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100+ Free CISI Corporate Finance Technical Foundations Practice Questions

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Key Facts: CISI Corporate Finance Technical Foundations Exam

50

Exam Questions

CISI

70%

Passing Score

35/50 correct

1 hour

Time Limit

Computer-based

80 hrs

Recommended Study

CISI workbook

£250

Exam Fee

CISI website

Level 3

Qualification Level

UK Regulated

The CISI Corporate Finance Technical Foundations exam comprises 50 multiple-choice questions to be completed in 1 hour. It requires a 70% passing score (35/50). Recommended study time is 80 hours. There are no formal entry prerequisites, making it the ideal entry point for securities and investment banking careers in the United Kingdom.

Sample CISI Corporate Finance Technical Foundations Practice Questions

Try these sample questions to test your CISI Corporate Finance Technical Foundations exam readiness. Each question includes a detailed explanation. Start the interactive quiz above for the full 100+ question experience with AI tutoring.

1Which of the following statements represents a key difference between Net Present Value (NPV) and Internal Rate of Return (IRR)?
A.NPV does not take the time value of money into account, whereas IRR does.
B.NPV is a relative measure of profitability, whereas IRR is an absolute measure of dollar value added.
C.NPV calculations require the project's internal rate of return as an input, whereas IRR does not.
D.NPV assumes reinvestment at the cost of capital, whereas IRR assumes reinvestment at the project's internal rate of return.
Explanation: NPV assumes that cash flows are reinvested at the cost of capital, which is a more realistic reinvestment rate. IRR assumes cash flows can be reinvested at the project's own IRR, which is often unrealistically high for highly profitable projects.
2A company's equity beta is 1.2, the risk-free rate is 4%, and the market risk premium is 6%. Using the Capital Asset Pricing Model (CAPM), what is the company's cost of equity?
A.7.2%
B.11.0%
C.11.2%
D.10.0%
Explanation: Under the Capital Asset Pricing Model (CAPM), the cost of equity is calculated as: Cost of Equity = Risk-free Rate + (Beta * Market Risk Premium). Here, 4% + (1.2 * 6%) = 4% + 7.2% = 11.2%.
3An investment is expected to pay £5,000 annually in perpetuity. If the discount rate is 8%, what is the present value of this perpetuity?
A.£40,000
B.£50,000
C.£67,500
D.£62,500
Explanation: The present value of a perpetuity is calculated by dividing the annual cash flow by the discount rate: PV = C / r. In this case, PV = £5,000 / 0.08 = £62,500.
4If an investor deposits £10,000 in a savings account paying a 5% nominal annual interest rate compounded annually, what will be the balance after 3 years?
A.£11,500.00
B.£11,625.00
C.£11,576.25
D.£11,000.00
Explanation: The future value under compound interest is calculated using the formula FV = PV * (1 + r)^n. Here, FV = £10,000 * (1.05)^3 = £10,000 * 1.157625 = £11,576.25.
5What is the discount factor for year 2 at a discount rate of 10%?
A.0.9091
B.0.8333
C.0.7513
D.0.8264
Explanation: The discount factor is calculated as 1 / (1 + r)^n. For year 2 at a 10% discount rate, the discount factor is 1 / (1.10)^2 = 1 / 1.21 = 0.8264.
6A project requires an initial outlay of £150,000 and is expected to generate constant annual cash inflows of £40,000. What is the payback period for this project?
A.3.50 years
B.3.25 years
C.4.00 years
D.3.75 years
Explanation: The payback period is calculated by dividing the initial investment by the constant annual cash inflow: £150,000 / £40,000 = 3.75 years.
7A portfolio consists of 60% Stock A (expected return of 12%) and 40% Stock B (expected return of 8%). What is the expected return of the portfolio?
A.9.6%
B.10.0%
C.10.4%
D.11.2%
Explanation: The expected return of a portfolio is the weighted average of the expected returns of the individual assets: E(Rp) = (wA * E(RA)) + (wB * E(RB)). Here, E(Rp) = (0.60 * 12%) + (0.40 * 8%) = 7.2% + 3.2% = 10.4%.
8A company has a capital structure of 60% equity and 40% debt. The cost of equity is 12%, the pre-tax cost of debt is 7%, and the corporate tax rate is 20%. What is the Weighted Average Cost of Capital (WACC)?
A.10.00%
B.8.88%
C.9.44%
D.9.60%
Explanation: WACC is calculated as: WACC = (We * Ke) + [Wd * Kd * (1 - T)]. Substituting the values: WACC = (0.60 * 12%) + [0.40 * 7% * (1 - 0.20)] = 7.2% + [2.8% * 0.80] = 7.2% + 2.24% = 9.44%.
9A firm expects to pay a dividend of £3.00 next year, which is expected to grow at a constant rate of 4% per year indefinitely. If the required rate of return on the stock is 10%, what is its theoretical value today?
A.£50.00
B.£30.00
C.£75.00
D.£52.00
Explanation: Using the Gordon Growth Model, the value of a stock is P0 = D1 / (Ke - g). In this case, P0 = £3.00 / (0.10 - 0.04) = £3.00 / 0.06 = £50.00.
10Stock X has a standard deviation of 20%, Stock Y has a standard deviation of 30%, and their correlation coefficient is 0.5. If a portfolio is equally weighted between Stock X and Stock Y, what is the portfolio variance?
A.0.0325
B.0.0550
C.0.0475
D.0.0650
Explanation: Portfolio Variance is calculated as: Var(Rp) = (wX^2 * Var(X)) + (wY^2 * Var(Y)) + (2 * wX * wY * SD(X) * SD(Y) * Correlation). Here, wX = 0.5, wY = 0.5. Var(Rp) = (0.25 * 0.04) + (0.25 * 0.09) + (2 * 0.5 * 0.5 * 0.20 * 0.30 * 0.5) = 0.0100 + 0.0225 + 0.0150 = 0.0475.

About the CISI Corporate Finance Technical Foundations Exam

Foundational unit covering quantitative analysis, capital structure, business valuations, and corporate transactions in corporate finance.

Questions

50 scored questions

Time Limit

1 hour

Passing Score

70%

Exam Fee

£250 (CISI)

CISI Corporate Finance Technical Foundations Exam Content Outline

30%

Quantitative Analysis for Corporate Finance

Time value of money, cost of capital, statistical concepts, investment appraisal

22%

Capital Structure

Debt vs equity, gearing ratios, MM theories, leverage, dividend policy

16%

Business Valuations

Valuation methods (DCF, multiples), cash flow forecasting, goodwill

22%

Corporate Transactions

M&A strategics, LBOs, IPOs, demergers, UK Takeover Code rules

10%

Corporate Finance Documentation

Prospectuses, information memorandums, NDAs, circulars, RNS

How to Pass the CISI Corporate Finance Technical Foundations Exam

What You Need to Know

  • Passing score: 70%
  • Exam length: 50 questions
  • Time limit: 1 hour
  • Exam fee: £250

Keys to Passing

  • Complete 500+ practice questions
  • Score 80%+ consistently before scheduling
  • Focus on highest-weighted sections
  • Use our AI tutor for tough concepts

CISI Corporate Finance Technical Foundations Study Tips from Top Performers

1Dedicate at least 80 hours of focused study using the official CISI workbook.
2Practice quantitative calculations like WACC, CAPM, and unlevering/relevering beta repeatedly.
3Understand the key thresholds and rules under the UK Takeover Code, particularly Rule 9.
4Take multiple full-length practice tests to manage the 1-hour time limit effectively.

Frequently Asked Questions

What is the passing score for the CISI Corporate Finance Technical Foundations exam?

The pass mark is 70%, which corresponds to correctly answering at least 35 out of the 50 multiple-choice questions on the exam.

How long is the CISI Corporate Finance Technical Foundations exam?

Candidates are given exactly 1 hour (60 minutes) to complete the 50 multiple-choice questions of this computer-based exam.

Is a calculator allowed on the CISI Corporate Finance exam?

Yes, candidates are expected to bring and use an approved calculator to perform quantitative calculations, such as NPV and WACC, during the examination.