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ICAN Strategic Financial Management 2025 past questions and answers

This 2025 ICAN Strategic Financial Management set has 20 practice questions. Try these 5 free sample questions, tap a question to reveal the answer and explanation. Then practise the whole 2025 set with instant marking.

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Sample ICAN Strategic Financial Management 2025 questions

1. A company funds a proposed expansion with 60% equity and 40% debt at market values. Its cost of equity is 14% and its after-tax cost of debt is 6%. Assuming these weights and costs remain appropriate for the project, what WACC should it use?
  1. 9.6%
  2. 10.8%
  3. 11.2%
  4. 12.0%

Answer: B. 10.8%

WACC = (0.60 × 14%) + (0.40 × 6%) = 10.8%. The debt cost supplied is already after tax, so applying the tax adjustment again would understate WACC.

2. A listed logistics company has an equity beta of 1.2. The risk-free rate is 5% and the expected market risk premium is 7%. Using CAPM, what is the company's required return on equity?
  1. 11.4%
  2. 12.0%
  3. 13.4%
  4. 14.6%

Answer: C. 13.4%

CAPM gives 5% + (1.2 × 7%) = 13.4%. The beta multiplies the market risk premium, not the entire expected market return.

3. A privately owned distributor reports maintainable EBITDA of N4 billion. Comparable businesses trade at an enterprise-value/EBITDA multiple of 6.0. The distributor has net debt of N7 billion and no surplus assets. What equity value is indicated by this multiple?
  1. N17 billion
  2. N24 billion
  3. N31 billion
  4. N11 billion

Answer: A. N17 billion

Enterprise value is N4 billion × 6.0 = N24 billion. Deducting net debt of N7 billion gives equity value of N17 billion; N24 billion is the enterprise value, not the equity value.

4. A valuation analyst forecasts free cash flow to the firm of N12 billion in year 5, after which it will grow at 3% per year indefinitely. The appropriate WACC is 9%. Using the Gordon growth model, what is the terminal value at the end of year 4?
  1. N133.3 billion
  2. N150.0 billion
  3. N164.8 billion
  4. N200.0 billion

Answer: D. N200.0 billion

Terminal value at year 4 = FCFF in year 5/(WACC − growth) = 12/(0.09 − 0.03) = N200 billion. Using year-4 cash flow in the numerator would omit the first growing perpetuity cash flow.

5. An acquirer is considering a target with a stand-alone equity value of N50 billion. The present value of after-tax synergies is estimated at N20 billion, and the proposed consideration is N65 billion. Ignoring transaction costs and financing effects, what is the net value created for the acquirer's shareholders?
  1. N15 billion
  2. N5 billion
  3. N20 billion
  4. N35 billion

Answer: B. N5 billion

Value created = target stand-alone value + synergy value − consideration = 50 + 20 − 65 = N5 billion. The synergy value is not itself the acquirer's net gain because the target's stand-alone value must also be paid for.

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