CFA一级模考

CFA一级模考

CFA一级模考题

1 . Lane Industries has a project with the following cash flows:

Year Cash Flow

0 ?$200,000

1 60,000

2 80,000

3 70,000

4 60,000

5 50,000

The project's cost of capital is 12%. The discounted payback

period is closest to:

A) 2.9 years.

B) 3.9 years.

C) 3.4 years.

The correct answer was: B

The discounted payback period method discounts the

estimated cash flows by the project’s cost of capital and then

calculates the time needed to recover the investment.

Year Cash Flow Discounted Cash Flow Cumulative

Discounted Cash Flow

0 ?$200,000 ?$200,000.00 ?$200,000.00

1 60,000 53,571.43 ?146,428.57

2 80,000 63,775.51 ?82,653.06

3 70,000 49,824.62 ?32,828.44

4 60,000 38,131.08 5,302.64

5 50,000 28,371.30 33,673.98

discounted payback period =number of years until the year

before full recovery + 2 .Which of the following rights concerning shareholder-sponsored board nominations and shareholder-sponsored

resolutions would be advantageous to an investor?

A) The right to nominate or remove board members in

certain circumstances, and the right to propose initiatives for

consideration at the annual meeting.

B) The right to propose initiatives for consideration at the

annual meeting, but not the right to nominate or remove board

members in certain circumstances.

C) The right to nominate or remove board members in

certain circumstances, but not the right to propose initiatives for

consideration at the annual meeting.

The correct answer was A The right to nominate or remove

board members in certain circumstances, and the right to

propose initiatives for consideration at the annual meeting.

Investors need the power to put forth an independent board

nominee. In addition, the right to propose initiatives for

consideration at the annual meeting is an important method to

send a message to management.

3 . Additional debt should be used in t he firm’s capital

structure if it increases:

A) the value of the firm.

B) firm earnings.

C) earnings per share.

The correct answer was A the value of the firm.

The key to finding the optimal capital structure is identifying

the level of debt that will maximize firm value. Earnings and

earnings per share are not critical in and of themselves when

assessing firm value, because they do not consider risk.

4 .Carlos Rodriquez, CFA, and Regine Davis, CFA, were recently discussing the relationships between capital structure,

capital budgets, and net present value (NPV) analysis. Which of

the following comments made by these two individuals is least

accurate?

A) “The optimal capital budget is determined by the

intersection of a firm’s marginal cost of cap ital curve and its

investment opportunity schedule.”

B) “A break point occurs at a level of capital expenditure

where one of the component costs of capital increases.”

C) “For projects with more risk than the average firm project,

NPV computations should b e based on the marginal cost of

capital instead of the weighted average cost of capital.”

The correct answer was C) “For projects with more risk than

the average firm project, NPV computations should be based on

the marginal cost of capital instead of the weighted average cost

of capital.”

The marginal cost of capital (MCC) and the weighted average

cost of capital (W ACC) are the same thing. If a firm’s capital

structure remains constant, the MCC (W ACC) increases as

additional capital is raised.

5 . Sincl air Construction Company’s Board of Directors is

considering repurchasing $30,000,000 worth of common stock.

Sinclair assumes that the stock can be repurchased at the market

price of $50 per share. After much discussion Sinclair decides to

borrow $30 million that it will use to repurchase shares.

Sinclair’s Chief Executive Officer (CEO) has compiled the

following information regarding the repurchase of the firm’s

common stock:

Share price at the time of buyback = $50

Shares outstanding before buyback = 30,600,000 EPS before buyback = $3.33

Earnings yield = $3.33 / $50 = 6.7%

After-tax cost of borrowing = 8.0%

Planned buyback = 600,000 shares

Based on the inform ation above, Sinclair’s earnings per

share (EPS) after the repurchase of its common stock will be

closest to:

A) $3.18.

B) $3.32.

C) $3.23.

The correct answer was: B

Total earnings = $3.33 × 30,600,000 = $101,898,000

Since the 8.0% after-tax cost of borrowing is greater than the

6.7% earnings yield (E/P) of the shares, the share repurchase

reduces Sinclair’s EPS.