2026 Latest D775 Introduction to Business Finance Exam
Prep for OA and Pre-Assessment with 150 Correctly
Answered Questions/ WGU D775 PA and OA Practice Test
2026 (A Review of 150 Recent Real Exam Questions)
What is an example of a secondary market activity?
The trading of stocks on the New York Stock Exchange
3 multiple choice options
A company is evaluating a project with the following cash flows:
Initial investment: $100,000
Year 1 cash inflow: $40,000
Year 2 cash inflow: $50,000
Year 3 cash inflow: $30,000
The company's cost of capital is 10%.
The calculated NPV is approximately −$3,900.
What does the project's Net Present Value (NPV) indicate about its profitability?
The project is not profitable and should be rejected.
3 multiple choice options
A real estate development company is evaluating a proposed residential project.
After conducting a capital budgeting analysis, the company calculates a Net
Present Value (NPV) of $500,000 for the project.
The project should be undertaken because it is expected to generate more value
than costs.
3 multiple choice options
A construction firm is entirely financed through loans and bonds rather than equity.
To evaluate new investment opportunities, the firm must determine its cost of
capital. What can be determined about the firm's cost of capital?
It is equal to the after-tax cost of debt, as no equity financing costs are involved.
1
,3 multiple choice options
How is the cost of capital typically measured?
As a percentage return
3 multiple choice options
A small business is evaluating two projects.
Project A requires an investment of $250,000 and has an internal rate of return
(IRR) of 8%.
Project B requires an investment of 400,000, has a project life of 9 years, and a net
present value (NPV) of $220,000 when discounted at 10%.
The firm's cost of capital is 9%.
How should the business proceed if it has enough money to invest in both projects?
Invest in Project B only
3 multiple choice options
What is the advantage of using net present value (NPV)to evaluate investment
opportunities?
It accounts for the time value of money, providing a more accurate analysis.
3 multiple choice options
Which financial metric should be used alongside the payback period to provide a
more comprehensive investment evaluation?
Net present value
3 multiple choice options
Why might a business prefer using an internal rate of return (IRR) over net present
value (NPV) for evaluating investments?
Internal rate of return (IRR) provides a single percentage, which makes comparing
dissimilar investments easier.
3 multiple choice options
2
, Freedom Rock Bicycles is evaluating new production equipment. The expected
cash inflows from the equipment are projected to be:
-$50,000 in year 1
-$80,000 in year 2
-$60,000 in year 3
-$45,000 in year 4
-$70,000 in year 5
To determine if the investment is worthwhile, the finance team calculates the net
present value (NPV) using a discount rate of 8%. How does NPV assess the
equipment's annual cash inflows?
By calculating the present value of each annual cash inflow for the appropriate
number of periods at 8%, then adding those together
3 multiple choice options
Which factor increases the future value interest factor for an annuity (FVIFA)?
A higher interest rate
3 multiple choice options
Which example shows an annuity?
Credit card payments of equal amounts at 21% APR to retire an outstanding
balance
3 multiple choice options
Whole Pine, Inc. is considering using a payment plan for marketing consulting
services it purchases. Under the plan, Whole Pine will make annual payments of
$15,000 to its consultant over the next 6 years. Whole Pine's finance team wants to
calculate the future value of this annuity. The finance team has determined that 5%
is an appropriate interest rate. Which factors influence this payment plan's future
value interest factor for an annuity (FVIFA)?
The number of payments (6), interest rate (5%), and payment amount ($15,000)
3 multiple choice options
Why is the present value of an annuity important for retirement planning?
It determines how much needs to be saved today to meet future financial goals.
3
Prep for OA and Pre-Assessment with 150 Correctly
Answered Questions/ WGU D775 PA and OA Practice Test
2026 (A Review of 150 Recent Real Exam Questions)
What is an example of a secondary market activity?
The trading of stocks on the New York Stock Exchange
3 multiple choice options
A company is evaluating a project with the following cash flows:
Initial investment: $100,000
Year 1 cash inflow: $40,000
Year 2 cash inflow: $50,000
Year 3 cash inflow: $30,000
The company's cost of capital is 10%.
The calculated NPV is approximately −$3,900.
What does the project's Net Present Value (NPV) indicate about its profitability?
The project is not profitable and should be rejected.
3 multiple choice options
A real estate development company is evaluating a proposed residential project.
After conducting a capital budgeting analysis, the company calculates a Net
Present Value (NPV) of $500,000 for the project.
The project should be undertaken because it is expected to generate more value
than costs.
3 multiple choice options
A construction firm is entirely financed through loans and bonds rather than equity.
To evaluate new investment opportunities, the firm must determine its cost of
capital. What can be determined about the firm's cost of capital?
It is equal to the after-tax cost of debt, as no equity financing costs are involved.
1
,3 multiple choice options
How is the cost of capital typically measured?
As a percentage return
3 multiple choice options
A small business is evaluating two projects.
Project A requires an investment of $250,000 and has an internal rate of return
(IRR) of 8%.
Project B requires an investment of 400,000, has a project life of 9 years, and a net
present value (NPV) of $220,000 when discounted at 10%.
The firm's cost of capital is 9%.
How should the business proceed if it has enough money to invest in both projects?
Invest in Project B only
3 multiple choice options
What is the advantage of using net present value (NPV)to evaluate investment
opportunities?
It accounts for the time value of money, providing a more accurate analysis.
3 multiple choice options
Which financial metric should be used alongside the payback period to provide a
more comprehensive investment evaluation?
Net present value
3 multiple choice options
Why might a business prefer using an internal rate of return (IRR) over net present
value (NPV) for evaluating investments?
Internal rate of return (IRR) provides a single percentage, which makes comparing
dissimilar investments easier.
3 multiple choice options
2
, Freedom Rock Bicycles is evaluating new production equipment. The expected
cash inflows from the equipment are projected to be:
-$50,000 in year 1
-$80,000 in year 2
-$60,000 in year 3
-$45,000 in year 4
-$70,000 in year 5
To determine if the investment is worthwhile, the finance team calculates the net
present value (NPV) using a discount rate of 8%. How does NPV assess the
equipment's annual cash inflows?
By calculating the present value of each annual cash inflow for the appropriate
number of periods at 8%, then adding those together
3 multiple choice options
Which factor increases the future value interest factor for an annuity (FVIFA)?
A higher interest rate
3 multiple choice options
Which example shows an annuity?
Credit card payments of equal amounts at 21% APR to retire an outstanding
balance
3 multiple choice options
Whole Pine, Inc. is considering using a payment plan for marketing consulting
services it purchases. Under the plan, Whole Pine will make annual payments of
$15,000 to its consultant over the next 6 years. Whole Pine's finance team wants to
calculate the future value of this annuity. The finance team has determined that 5%
is an appropriate interest rate. Which factors influence this payment plan's future
value interest factor for an annuity (FVIFA)?
The number of payments (6), interest rate (5%), and payment amount ($15,000)
3 multiple choice options
Why is the present value of an annuity important for retirement planning?
It determines how much needs to be saved today to meet future financial goals.
3
