WGU C214 Pre-Assessment Final
Exam Questions with Answers
best rated a plus
How can a private firm appropriately maximize shareholder value? - Answer By
making decisions that keep the control of the business with the owners
Why are American regulators focused on international investing in a global
marketplace? - Answer Because international investing in a global marketplace is
the concern of
American investors
What is the sustainable growth rate for the company? - Answer 75%
A machine will reach the end of its useful life in Year 5. The realizable salvage
value is expected to be
$50,000 with a book value of zero. The company's marginaltax rate is 34%.
What is the tax implication on the sale of the new machine at Year 5? - Answer
50,000 - 0 * .34 = 17,000
,Tax liabilities of $17,000
What is the acceptance criteria when using internal rate of return to evaluate a
project? - Answer Accept when the project return is greater than the required
return.
A company would like to invest in a capital budget project that will be worth
$500,000 in 40 years.
How much should the company invest today, assuming an average inflation rate
of 2% and a 10% annual
return? - Answer Step 1: FV needed for 500,000 inflation-adjusted value
500,000 PV
2 I/Y
40 N
CPT FV = 1,104,019
Step 2: PV needed to accumulate 1104019.8
, 40 N
10 I/Y
1104019.8 FV
CPT PV
24,393
A company has a market value of $500 million.
It has a market value of equity of $200 million, a market value of long-term debt
of $150 million, and a
market value of short-term debt of $150 million.
The cost of equity is 12%,the cost of long-term debtis 8%, and the cost of short-
term debtis 6%. The
marginal tax rate is 35%.
What is the weighted average pre-tax cost of capital (WACC) for this company? -
Answer This is tricky because it asks for the pre-tax cost.
Exam Questions with Answers
best rated a plus
How can a private firm appropriately maximize shareholder value? - Answer By
making decisions that keep the control of the business with the owners
Why are American regulators focused on international investing in a global
marketplace? - Answer Because international investing in a global marketplace is
the concern of
American investors
What is the sustainable growth rate for the company? - Answer 75%
A machine will reach the end of its useful life in Year 5. The realizable salvage
value is expected to be
$50,000 with a book value of zero. The company's marginaltax rate is 34%.
What is the tax implication on the sale of the new machine at Year 5? - Answer
50,000 - 0 * .34 = 17,000
,Tax liabilities of $17,000
What is the acceptance criteria when using internal rate of return to evaluate a
project? - Answer Accept when the project return is greater than the required
return.
A company would like to invest in a capital budget project that will be worth
$500,000 in 40 years.
How much should the company invest today, assuming an average inflation rate
of 2% and a 10% annual
return? - Answer Step 1: FV needed for 500,000 inflation-adjusted value
500,000 PV
2 I/Y
40 N
CPT FV = 1,104,019
Step 2: PV needed to accumulate 1104019.8
, 40 N
10 I/Y
1104019.8 FV
CPT PV
24,393
A company has a market value of $500 million.
It has a market value of equity of $200 million, a market value of long-term debt
of $150 million, and a
market value of short-term debt of $150 million.
The cost of equity is 12%,the cost of long-term debtis 8%, and the cost of short-
term debtis 6%. The
marginal tax rate is 35%.
What is the weighted average pre-tax cost of capital (WACC) for this company? -
Answer This is tricky because it asks for the pre-tax cost.
