Lesson Overview
Give students a project-decision map for corporate finance questions.
Level I questions are three-choice multiple choice and are built to reward fast recognition of the relevant rule, relationship, or calculation path. For this lesson, the job is to turn the topic into a repeatable exam move rather than another note to reread.
Mental Model
Project cash-flow branches discount into present-value blocks, then route to accept/reject decisions.
In the Above MPS system, this sits in Valuation: Focus the method. Use that shape as the memory hook, then connect it to the precise facts in the question stem.
Exam Playbook
- Name the topic before calculating. Decide whether the stem is asking for a definition, direction of effect, classification, or numerical result.
- Apply the rule that changes the answer. Ignore details that do not affect the relationship being tested.
- Check the answer against the common trap. If the tempting choice matches one of the traps below, slow down before locking it in.
High-Yield Map
- NPV measures value added in currency units.
- IRR can mislead with nonconventional or mutually exclusive projects.
- Relevant cash flows are incremental after-tax cash flows.
Common Traps
- Using accounting income instead of cash flow.
- Including sunk costs.
- Choosing IRR when NPV gives the correct ranking.
Repair Drills
- Identify relevant vs irrelevant cash flows in five project prompts.
- Compare NPV and IRR decisions for two projects.