C214 Practice Test Question and
answer correctly solved 2025/2026
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) - correct answer ✔CFO = Net Income + Depreciation - Increase NWC
=100,000 + 25,000 - 15,000
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) - correct answer ✔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. What is the Cash Flow from Financing?
Accounts Payable 50,000
Stock Issuance 75,000
Increase in Bonds Payable 125,000
Dividends Paid 80,000
a. 150,000
b. 120,000
c. 100,000
d. 145,000 - correct answer ✔Cash Flow Financing
CFF = Increase in Stock + Increase in Debt - Dividends Paid
=75,000+125,000-80,000
=120,000
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 - correct answer ✔100,000 FV
5N
,5 I/Y
Cpt PMT = 18,097
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% - correct answer ✔SGR = ROE * ( 1 - Payout Ratio )
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. 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% - correct answer ✔20 N
1000 FV
25 PMT
(950) PV
Cpt I/Y = 2.83 * 2 = 5.66%
, 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 - correct answer ✔1 N
(75) PV
2 PMT
12 I/Y
Cpt FV = 82
8. A company just paid a dividend of 2.00 to its shareholder. It estimates that future growth will be at
5%. What is the value of the stock if you are looking for an 10% return on your investment?
a. 41.75
b. 42
c. 41
d. 39 - correct answer ✔Price = Projected Next Div / (Req Return - Growth Rate)
Next Dividend = Last Dividend x (1+growth rate)
= (2 * 1.05) / (0.10 - 0.05)
= 42
9. To create a fund for annual college scholarships of $100,000 that will last forever, how much must be
invested today if the interest rate is 5%?
a. 1,000,000
b. 5,000,000
c. 500,000
answer correctly solved 2025/2026
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) - correct answer ✔CFO = Net Income + Depreciation - Increase NWC
=100,000 + 25,000 - 15,000
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) - correct answer ✔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. What is the Cash Flow from Financing?
Accounts Payable 50,000
Stock Issuance 75,000
Increase in Bonds Payable 125,000
Dividends Paid 80,000
a. 150,000
b. 120,000
c. 100,000
d. 145,000 - correct answer ✔Cash Flow Financing
CFF = Increase in Stock + Increase in Debt - Dividends Paid
=75,000+125,000-80,000
=120,000
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 - correct answer ✔100,000 FV
5N
,5 I/Y
Cpt PMT = 18,097
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% - correct answer ✔SGR = ROE * ( 1 - Payout Ratio )
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. 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% - correct answer ✔20 N
1000 FV
25 PMT
(950) PV
Cpt I/Y = 2.83 * 2 = 5.66%
, 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 - correct answer ✔1 N
(75) PV
2 PMT
12 I/Y
Cpt FV = 82
8. A company just paid a dividend of 2.00 to its shareholder. It estimates that future growth will be at
5%. What is the value of the stock if you are looking for an 10% return on your investment?
a. 41.75
b. 42
c. 41
d. 39 - correct answer ✔Price = Projected Next Div / (Req Return - Growth Rate)
Next Dividend = Last Dividend x (1+growth rate)
= (2 * 1.05) / (0.10 - 0.05)
= 42
9. To create a fund for annual college scholarships of $100,000 that will last forever, how much must be
invested today if the interest rate is 5%?
a. 1,000,000
b. 5,000,000
c. 500,000
