WGU C214 Financial
Management – 2025/2026
Real Exam Q&A | Verified A
Grade
1. A company invests $10,000 today at 5% annual interest, compounded
annually. What is the future value after 3 years?
o A. $11,500
o B. $11,576.25
o C. $12,000
o D. $12,250 Rationale: FV = PV × (1 + r)^n = $10,000 × (1.05)^3 =
$11,576.25. This time value of money formula quantifies
compounding's impact on investment growth, guiding corporate
decisions on reinvestment versus payout.
2. The present value of $5,000 received in 4 years at a 6% discount rate is
closest to:
o A. $3,700
o B. $3,967
o C. $4,200
o D. $4,500 Rationale: PV = FV / (1 + r)^n = $5,000 / (1.06)^4 ≈
$3,967. Discounting reflects opportunity cost, essential for NPV
calculations in capital budgeting to accept projects adding value.
3. An annuity of $1,000 per year for 5 years at 4% interest has a future value
of:
o A. $4,800
o B. $5,416
o C. $5,800
o D. $6,000 Rationale: FV annuity = PMT × [(1 + r)^n - 1]/r = $1,000
× [(1.04)^5 - 1]/0.04 ≈ $5,416. This formula aids retirement planning
and lease decisions by accumulating periodic cash flows.
4. The internal rate of return (IRR) for a project with initial outflow $20,000
and inflows $8,000/year for 3 years is approximately:
o A. 8%
o B. 10%
, o C. 12%
o D. 15% Rationale: IRR solves NPV = 0 via trial: at 10%, PV inflows
≈ $20,000. IRR benchmarks project viability against WACC for
capital rationing decisions.
5. A bond with face value $1,000, 5% coupon, and 3% YTM maturing in 10
years has a price of:
o A. $900
o B. $1,100
o C. $1,000
o D. $1,200 Rationale: Price = Σ [C / (1 + y)^t] + FV / (1 + y)^n = $50
annuity PV + $1,000 PV ≈ $1,100 (premium bond). Valuation informs
fixed-income portfolio risk-return trade-offs.
6. The net present value (NPV) of a project with $50,000 initial cost, $20,000
annual inflows for 3 years at 8% discount rate is:
o A. -$5,000
o B. $1,200
o C. $5,000
o D. $10,000 Rationale: NPV = -50,000 + Σ [$20,000 / (1.08)^t] ≈
$1,200 positive. Accept if NPV > 0, maximizing shareholder value
per discounted cash flow model.
7. Beta measures a stock's:
o A. Total risk
o B. Systematic risk relative to market
o C. Unsystematic risk
o D. Dividend yield Rationale: Beta (cov(Ri, Rm)/var(Rm)) quantifies
volatility; β=1 matches market, guiding CAPM expected returns for
portfolio diversification.
8. The weighted average cost of capital (WACC) formula includes:
o A. Only debt cost
o B. (E/V × Re) + (D/V × Rd × (1 - Tc))
o C. Equity only
o D. Preferred stock alone Rationale: WACC discounts firm cash
flows, balancing tax-shielded debt with equity risk for hurdle rate in
investments.
9. Modigliani-Miller theorem (no taxes) states capital structure affects:
o A. Firm value
o B. Firm value is irrelevant
o C. Cost of equity
Management – 2025/2026
Real Exam Q&A | Verified A
Grade
1. A company invests $10,000 today at 5% annual interest, compounded
annually. What is the future value after 3 years?
o A. $11,500
o B. $11,576.25
o C. $12,000
o D. $12,250 Rationale: FV = PV × (1 + r)^n = $10,000 × (1.05)^3 =
$11,576.25. This time value of money formula quantifies
compounding's impact on investment growth, guiding corporate
decisions on reinvestment versus payout.
2. The present value of $5,000 received in 4 years at a 6% discount rate is
closest to:
o A. $3,700
o B. $3,967
o C. $4,200
o D. $4,500 Rationale: PV = FV / (1 + r)^n = $5,000 / (1.06)^4 ≈
$3,967. Discounting reflects opportunity cost, essential for NPV
calculations in capital budgeting to accept projects adding value.
3. An annuity of $1,000 per year for 5 years at 4% interest has a future value
of:
o A. $4,800
o B. $5,416
o C. $5,800
o D. $6,000 Rationale: FV annuity = PMT × [(1 + r)^n - 1]/r = $1,000
× [(1.04)^5 - 1]/0.04 ≈ $5,416. This formula aids retirement planning
and lease decisions by accumulating periodic cash flows.
4. The internal rate of return (IRR) for a project with initial outflow $20,000
and inflows $8,000/year for 3 years is approximately:
o A. 8%
o B. 10%
, o C. 12%
o D. 15% Rationale: IRR solves NPV = 0 via trial: at 10%, PV inflows
≈ $20,000. IRR benchmarks project viability against WACC for
capital rationing decisions.
5. A bond with face value $1,000, 5% coupon, and 3% YTM maturing in 10
years has a price of:
o A. $900
o B. $1,100
o C. $1,000
o D. $1,200 Rationale: Price = Σ [C / (1 + y)^t] + FV / (1 + y)^n = $50
annuity PV + $1,000 PV ≈ $1,100 (premium bond). Valuation informs
fixed-income portfolio risk-return trade-offs.
6. The net present value (NPV) of a project with $50,000 initial cost, $20,000
annual inflows for 3 years at 8% discount rate is:
o A. -$5,000
o B. $1,200
o C. $5,000
o D. $10,000 Rationale: NPV = -50,000 + Σ [$20,000 / (1.08)^t] ≈
$1,200 positive. Accept if NPV > 0, maximizing shareholder value
per discounted cash flow model.
7. Beta measures a stock's:
o A. Total risk
o B. Systematic risk relative to market
o C. Unsystematic risk
o D. Dividend yield Rationale: Beta (cov(Ri, Rm)/var(Rm)) quantifies
volatility; β=1 matches market, guiding CAPM expected returns for
portfolio diversification.
8. The weighted average cost of capital (WACC) formula includes:
o A. Only debt cost
o B. (E/V × Re) + (D/V × Rd × (1 - Tc))
o C. Equity only
o D. Preferred stock alone Rationale: WACC discounts firm cash
flows, balancing tax-shielded debt with equity risk for hurdle rate in
investments.
9. Modigliani-Miller theorem (no taxes) states capital structure affects:
o A. Firm value
o B. Firm value is irrelevant
o C. Cost of equity
