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C214 Practice Test Questions with Detailed
Verified Answers
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
b. 110,000
c. 120,000
d. (130,000)
⼀Answer:⼀ CFO = Net Income + Depreciation - Increase NWC
=100,000 + 25,000 - 15,000
2. What is the Cash Flow from Investing?
Beginning Net PP&E 50,000
Ending Net PP&E 200,000
Depreciation Expense 40,000
a. (190,000)
b. 150,000
c. 200,000
d. (150,000)
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⼀Answer:⼀ 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. What is the Cash Flow from Financing?
Accounts Payable 50,000
Stock Issuance 75,000
Increase in Bonds Payable 125,000
Dividends Paid 80,000
a. 150,000
b. 120,000
c. 100,000
d. 145,000
⼀Answer:⼀ Cash Flow Financing
CFF = Increase in Stock + Increase in Debt - Dividends Paid
=75,000+125,000-80,000
=120,000
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 both get
bonuses from their employers, what do they have to put aside
annually?
a. 22,096
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b. 17,752
c. 18,097
d. 18,462
⼀Answer:⼀ 100,000 FV
5N
5 I/Y
Cpt PMT = 18,097
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 board
approved dividends of 4,000,000. What is the company's
Sustainable Growth Rate?
a. 20%
b. 15%
c. 25%
d. 14%
⼀Answer:⼀ 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. A company wishes to issue 10 year semi-annual pay bonds
with a face value of $1,000 and a coupon rate of 5%. The market
has shifted before the issuance and the bonds will sell at 95% of
face value. What is the YTM of the bonds when they are sold?
a. 6.71%
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b. 5.50%
c. 5.66%
d. 6.33%
⼀Answer:⼀ 20 N
1000 FV
25 PMT
(950) PV
Cpt I/Y = 2.83 * 2 = 5.66%
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
⼀Answer:⼀ 1 N
(75) PV
2 PMT
12 I/Y
Cpt FV = 82
8. A company just paid a dividend of 2.00 to its shareholder. It
estimates that future growth will be at 5%. What is the value of the
stock if you are looking for an 10% return on your investment?
a. 41.75
b. 42
c. 41
C214 Practice Test Questions with Detailed
Verified Answers
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
b. 110,000
c. 120,000
d. (130,000)
⼀Answer:⼀ CFO = Net Income + Depreciation - Increase NWC
=100,000 + 25,000 - 15,000
2. What is the Cash Flow from Investing?
Beginning Net PP&E 50,000
Ending Net PP&E 200,000
Depreciation Expense 40,000
a. (190,000)
b. 150,000
c. 200,000
d. (150,000)
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⼀Answer:⼀ 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. What is the Cash Flow from Financing?
Accounts Payable 50,000
Stock Issuance 75,000
Increase in Bonds Payable 125,000
Dividends Paid 80,000
a. 150,000
b. 120,000
c. 100,000
d. 145,000
⼀Answer:⼀ Cash Flow Financing
CFF = Increase in Stock + Increase in Debt - Dividends Paid
=75,000+125,000-80,000
=120,000
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 both get
bonuses from their employers, what do they have to put aside
annually?
a. 22,096
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b. 17,752
c. 18,097
d. 18,462
⼀Answer:⼀ 100,000 FV
5N
5 I/Y
Cpt PMT = 18,097
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 board
approved dividends of 4,000,000. What is the company's
Sustainable Growth Rate?
a. 20%
b. 15%
c. 25%
d. 14%
⼀Answer:⼀ 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. A company wishes to issue 10 year semi-annual pay bonds
with a face value of $1,000 and a coupon rate of 5%. The market
has shifted before the issuance and the bonds will sell at 95% of
face value. What is the YTM of the bonds when they are sold?
a. 6.71%
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b. 5.50%
c. 5.66%
d. 6.33%
⼀Answer:⼀ 20 N
1000 FV
25 PMT
(950) PV
Cpt I/Y = 2.83 * 2 = 5.66%
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
⼀Answer:⼀ 1 N
(75) PV
2 PMT
12 I/Y
Cpt FV = 82
8. A company just paid a dividend of 2.00 to its shareholder. It
estimates that future growth will be at 5%. What is the value of the
stock if you are looking for an 10% return on your investment?
a. 41.75
b. 42
c. 41
