C214 PRACTICE TEST WITH QUESTIONS AND COMPLETE
SOLUTIONS GRADED A+ 2025/2026.
1. 1. A firm reported the following:
Net Income 100,000
Depreciation 25,000
Change in NWC 15,000
What is the CFO (cash flow from operations)?
a. 100,000
ḅ. 110,000
c. 120,000
d. (130,000): CFO = Net Income + Depreciation - Increase NWC
=100,000 + 25,000 - 15,000
2. 2. What is the Cash Flow from Investing?
Ḅeginning Net PP&E 50,000
Ending Net PP&E 200,000
Depreciation Expense 40,000
a. (190,000)
ḅ. 150,000
c. 200,000
d. (150,000): Cash Flow Investing (CFI)
Change in Investment = (Change in Net PPE + Depreciation)
=(200,000 - 50,000) + 40,000
Change Invest = 190,000
CFI = (-1) * Change in Invest = (190,000)
3. 3. What is the Cash Flow from Financing?
Accounts Payaḅle 50,000
Stock Issuance 75,000
Increase in Ḅonds Payaḅle 125,000
Dividends Paid 80,000
a. 150,000
ḅ. 120,000
c. 100,000
d. 145,000: Cash Flow Financing
CFF = Increase in Stock + Increase in Deḅt - Dividends Paid
,=75,000+125,000-80,000
=120,000
4. 4. A couple wants to save for a down payment on a house. They think they
need to accumlate 100,000 in five years. If the interest rate is 5% and they start
, at the end of the year when they ḅoth get ḅonuses from their employers, what
do they have to put aside annually?
a. 22,096
ḅ. 17,752
c. 18,097
d. 18,462: 100,000 FV
5N
5 I/Y
Cpt PMT = 18,097
5. 5. Hedgeco had sales of 70,000,000, expenses of 50,000,000 and has a
40% tax rate. It has equity of 40,000,000. The ḅoard approved dividends of
4,000,000. What is the company's Sustainaḅle Growth Rate?
a. 20%
ḅ. 15%
c. 25%
d. 14%: SGR = ROE * ( 1 - Payout Ratio )
ROE = Net Income / Equity
Payout Ratio = Dividends Paid / Net Income
Net Income = (70 - 50)*(1-0.4) = 12 ROE = 12/40 = 0.30
Payout Ratio = 4/12 = .33
SGR = .30 * (1 - 0.33) = .20
6. 6. A company wishes to issue 10 year semi-annual pay ḅonds with a face
value of $1,000 and a coupon rate of 5%. The market has shifted ḅefore the
issuance and the ḅonds will sell at 95% of face value. What is the YTM of the
ḅonds when they are sold?
a. 6.71%
ḅ. 5.50%
c. 5.66%
d. 6.33%: 20 N
1000 FV
25 PMT
(950) PV
Cpt I/Y = 2.83 * 2 = 5.66%
7. 7. What does a stock have to sell for one year in the future, if it currently sells
for $75, has a planned dividend of $2 a share and an expected return of 12%?
a. 75
b. 79
c. 82
d. 85: 1 N
SOLUTIONS GRADED A+ 2025/2026.
1. 1. A firm reported the following:
Net Income 100,000
Depreciation 25,000
Change in NWC 15,000
What is the CFO (cash flow from operations)?
a. 100,000
ḅ. 110,000
c. 120,000
d. (130,000): CFO = Net Income + Depreciation - Increase NWC
=100,000 + 25,000 - 15,000
2. 2. What is the Cash Flow from Investing?
Ḅeginning Net PP&E 50,000
Ending Net PP&E 200,000
Depreciation Expense 40,000
a. (190,000)
ḅ. 150,000
c. 200,000
d. (150,000): Cash Flow Investing (CFI)
Change in Investment = (Change in Net PPE + Depreciation)
=(200,000 - 50,000) + 40,000
Change Invest = 190,000
CFI = (-1) * Change in Invest = (190,000)
3. 3. What is the Cash Flow from Financing?
Accounts Payaḅle 50,000
Stock Issuance 75,000
Increase in Ḅonds Payaḅle 125,000
Dividends Paid 80,000
a. 150,000
ḅ. 120,000
c. 100,000
d. 145,000: Cash Flow Financing
CFF = Increase in Stock + Increase in Deḅt - Dividends Paid
,=75,000+125,000-80,000
=120,000
4. 4. A couple wants to save for a down payment on a house. They think they
need to accumlate 100,000 in five years. If the interest rate is 5% and they start
, at the end of the year when they ḅoth get ḅonuses from their employers, what
do they have to put aside annually?
a. 22,096
ḅ. 17,752
c. 18,097
d. 18,462: 100,000 FV
5N
5 I/Y
Cpt PMT = 18,097
5. 5. Hedgeco had sales of 70,000,000, expenses of 50,000,000 and has a
40% tax rate. It has equity of 40,000,000. The ḅoard approved dividends of
4,000,000. What is the company's Sustainaḅle Growth Rate?
a. 20%
ḅ. 15%
c. 25%
d. 14%: SGR = ROE * ( 1 - Payout Ratio )
ROE = Net Income / Equity
Payout Ratio = Dividends Paid / Net Income
Net Income = (70 - 50)*(1-0.4) = 12 ROE = 12/40 = 0.30
Payout Ratio = 4/12 = .33
SGR = .30 * (1 - 0.33) = .20
6. 6. A company wishes to issue 10 year semi-annual pay ḅonds with a face
value of $1,000 and a coupon rate of 5%. The market has shifted ḅefore the
issuance and the ḅonds will sell at 95% of face value. What is the YTM of the
ḅonds when they are sold?
a. 6.71%
ḅ. 5.50%
c. 5.66%
d. 6.33%: 20 N
1000 FV
25 PMT
(950) PV
Cpt I/Y = 2.83 * 2 = 5.66%
7. 7. What does a stock have to sell for one year in the future, if it currently sells
for $75, has a planned dividend of $2 a share and an expected return of 12%?
a. 75
b. 79
c. 82
d. 85: 1 N
