C214 Practice Test
1. 1. A firm reported the following:
Net Income 100,000
Depreciation 25,000
Change in NWC 15,000
What is the CFO (cash flow from operations)?
a. 100,000
b. 110,000
c. 120,000
d. (130,000): CFO = Net Income + Depreciation - Increase NWC
=100,000 + 25,000 - 15,000
2. 2. What is the Cash Flow from Investing?
Beginning Net PP&E 50,000
Ending Net PP&E 200,000
Depreciation Expense 40,000
a. (190,000)
b. 150,000
c. 200,000
d. (150,000): Cash Flow Investing (CFI)
Change in Investment = (Change in Net PPE + Depreciation)
=(200,000 - 50,000) + 40,000
Change Invest = 190,000
CFI = (-1) * Change in Invest = (190,000)
3. 3. What is the Cash Flow from Financing?
Accounts Payable 50,000
Stock Issuance 75,000
,C214 Practice Test
Increase in Bonds Payable 125,000
Dividends Paid 80,000
a. 150,000
b. 120,000
c. 100,000
d. 145,000: Cash Flow Financing
CFF = Increase in Stock + Increase in Debt - Dividends Paid
=75,000+125,000-80,000
=120,000
4. 4. A couple wants to save for a down payment on a house. They think they
need to accumlate 100,000 in five years. If the interest rate is 5% and they start
at the end of the year when they both get bonuses from their employers, what
do they have to put aside annually?
a. 22,096
b. 17,752
c. 18,097
d. 18,462: 100,000 FV
5N
5 I/Y
Cpt PMT = 18,097
5. 5. Hedgeco had sales of 70,000,000, expenses of 50,000,000 and has a 40%
tax rate. It has equity of 40,000,000. The board approved dividends of
4,000,000. What is the company's Sustainable Growth Rate?
a. 20%
b. 15%
c. 25%
d. 14%: SGR = ROE * ( 1 - Payout Ratio )
,C214 Practice Test
ROE = Net Income / Equity
Payout Ratio = Dividends Paid / Net Income
Net Income = (70 - 50)*(1-0.4) = 12 ROE = 12/40 = 0.30
Payout Ratio = 4/12 = .33
SGR = .30 * (1 - 0.33) = .20
6. 6. A company wishes to issue 10 year semi-annual pay bonds with a face
value of $1,000 and a coupon rate of 5%. The market has shifted before the
issuance and the bonds will sell at 95% of face value. What is the YTM of the
bonds when they are sold?
a. 6.71%
b. 5.50%
c. 5.66%
d. 6.33%: 20 N
1000 FV
25 PMT
(950) PV
Cpt I/Y = 2.83 * 2 = 5.66%
7. 7. What does a stock have to sell for one year in the future, if it currently sells
for $75, has a planned dividend of $2 a share and an expected return of 12%?
a. 75
b. 79
c. 82
d. 85: 1 N
(75) PV
2 PMT
12 I/Y
Cpt FV = 82
1. 1. A firm reported the following:
Net Income 100,000
Depreciation 25,000
Change in NWC 15,000
What is the CFO (cash flow from operations)?
a. 100,000
b. 110,000
c. 120,000
d. (130,000): CFO = Net Income + Depreciation - Increase NWC
=100,000 + 25,000 - 15,000
2. 2. What is the Cash Flow from Investing?
Beginning Net PP&E 50,000
Ending Net PP&E 200,000
Depreciation Expense 40,000
a. (190,000)
b. 150,000
c. 200,000
d. (150,000): Cash Flow Investing (CFI)
Change in Investment = (Change in Net PPE + Depreciation)
=(200,000 - 50,000) + 40,000
Change Invest = 190,000
CFI = (-1) * Change in Invest = (190,000)
3. 3. What is the Cash Flow from Financing?
Accounts Payable 50,000
Stock Issuance 75,000
,C214 Practice Test
Increase in Bonds Payable 125,000
Dividends Paid 80,000
a. 150,000
b. 120,000
c. 100,000
d. 145,000: Cash Flow Financing
CFF = Increase in Stock + Increase in Debt - Dividends Paid
=75,000+125,000-80,000
=120,000
4. 4. A couple wants to save for a down payment on a house. They think they
need to accumlate 100,000 in five years. If the interest rate is 5% and they start
at the end of the year when they both get bonuses from their employers, what
do they have to put aside annually?
a. 22,096
b. 17,752
c. 18,097
d. 18,462: 100,000 FV
5N
5 I/Y
Cpt PMT = 18,097
5. 5. Hedgeco had sales of 70,000,000, expenses of 50,000,000 and has a 40%
tax rate. It has equity of 40,000,000. The board approved dividends of
4,000,000. What is the company's Sustainable Growth Rate?
a. 20%
b. 15%
c. 25%
d. 14%: SGR = ROE * ( 1 - Payout Ratio )
,C214 Practice Test
ROE = Net Income / Equity
Payout Ratio = Dividends Paid / Net Income
Net Income = (70 - 50)*(1-0.4) = 12 ROE = 12/40 = 0.30
Payout Ratio = 4/12 = .33
SGR = .30 * (1 - 0.33) = .20
6. 6. A company wishes to issue 10 year semi-annual pay bonds with a face
value of $1,000 and a coupon rate of 5%. The market has shifted before the
issuance and the bonds will sell at 95% of face value. What is the YTM of the
bonds when they are sold?
a. 6.71%
b. 5.50%
c. 5.66%
d. 6.33%: 20 N
1000 FV
25 PMT
(950) PV
Cpt I/Y = 2.83 * 2 = 5.66%
7. 7. What does a stock have to sell for one year in the future, if it currently sells
for $75, has a planned dividend of $2 a share and an expected return of 12%?
a. 75
b. 79
c. 82
d. 85: 1 N
(75) PV
2 PMT
12 I/Y
Cpt FV = 82
