CPA 2026 BAR Business Analysis Capital Budgeting Free Quiz 3

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CPA 2026 BAR Business Analysis Capital Budgeting Free Quiz 3

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CPA 2026 BAR Business Analysis Capital Budgeting Free Quiz 3

Practice CPA 2026 BAR Business Analysis MCQs from Capital Budgeting. Get instant results with Explanation.

General10 MCQs

1. How can project risk be incorporated into capital budgeting?

A. Risk-adjusted discount rates are used only for financial projectsB. Risk-adjusted discount rates increase the discount rate for riskier projects; certainty equivalents adjust cash flowsC. The certainty equivalent method adjusts the discount rateD. Both methods ignore risk

2. What discount rate should be used for a project with different risk than the company?

A. Always use the company's WACCB. Always use the cost of equityC. Use a project-specific discount rate based on the project's riskD. Always use the cost of debt

3. What is the pure-play method for estimating project beta?

A. Pure-play method uses the beta of a comparable company and adjusts for leverageB. Pure-play method uses the company's own betaC. Pure-play method uses the industry average betaD. Pure-play method uses the risk-free rate

4. How do you unlever a beta?

A. β_u = β_L × [1 + (1 - T) × (D/E)]B. β_u = β_L - (1 - T) × (D/E)C. β_u = β_L × (1 - T) × (D/E)D. β_u = β_L / [1 + (1 - T) × (D/E)]

5. How do you lever a beta for a project?

A. β_L = β_u / [1 + (1 - T) × (D/E)]B. β_L = β_u × [1 + (1 - T) × (D/E)]C. β_L = β_u + (1 - T) × (D/E)D. β_L = β_u × (1 + (1 - T) × (D/E))

General10 MCQs

6. What is a hurdle rate in capital budgeting?

A. The hurdle rate is always the risk-free rateB. The hurdle rate is the same for all projectsC. The hurdle rate is the minimum acceptable rate of return, often the WACCD. The hurdle rate is the return on equity

7. What is the post-audit in capital budgeting?

A. The post-audit compares actual to forecasted results after project implementationB. The post-audit is performed before the project is approvedC. The post-audit is only for large projectsD. The post-audit is not necessary

8. What is the NPV decision rule?

A. Accept if NPV is negativeB. Accept if NPV is zeroC. Reject if NPV is positiveD. Accept if NPV is positive

9. What is the reinvestment rate assumption in NPV and IRR?

A. Both assume reinvestment at the cost of capitalB. NPV assumes reinvestment at the cost of capital; IRR assumes reinvestment at the IRRC. Both assume reinvestment at the IRRD. Neither assumes reinvestment

10. What is the problem with IRR when a project has non-conventional cash flows?

A. IRR is always uniqueB. Non-conventional cash flows do not affect IRRC. Multiple IRRs can occur with non-conventional cash flows, making NPV preferredD. Multiple IRRs are not a problem

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CPA

Conducting Body: AICPA

Frequency: Exam Frequency Year Round | Time: 960 Minutes

Negative Marking: No

⚡ Test Pattern (Total: 250 MCQs):

Auditing and Attestation: 78 MCQs
Financial Accounting and Reporting: 50 MCQs
Taxation and Regulation: 72 MCQs
Business Analysis and Reporting: 50 MCQs
Information Systems and Controls: 82 MCQs
Tax Compliance and Planning: 68 MCQs

Merit Formula: -

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