SOA CFE SDMCorporate Finance & ERM — Strategic Decision Making

Fellowship (FSA)

5 hours·≈8–10 case-based written-answer questions·≈450 study hours

Score 0/0 · 5 MC

CFE SDM · Q1
Multiple choice
Corporate finance & valuation
Equity 600 (market), debt 400 (market), $r_E$ = 10%, $r_D$ = 5%, tax 25%. WACC is:
CFE SDM · Q2
Written answer
Corporate finance & valuation
The case company is considering acquiring a specialty insurer for 1.2bn (book value 900m). Projected synergies are 40m pre-tax per year growing 2%; tax 25%; WACC 8%. (a) Value the synergies. (b) Assess whether the premium over book is justified. (c) Identify three integration and financing risks and how to mitigate them.
CFE SDM · Q3
Multiple choice
Corporate finance & valuation
A company is financed 60% equity (cost of equity 10%) and 40% debt (pre-tax cost of debt 5%), with a 30% tax rate. Calculate the weighted average cost of capital (WACC).
CFE SDM · Q4
Written answer
Corporate finance & valuation
An insurer is evaluating entering a new product line with an expected NPV of +20 million but a standalone economic capital requirement that would increase group risk-based capital needs and reduce group RAROC. Discuss the strategic ERM considerations beyond the standalone NPV.