WGU c214 Concept Quiz with verified answers
A firm will have volatile profits if Ans✓✓✓ It has high operating leverage, It has
high financial leverage, It has high combined leverage
A potential project should be adopted if Ans✓✓✓ IRR is greater than WACC
A strong dollar has what effect? Ans✓✓✓ Increases imports
Excessive leverage will likely result in Ans✓✓✓ Increased WACC and Reduced
stock price
Firms use "sensitivity analysis" because: Ans✓✓✓ To anticipate impact of
erroneous forecasts
FX hedging is used to... Ans✓✓✓ Reduce FX risk
How might a firm incent customers to pay sooner? Ans✓✓✓ Larger discount
If a firm's combined leverage is high what is the implication? Ans✓✓✓ Profits are
more volatile as sales fluctuate
If an equipment salvage value is greater than book value, Ans✓✓✓ There is a tax
cash outflow
If firm increases leverage Ans✓✓✓ Indeterminant impact on price
A firm will have volatile profits if Ans✓✓✓ It has high operating leverage, It has
high financial leverage, It has high combined leverage
A potential project should be adopted if Ans✓✓✓ IRR is greater than WACC
A strong dollar has what effect? Ans✓✓✓ Increases imports
Excessive leverage will likely result in Ans✓✓✓ Increased WACC and Reduced
stock price
Firms use "sensitivity analysis" because: Ans✓✓✓ To anticipate impact of
erroneous forecasts
FX hedging is used to... Ans✓✓✓ Reduce FX risk
How might a firm incent customers to pay sooner? Ans✓✓✓ Larger discount
If a firm's combined leverage is high what is the implication? Ans✓✓✓ Profits are
more volatile as sales fluctuate
If an equipment salvage value is greater than book value, Ans✓✓✓ There is a tax
cash outflow
If firm increases leverage Ans✓✓✓ Indeterminant impact on price
