 50-str… — What is the maximum possible profit for this s
10. According to standard financial theory, which project should be accepted?
11. Which of the following signals would most likely lead to a 'low' score (indicating potential financial manipul
12. If the discount rate is 10%, which project is preferred using the Equivalent Annual Annuity (EAA) method?
13. If the project's NPV is positive, what can we conclude about the project's 'Profitability Index' (PI)?
14. What is the total cash flow for Year 5?
15. Given CFO = $500M, Interest Expense = $80M, Tax Rate = 25%, and Capital Expenditures = $200M, what is the FCFF
16. If the cost of capital is 10%, which project should be selected based on the Equivalent Annual Annuity (EAA)?
17. Which firm will likely have a higher 'Cash Flow from Operations' (CFO), and why?
18. How does the discounted payback period resolve a specific 'failure mode' of the simple payback period?
19. How does using market value weights for WACC reflect the 'Capital Rationing' environment of a firm?
20. If the firm's goal is to maximize the efficiency of capital usage under a tight budget, which project is super
21. If a company's Net Income falls by $6.00 solely due to a $10.00 increase in depreciation, what is the implied
22. How does an increase in the marginal tax rate typically affect the FCFE of a levered firm, assuming EBIT and I
23. Under what condition might a project yield multiple internal rates of return (IRRs)?
24. How does the Modified Internal Rate of Return (MIRR) address the primary weakness of the standard IRR reinvest
25. In a case of 'mutually exclusive projects' with different timing (e.g., one front-loaded, one back-loaded), th
26. How does the 'Cash Sweep' in an LBO typically treat capital expenditures?
27. When using the EAA method to compare a 3-year project and a 4-year project, the resulting EAA values are equiv
28. How does the inclusion of a significant 'salvage value' at the end of a project's life affect its EAA calculat
29. If a firm uses its consolidated corporate WACC to evaluate all projects regardless of risk, which of the follo
30. An analyst correctly observes that a project has a higher β than the firm's average. If she fails to adjust th

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