Section 1: 40–50%B5
Financial Valuation and Capital Budgeting
Exam Insight
Capital-budgeting and valuation questions tie BAR together — the exam expects you to discount cash flows at a WACC built from CAPM, accept projects with positive NPV, and value a business by DCF, market multiples, or asset base. The decision rules and the discounting mechanics are heavily tested.
CPA Exam Lab is an independent study resource and is not affiliated with, endorsed by, or sponsored by the AICPA® or NASBA. Practice questions are original content created for study purposes. “CPA” is a registered trademark of the AICPA.
What AICPA Wants You to Know
- 1Apply the time value of money to discount and compound cash flows
- 2Compute net present value (NPV) and apply the accept-if-positive rule
- 3Interpret the internal rate of return (IRR) and profitability index
- 4Compute payback and discounted payback periods
- 5Build the weighted average cost of capital (WACC) from CAPM and the after-tax cost of debt
- 6Apply the DCF, market-multiple, and asset-based business valuation approaches