Free CPA BAR (Business Analysis & Reporting) Business Analysis Practice Questions

D is correct. Prescriptive analytics goes beyond describing or predicting outcomes; it recommends specific actions to achieve desired results using optimization models, simulations, and decision analysis. It answers the question: what should we do? Choice A describes descriptive analytics, which summarizes past data. Choice B describes predictive analytics, which forecasts future outcomes from historical patterns. Choice C describes diagnostic analytics, which investigates causes behind past events. The four types form a hierarchy: descriptive, diagnostic, predictive, prescriptive.

B is correct. D = 0.60E and D + E = 5,200,000, so 1.60E = 5,200,000; E = 3,250,000; D = 1,950,000. Check: 1,950,000 / 3,250,000 = 0.60. Choice B sets debt = 60% of assets (3,120,000); implied D/E = 3,120,000 / 2,080,000 = 1.50, not 0.60. Choice C sets equity = 60% of assets (3,120,000); implied D/E = 2,080,000 / 3,120,000 = 0.667, not 0.60. Choice D starts with assumed equity of 4,000,000 and multiplies by 0.60 for debt (2,400,000); total = 6,400,000, violating the 5,200,000 asset constraint.

B is correct. PV of 5-year FCFs = 2,000,000 x 3.8897 = 7,779,400. Terminal value at Year 5 = 2,000,000 x 1.03 / (0.09 - 0.03) = 2,060,000 / 0.06 = 34,333,333. PV of TV = 34,333,333 / 1.5386 = 22,315,000. Enterprise value = 7,779,400 + 22,315,000 = 30,094,400 dollars. Choice B omits the terminal value, massively understating value for a going concern. Choice C divides by WACC only (2,060,000 / 0.09 = 22,889,000), overstating TV by not subtracting the growth rate. Choice D computes a no-growth perpetuity (2,000,000 / 0.09 = 22,222,000) without the explicit period PVs.