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.
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
Patterns in this topic
The exam re-skins the same archetypes. Recognize these here, then drill them in the Pattern Lab.
Exam tip
Study smarter: before you expand each card, cover the screen and try to recall what the concept means from its title alone. Retrieving it from memory builds the recall the exam actually tests, and it beats re-reading.