WGU C214 FINAL PAPER 2025/2026 QUESTIONS AND
ANSWERS GUARANTEE A+
✔✔Simple interest - ✔✔you own interest only on the principle (do not need financial
calculator)
✔✔compound interest - ✔✔earn interest on principle and interest (Need financial
calculator)
✔✔PV - ✔✔Principle Value
✔✔I/PY - ✔✔Interst per year
✔✔N - ✔✔Number of payments (most likely number of years)
✔✔Required rate of return - ✔✔Benchmark for a broker to meet for rate of return on
stocks. Not included in calculations.
✔✔D1 - ✔✔dividend paid at the end of the year (NOT TODAY)
Dividend at end of year = dividend today x (1x growth rate)
✔✔prefered stock valuation - ✔✔dividend does not grow
V0 = D1/kps
kps = desire return
✔✔g - ✔✔growth rate of dividend
%
✔✔CAPM - ✔✔capital asset pricing model
✔✔Efficient frontier - ✔✔the ratio that maximizes expected return for a given level of
risk. (MEMORIZE)
Risk on the bottom axis
Average annual returns on vertical axis
✔✔Beta - ✔✔systematic risk (stock specific risk) 1 = riskier less then 1 = less riskier
than the market.
, ✔✔How to use expected return - ✔✔MEMORIZE - us expected return to compute the
present value of that particular stocks cash flow and the present value of the stocks
cash flow is what that stock is worth.
use expected return to figure out a stocks worth.
✔✔when doing probability of return - ✔✔calculate the Er for both probabilities then add
them together.
probability should always add up to 100%
✔✔Efficient Market Hypothesis (EMH) - ✔✔capital market assumes that all stocks are
efficient.
the intrinsic value of a stock is the present value of stock's after tax net cash flow.
✔✔Capital Budgeting - ✔✔Refers to the process used by companies to make long term
investment decisions.
✔✔Variables used in capital budgeting - ✔✔Initial outlay
differential annual cash flow
terminal cash flow
✔✔Initial outlay - ✔✔What you are going to invest in the project today
1.Cost of asset
2. shipping costs
3. investment in working capital
✔✔Differential annual cash flow - ✔✔the amount of cash that is generated on an
ongoing basis
✔✔terminal cash flow - ✔✔When a project is complete.
After tax proceeds from the sale of the assets.
when the project ends, you sell the asset and pay taxes on it.
✔✔Net present Value Method NPV - ✔✔Present value of after tax net flows
most commonly used method in capital budgeting
Need a financial calculator - look up how to do it
✔✔Internal rate of return method IRR - ✔✔discount rate that results in a 0 net present
value.
ANSWERS GUARANTEE A+
✔✔Simple interest - ✔✔you own interest only on the principle (do not need financial
calculator)
✔✔compound interest - ✔✔earn interest on principle and interest (Need financial
calculator)
✔✔PV - ✔✔Principle Value
✔✔I/PY - ✔✔Interst per year
✔✔N - ✔✔Number of payments (most likely number of years)
✔✔Required rate of return - ✔✔Benchmark for a broker to meet for rate of return on
stocks. Not included in calculations.
✔✔D1 - ✔✔dividend paid at the end of the year (NOT TODAY)
Dividend at end of year = dividend today x (1x growth rate)
✔✔prefered stock valuation - ✔✔dividend does not grow
V0 = D1/kps
kps = desire return
✔✔g - ✔✔growth rate of dividend
%
✔✔CAPM - ✔✔capital asset pricing model
✔✔Efficient frontier - ✔✔the ratio that maximizes expected return for a given level of
risk. (MEMORIZE)
Risk on the bottom axis
Average annual returns on vertical axis
✔✔Beta - ✔✔systematic risk (stock specific risk) 1 = riskier less then 1 = less riskier
than the market.
, ✔✔How to use expected return - ✔✔MEMORIZE - us expected return to compute the
present value of that particular stocks cash flow and the present value of the stocks
cash flow is what that stock is worth.
use expected return to figure out a stocks worth.
✔✔when doing probability of return - ✔✔calculate the Er for both probabilities then add
them together.
probability should always add up to 100%
✔✔Efficient Market Hypothesis (EMH) - ✔✔capital market assumes that all stocks are
efficient.
the intrinsic value of a stock is the present value of stock's after tax net cash flow.
✔✔Capital Budgeting - ✔✔Refers to the process used by companies to make long term
investment decisions.
✔✔Variables used in capital budgeting - ✔✔Initial outlay
differential annual cash flow
terminal cash flow
✔✔Initial outlay - ✔✔What you are going to invest in the project today
1.Cost of asset
2. shipping costs
3. investment in working capital
✔✔Differential annual cash flow - ✔✔the amount of cash that is generated on an
ongoing basis
✔✔terminal cash flow - ✔✔When a project is complete.
After tax proceeds from the sale of the assets.
when the project ends, you sell the asset and pay taxes on it.
✔✔Net present Value Method NPV - ✔✔Present value of after tax net flows
most commonly used method in capital budgeting
Need a financial calculator - look up how to do it
✔✔Internal rate of return method IRR - ✔✔discount rate that results in a 0 net present
value.
