F301 – Financial Management
Final Exam information
There will be 15 or 16 multiple-choice questions on the Final Exam. Then there will be four or
five written-answer problems.
Approximately two-thirds of the exam will be based upon the new material (chapters 10, 11 and
12) and one-third will be on TVM, NPV and the key points of other material covered on the first
two exams.
You should focus your studying on the following types of problems:
TVM – calculating
EAR
, FV, PV, interest rates, APR, payments
Stock valuation – computing a stock price with the growing perpetuity equation
Bonds – solving for a bond price, YTM on semiannual bonds
Capital budgeting criteria – determining OCF, NWC and capital spending cash flows, and
computing NPV and IRR from a given set of cash flows
Return calculations –
geometric average, arithmetic average, portfolio weighted average
return
Portfolio investment theory:
diversification and portfolio risk, systematic risk and beta,
computing a weighted average beta
CAPM and the security market line – calculating the CAPM return, using the CAPM and
the SML to make an accept-reject decision on a given project
WACC – computing a weighted average cost of capital, how a project’s risk should affect
the discount rate used for that project
The best way to study for the problem-solving portion of the exam is to review (and rework)
problems from the first two exams (and practice exams), the problem sets, and work the
following practice problems (answers provided in italics). Especially try Problems 3, 7, 8, 15, 19,
25, 34 and An all equity firm is considering the following projects:. Problem 34 is a good WACC
practice problem, and the detailed solution is shown on the last page of this document.
F301