WGU C214 OA FINANCIAL MANAGEMENT
RETAKE FINAL PAPER 2026 ACTUAL EXAM
◉ not under control factors of WACC. Answer: interest rates in the
economy
general level of stock prices
tax rates
◉ factors we can control of WACC. Answer: weights we determine,
how much debt vs equity we want to use
returns on bond loans, stock
risk: high risk projects higher required rate , B goes up thenRd goes
up Re goes up WACC goes up
◉ why must firms adjust their costs of capital for risk? how?.
Answer: different projects have different risk levels and therefore
need to be held to different standards
firms can use project specific costs of capital to adjust for differing
risk levels
◉ normal risk projects:. Answer: use wacc as discount (hurdle) rate
◉ high risk projects. Answer: use r > WACC
,◉ low risk projects. Answer: use r < WACC
◉ estimating project specific costs pure play approach. Answer: use
required rate of return of a near substitute investment
◉ estimating project specific costs subjective approach. Answer:
assign investment to "risk" categories with coresponding risk
premiums
lower risk : discount rate is WACC -2%
normal risk : discount rate is WACC
high risk: discount rate is WACC +2%
◉ managers main concern of capital. Answer: MARP estimate in
CAPM Re (E(Rm-Rf))
◉ flotation costs. Answer: direct cost if issuing securities
investment banking fees
costs can increase the costs of taking on projects
◉ why do flotation costs increase the cost of taking on projects.
Answer: you must inflate Rd and Re estimates before calculating
WACC to account for these
, ◉ what do majority of firms use to find Re. Answer: CAPM
◉ how often do firms calculate WACC and what is avg.. Answer: at
least annually
9%
◉ what happens to WACC when you use debt. Answer: goes down
◉ relationship of Rd and Re and what is exception. Answer: Rd<Re
except for firms with extremely high debt
◉ wacc for riskier firms. Answer: higher
◉ possible decision rules of capital budgeting. Answer: payback rule,
discounted payback rule
npv, irr
◉ problems with discounted pay back rule. Answer: there is an
arbitrary cut off you ignore cfs beyond this rule: payback ignores
TVM
RETAKE FINAL PAPER 2026 ACTUAL EXAM
◉ not under control factors of WACC. Answer: interest rates in the
economy
general level of stock prices
tax rates
◉ factors we can control of WACC. Answer: weights we determine,
how much debt vs equity we want to use
returns on bond loans, stock
risk: high risk projects higher required rate , B goes up thenRd goes
up Re goes up WACC goes up
◉ why must firms adjust their costs of capital for risk? how?.
Answer: different projects have different risk levels and therefore
need to be held to different standards
firms can use project specific costs of capital to adjust for differing
risk levels
◉ normal risk projects:. Answer: use wacc as discount (hurdle) rate
◉ high risk projects. Answer: use r > WACC
,◉ low risk projects. Answer: use r < WACC
◉ estimating project specific costs pure play approach. Answer: use
required rate of return of a near substitute investment
◉ estimating project specific costs subjective approach. Answer:
assign investment to "risk" categories with coresponding risk
premiums
lower risk : discount rate is WACC -2%
normal risk : discount rate is WACC
high risk: discount rate is WACC +2%
◉ managers main concern of capital. Answer: MARP estimate in
CAPM Re (E(Rm-Rf))
◉ flotation costs. Answer: direct cost if issuing securities
investment banking fees
costs can increase the costs of taking on projects
◉ why do flotation costs increase the cost of taking on projects.
Answer: you must inflate Rd and Re estimates before calculating
WACC to account for these
, ◉ what do majority of firms use to find Re. Answer: CAPM
◉ how often do firms calculate WACC and what is avg.. Answer: at
least annually
9%
◉ what happens to WACC when you use debt. Answer: goes down
◉ relationship of Rd and Re and what is exception. Answer: Rd<Re
except for firms with extremely high debt
◉ wacc for riskier firms. Answer: higher
◉ possible decision rules of capital budgeting. Answer: payback rule,
discounted payback rule
npv, irr
◉ problems with discounted pay back rule. Answer: there is an
arbitrary cut off you ignore cfs beyond this rule: payback ignores
TVM
