C214 WGU EXAM TEST 2023/2024

C214 WGU EXAM TEST 2023/2024 Pt - CORRECT ANSWER-is the sold price Pt-1 - CORRECT ANSWER-is the bought price CFt - CORRECT ANSWER-is the cash flow (coupons for bonds; dividends for stocks). Dollar Returns - CORRECT ANSWER-= Pt - Pt-1 + CFt Cash Flow from Investing (CFI) - CORRECT ANSWER-= Change in Net PP&E + Depreciation Expense Net PP&E - CORRECT ANSWER-= Gross PP&E - Accumulated Depreciation With the assumption of no asset disposals, CFI will be equal to - CORRECT ANSWER1) change in Gross PP&E or 2) Change in Net PP&E plus depreciation expense. Dividends - CORRECT ANSWER-= (Old RE + Net Income) - New RE Change in RE - CORRECT ANSWER-= NI -dividends CFF - CORRECT ANSWER-= change in notes payable + change in long-term debt - dividends (assuming no other relevant changes) FCFF - CORRECT ANSWER-= EBIT (1-tax rate) + Depreciation - CAPEX - Increases in NWC EBIT - CORRECT ANSWER-= Earnings before interest and taxes CAPEX - CORRECT ANSWER-= Capital expenditure on PP&E; frequently measured as CFI NWC - CORRECT ANSWER-= Net working capital (current assets - current liabilities) changes FCFE - CORRECT ANSWER-= NI + Depreciation - CAPEX - Increases in NWC + Increases in Debt TAT Total Asset Turnover = Sales / Total Assets: - CORRECT ANSWER-Literally, this ratio measures how many dollars in sales the firm generates per dollar of assets. TAT of three indicates that for - CORRECT ANSWER-every $1 of assets, the firm is generating $3 in sales. TIE The Times Interest Earned Ratio = EBIT / Interest Expense: - CORRECT ANSWER-Operating expense/Interest Expense r - CORRECT ANSWER-= Real Risk-Free Rate + Inflation + Risk Premium r = (definition for TMV) - CORRECT ANSWER-Nominal discount rate (note: nominal means inflation is included) Real risk-free rate - CORRECT ANSWER-= The rate earned on riskless investments with 0% inflation Inflation - CORRECT ANSWER-= The annual decay in the purchasing power of money Risk premium - CORRECT ANSWER-= Compensation for bearing the risk of a particular investment TVM is a relatively simple concept. Essentially, we bring together three variables: - CORRECT ANSWER-1) amount of the cash flows 2) the timing of the cash flows 3) the rate at which the value of the cash flows changes due to the passage of time. Discretionary Financing Needed (DFN) - CORRECT ANSWER-= Projected Total Assets - Projected Total Liabilities - Projected Equity if+ funding needed - good Sustainable Growth Rate (SGR) - CORRECT ANSWER-= Return on Equity(ROE) * (1- Dividend Payout Ratio) Cash flow from Operating Activities (CFO) - CORRECT ANSWER-= Net Income + Depreciation +/- Decreases/Increases in Current Assets +/- Increases/Decreases in Current Liabilities Cash Flow from Investing Activities (CFI) - CORRECT ANSWER-= Change in PPE + Depreciation Cash Flow from Financing Activities (CFF) - CORRECT ANSWER-= Change in Equity + Change in Long Term Debt -Dividends paid Gordon Growth Model - CORRECT ANSWER-= (Expected Dividend at end of year)/(Required Rate of Return - Dividend Growth Rate) Degree of Operating Leverage (DoL) - CORRECT ANSWER-= (Sales Revenue - Variable Costs) /Net Income Book value - CORRECT ANSWER-is the historical cost less depreciation Financial instruments - CORRECT ANSWER-Stocks and Bonds net Income - CORRECT ANSWER-Revenues - expenses gross profit - CORRECT ANSWER-Revenues minus cost of goods sold Assets=liabilities + equity - CORRECT ANSWER-liabilities =equity +Assets x. Net income measure that cash flows from Op does not - CORRECT ANSWERDepreciation Accrual principal - CORRECT ANSWER-when a comp earns the rev they report it Matching principal - CORRECT ANSWER-expenses should be matched against the revenues x. co sold prod in 14 for 120k & collected 100k in cash in 14 & remainder in 2015. Co incurred 70K in exp for 14 & paid 100k which included 30k for exp in 13. What is net income for 14 - CORRECT ANSWER-Net income = 120,000-70,000=50,000 x. retained earnings on 1/1/14 is 25k. NI for 14 is 50k & dividend payout ration is 25% of NI. What are retained earnings on 12/31/14 - CORRECT ANSWERRE=25,000+50,000-(.25*50,000)=62,500 x. an investment of 10k made today at 8% simple interest for 3yrs and 9mths(3.75) will yield in principle and interest - CORRECT ANSWER-10,000+(10,000 x .08 x 3.75)=13,000 x. stock will be worth $36 at end of year & will pay a dividend of $2.25. How much should a investor pay expecting 12% rate of return - CORRECT ANSWER38.12/1.12=34.15 x. looking to purchase common stock at $55, hold it for 1yr after dividend of $3. What would the stock price need to be required rate of return 15% - CORRECT ANSWER55+(.15*55)-3=60.25 x. broker purchased stock pays $1.15 annual dividend of $16 with required rate of return if sold yr 1 for $19 - CORRECT ANSWER-rate of return ((1.15+19)-16)/16=.259 x. stock expected to pay a dividend of $5 for current year & is expected to grow at rat 4% per yr. If req rate of return is 10%, what is max amount that should be paid for stock today - CORRECT ANSWER-Gordon Growth model 5/(.10-.04)=83.33 x.XO issues 75mil worth of 8.25% preferred stock at $50 per share par value. Required rate of return is 9.5% what would we pay for the stock today - CORRECT ANSWER- .0825 × $50= $4.125 per year