Every Corporate Finance exam is built on one core idea: a dollar today is worth more than a dollar tomorrow.
Whether you are valuing a bond, a dividend stock, or a $50M factory expansion, every formula in Finance is just discounting future cash flows back to t = 0.
The 5-step Corporate Finance exam mastery system
Draw a Cash Flow Timeline before touching your BA II Plus / HP 12C calculator
Multi-stage TVM problems (e.g., saving for 10 years, waiting 3 years, then withdrawing for 20 years) trip up 70% of students because of off-by-one periods. Remember that an Ordinary Annuity PV lands ONE period BEFORE the first payment!
Keep Period Rate (I/Y), Number of Periods (N), and Payment (PMT) in matching units
If a bond or mortgage pays semiannually or monthly, divide the annual APR by m, multiply years by m, and convert the coupon/payment to match—and always make PV and PMT opposite signs (+/-).
Memorize the Free Cash Flow (FCF) Capital Budgeting formula
FCF = EBIT × (1 - Tax Rate) + Depreciation - CAPEX - ΔNet Working Capital. Never include sunk costs (like past R&D) or interest expense (already captured in WACC), and DO include cannibalization/opportunity costs.
Know when NPV beats IRR (Mutually Exclusive & Non-Normal Cash Flows)
NPV is the gold standard because it measures exact dollar value added at the firm's cost of capital. IRR can mislead when comparing projects of different scales or when cash flows flip signs more than once.
Build WACC from CAPM Cost of Equity and After-Tax Cost of Debt
Use MARKET values (not book values!) for E/V and D/V weights, calculate Cost of Equity via CAPM (Re = Rf + β(Rm - Rf)), and multiply Cost of Debt Rd by (1 - Tax Rate) for the interest tax shield.
High-stakes Finance problems to drill with AI
Multi-Stage TVM & Retirement Timelines
Chain annuities, perpetuities, and growing perpetuities P₀ = CF₁ / (r - g) without sign errors.
Bond Pricing, YTM & Interest Rate Risk
Understand why long-term, low-coupon bonds have the highest price sensitivity when rates change.
NPV, IRR & Capital Budgeting
Calculate operating cash flows, MACRS depreciation tax shields, and terminal salvage value after tax.
CAPM, Beta & WACC Calculation
Unlever/relever beta for new projects and compute the weighted average cost of capital.
Never include Interest Expense inside Free Cash Flow (FCF)
Discounting cash flows by WACC already accounts for the cost of debt financing. Subtracting interest expense inside your FCF numerator double-counts financing costs and costs you major points on Capital Budgeting exams.
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