WGU C214 OA Financial Management Retake Exam Questions and Answers 2024

WGU C214 Everything You Need to Know to Pass Exam 11. EBIT: $1,000,000 Depreciation: $30,000 Change in working capital($5,000) Net capital expenditures: $10,000 Tax rate: 40% What is the company's free cash flow - 1,000,000*(1-.40) + 30,000) - (-5,000) - 10,000 = 625,000 12. Define Free Cash Flow - Represents the cash available for the company to repay creditors or pay dividends and interest to investor 13. A company reported an increase in accounts payable of $4,000 during the recent period. Half of this amount is expected to be paid next period. What is the impact on the cash flow from operating activities - increase of $4000 14. An architect will receive $10,000 per year (at the end of the year) PMT for 10 years. The annual interest earned on the investment is 6%. What is the present value of the architect's investment - 10,000 PMT (at the end of each year) 6 I/Y 10 N CPT PV = - 15. An employee wants to retire 20 years from today and would like to have an annual income of $300,000 per year for 10 years starting in exactly 20 years. The discount rate is 6%. What is the present value, today - FUTURE 1000 PMT = 300,000 N = 10 I/Y = 6 CPT PV = 2,208,026.115 PRESENT FV = 2,208,026.115 N = 20 I/Y = 6 PV = 688,472,9797 16. A person won $75,000 in a lottery and invests this money for 2 years and 3 months at an interest rate of 6% simple interest. How much will the person have in principal and interest at the end of the period - 10,125.000 17. A company shows the following financial data: Accounts receivable: $300 Inventory: $700 Fixed assets: $900 Accounts payable: $500 Long-term debt: $1000 What is the current ratio - (300+700)/500 = 2.0 18. What is an example of an estimate used in recording transactions - Deciding the salvage value of a fixed asset when calculating depreciation expense 19. Give an example of accounting difference - The firms use different inventory methods 20. Which securities are issued by the U.S. federal government are taxable at the federal level - Treasury bonds 21. When will annual percentage yield (APY) be greater than the annual percentage rate (APR) - Compound interest more often than once a year 22. What is the intrinsic value of a stock - Present value 23. What is the current price of the bond, if the required rate of return on a bond is the same as the coupon rate - Equal to the par value of the bond 24. Which security includes the right to vote for a board of directors - Common Stock 25. The market rate I/Y is 5%. The face value of the bond is $1000, the coupon rate PMT is 3% with annual compounding, and the bond matures in 10 N years. What is the PV value of the bond - FV 1000 PMT 1000*3% = 30 N 10 I/Y 5 CPT PV = 845.5653 26. If the coupon rate is higher than the market rate of return, at what price will the bond sell - At a Premium 27. If the coupon rate on a bond is 8% and the bond is selling at a discount, Will the yield to maturity on the bond be higher than or lower than 8% - Higher 28. The market rate is I/Y 5%. The face value of the bond is FV $1000, the coupon rate is PMT 3% * FV with annual compounding, and the bond matures in 10 N years. What is the PV value of the bond - FV 1000 PMT 1000*3% = 30 N 10 I/Y 5 CPT PV = 845.5653 29. A company issues bonds at a market price of PV - $1,200. The face value is FV $1,000. The bonds mature in N 10 years and the coupon rate is PMT 8% * FV compounded annually. What is the I/Y yield to maturity on the company's bonds - PV -1200 FV 1000 PMT 100* 8% = 80 N 10 CPT I/Y = 5.3639 30. A loan carries a 11.5% annual percentage rate (APR) and compounds daily. What is the APY - APY = (1+(APR/n)] ^n -1 "n is compounding periods" 1+(11.5/1) = 12.1853 31. A broker purchases a stock that pays PMT a $2.15 annual dividend at a price of - PV $18.00. The broker expects a 15% rate of return. What is the total actual return I/Y if the broker sells the stock after N one year for FV $20 - (Time value of money question NOT GROWTH) PMT 2.15 PV -18.00 N 1 FV 20 CPT I/Y = 23.0556 32. A company just paid a $2 dividend per share of stock, which is expected to grow 10% annually. A broker's required return is 15%. What is the highest price the broker should be willing to pay for one share of the company today - (Expected Dividend = Recent dividend * (1 + Growth Rate) Expected Dividend = 2* (1 + .10) = 2*1.10 = 2.20 Price = Expected Dividend / (required return - Growth Rate) Price= 2.20 / (.15 - .10) = 2.20 / .05 = 44.00 33. How is the expected return from the CAPM model used to make financial decisions - It's used to discount the expected dividends and capital appreciation of the stock over the expected holding period. 34. Define par value of a bond - AMOUNT PAYABLE OF MATURITY OF BOND 35. What is the benefit of the Gordon growth model over the CAPM model - It is the most commonly used model to calculate share price and is therefore the easiest to understand. 36. In 2016, the ending retained earnings was $2,000,000. In 2017, the forecasted net income is $3,000,000 with a 30% dividend payout ratio. What is the forecasted retained earnings for year 2017 - 2,000,000+3,000,000 = 5,000,0000 3,000,000*30% = 900,000 5,000,000- 900,000 = 4,100,000 37. If the projected total assets are $2,000,000 with projected total liabilities of $800,000 and projected owner's equity of $500,000. What is the amount of discretionary financing needed - DFN= assets - liabilities - equity 2,000,000- 800,000-500,000= 700,000 38. If the inflation rate is 5%, how much will an investment be worth in a year - 5% LESS 39. A company is preparing a pro forma balance sheet. The forecast calls for $15 million in projected sales. The projected cash needed 5% of sales, accounts receivable are 20% of sales, and PP&E is 50% of sales. Accounts payable is 15% of sales, and Long-Term debt is $2 million. Total shareholders equity is $4 million. What is the discretionary financing needed - (15*0.5) + (15*0.20) + (15*0.50) - (15*0.15) - 2- 4 0.7500 + 3 + 7.5 - 2.25 - 2 - 4 = 3.0000