WGU C214 Financial Management 2023\/ 2024 Exam| Questions and Verified Answers| Grade A+<\/p>\n\n\n\n
WGU C214 Financial Management 2023\/
2024 Exam| Questions and Verified Answers|
Grade A+
Q: What do you do if the question says that the dividend was paid RECENTLY or the dividend
was JUST paid?
Answer:
First you must calculate the expected dividend.
Q: How do you know when to use the Gordon Growth model to answer a question?
Answer:
If you see the word GROW or GROWTH in the question, then it’s a GGM question.
Q: What is the CAPM model?
Answer:
Capital Asset Pricing Model. Considered superior to GGM because it incorporates RISK.
Uses concept of “Efficient Frontier”.
Q: What is the concept of Efficient Frontier?
Answer:
Efficient Frontier maximizes expected return for a given level of risk.
Q: In a probability question, what should the chance of recession and the chance of expansion
equal in percentage?<\/p>\n\n\n\n
Answer:
They should total 100%
Q: What are some implications of Efficient Market Hypothesis (EMH)
Answer:
One important implication of EMH is that no one can time the market.
In any market to survive in an efficient financial market, they have to consistently make
profitable decisions.
Q: Under the efficient market hypothesis (EMH) how is the intrinsic value of stock determined?
Answer:
Under EMH, the intrinsic value of a stock is the Present Value of the stock’s after tax net cash
flows.
Q: What is Capital budgeting?
Answer:
The process that companies employ to make decisions on long term investments (projects that
generate cash flows over a multi-year time horizon).
A company wants to buy a factory? That’s a capital budgeting decisions.
A company wants to buy $10million dollars in equipment? That’s a capital budgeting decision.
Q: What are the 3 sets of information you need in Capital budgeting decision making?
Answer:<\/p>\n\n\n\n
Q: Companies use two methods for capital budgeting. What are they?
Answer:
Net Present Value (NPV) and Internal Rate of Return (IRR)
Q: What is Net Present Value (NPV)?
Answer:
Is defined as the present value of after tax net cash flows and is the most commonly used method
in Capital budgeting.
Q: What is the Internal Rate of Return (IRR) Method?
Answer:
It is defined as the discount rate that results in a zero net present value.
Q: How do you calculate NPV?
Answer:
Use your financial calculator!
Q: What does it mean if you see a negative number?
Answer:
It means cash is going out.<\/p>\n\n\n\n
Q: What is the comprehensive formula for Net Income?
Answer:
Increase in revenue – Increase in fixed costs and variable costs – depreciation * (1- tax rate)
Q: On the financial calculator, a dividend is always entered as\u2026
Answer:
A payment: the “PMT” key.
Q: How do you enter I\/Y percentages in the financial calculator?
Answer:
You enter them as a whole number. So 15% would be 15
Q: Whenever somebody gets something every year, it’s called what?
Answer:
An annuity
Q: How is an annuity entered into the financial calculator
Answer:
An annuity is always entered as a payment (PMT) in the financial calculator.
Q: If a question has two time periods in the question, what clue is that giving you as to what
kind of question it is.
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