Exam Details

  • Exam Code
    :CFA-LEVEL-1
  • Exam Name
    :CFA Level I - Chartered Financial Analyst
  • Certification
    :CFA Institute Certifications
  • Vendor
    :CFA Institute
  • Total Questions
    :3960 Q&As
  • Last Updated
    :May 19, 2025

CFA Institute CFA Institute Certifications CFA-LEVEL-1 Questions & Answers

  • Question 1281:

    Which of the following methods of evaluating capital projects incorporate an explicit discount rate into the equation?

    A. Net Present Value, Payback Period

    B. Internal Rate of Return, Modified Internal Rate of Return

    C. Discounted Payback Period, Net Present Value, Payback Period

    D. Discounted Payback Period, Net Present Value, Modified Internal Rate of Return

    E. Discounted Payback Period, Net Present Value, Internal Rate of Return

  • Question 1282:

    Which of the following statements is most correct?

    A. One advantage of adopting a residual dividend policy is that it makes it easier for corporations to maintain dividend clienteles.

    B. None of these answers are correct.

    C. The clientele effect can explain why firms often change their dividend policies.

    D. The bird-in-hand theory would predict that companies could decrease their cost of equity financing by raising their dividend payout.

    E. All of these answers are correct.

  • Question 1283:

    Consider the following argument: "By selling predetermined amounts of stock in an environment of no taxes or transaction costs, investors can create their own dividend policy. For example, a shareholder that wants a 5% dividend can "create" it by selling 5% of her stock. Conversely, if a company pays a higher dividend than an investor desires, the investor can use the unwanted portion of this dividend to purchase additional stock." This argument applies to which of the following theories? Choose the best answer.

    A. Dividend Relevance Theory

    B. Tax Preference Theory

    C. Trade-off Theory

    D. Bird-in-hand Theory

    E. Dividend Irrelevance Theory

  • Question 1284:

    Which of the following statements is most correct?

    A. Stock splits reduce the number of shares outstanding.

    B. A key advantage of the residual dividend policy is that it usually results in a stable dividend policy, which is attractive to investors.

    C. A reduction in the capital gains rate should work to discourage corporations from repurchasing their shares.

    D. The bird-in-hand theory of dividends suggests that firms that increase their dividend payout should expect to realize a higher share price and a lower cost of equity capital.

  • Question 1285:

    If debt financing is used, which of the following is correct?

    A. The percentage change in net operating income is greater than a given percentage change in net income.

    B. The percentage change in net operating income is less than the percentage change in net income.

    C. The percentage change in net operating income is equal to a given percentage change in net income.

    D. The percentage change in net operating income depends on the interest rate charged on debt.

    E. The degree of operating leverage is greater than 1.

  • Question 1286:

    The stand-alone risk of a project is measured by:

    A. the project's impact on the systematic risk of the firm's stock.

    B. the project's impact on the unsystematic risk of the firm's stock.

    C. the variability of the project's projected returns.

    D. the project's impact on the uncertainty about the firm's future earnings.

  • Question 1287:

    If a firm adheres strictly to the residual dividend policy, a sale of new common stock by the company would suggest that ________.

    A. the dividend payout ratio is decreasing

    B. the dividend payout ratio has remained constant

    C. the dollar amount of investments has decreased

    D. the dividend payout ratio is increasing

    E. no dividends were paid for the year

  • Question 1288:

    Which of the following statements is most correct?

    A. None of the answers are correct.

    B. The modified internal rate of return (MIRR) can never exceed the IRR.

    C. All of the answers are correct.

    D. If the IRR of Project A exceeds the IRR of Project B, then Project A must also have a higher NPV.

    E. If a project with normal cash flows has an IRR which exceeds the cost of capital, then the project must have a positive NPV.

  • Question 1289:

    Ace Consulting, a multinational corporate finance consulting firm, is performing an analysis of the East Asian distribution network of Smith, Kleen, and Beetchnutty. Specifically, Ace Consulting is trying to identify the effect of changes in specific variables on the overall efficiency of SKB's distribution process. In their analysis, Ace Consulting identified a "base case" situation using the expected values for each input. Then, Ace modified each variable a few points above and below the base case, holding other variables constant. This was done in an effort to determine the effect of each variable on the overall efficiency of SKB's distribution process. Which of the following choices correctly describes this stand- alone risk measurement technique?

    A. Monte Carlo simulation

    B. Scenario analysis

    C. Case study analysis

    D. Regression analysis

    E. Sensitivity analysis

    F. Relational analysis

  • Question 1290:

    The Seattle Corporation has been presented with an investment opportunity which will yield cash flows of $30,000 per year in Years 1 through 4, $35,000 per year in Years 5 through 9, and $40,000 in Year 10. This investment will cost the firm $150,000 today, and the firm's cost of capital is 10 percent. Assume cash flows occur evenly during the year, 1/365th each day. What is the payback period for this investment?

    A. 4.35 years

    B. 4.00 years

    C. 5.23 years

    D. 4.86 years

    E. 6.12 years

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