WGU D362 CORPORATE FINANCE
EXAM 2024-2025 WITH ACTUAL
CORRECT QUESTIONS AND VERIFIED
DETAILED ANSWERS |FREQUENTLY
TESTED QUESTIONS AND SOLUTIONS
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independent Projects
Projects whose cash flows are unrelated
mutually exclusive projects
a set of projects where only one can be accepted
Contingent Projects
projects whose acceptance depends on the acceptance of other projects
Cost of Capital
the minimum required return on a new investment
Capital budgeting techniques
1. TMV
2. IRR
3. PBP
Payback period
the amount of time required for an investment to generate cash flows sufficient to recover its initial cost
Discounted Payback Period
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,Calculates the time it takes to get back invested capital in present value terms;
Alleviates the problem of the regular payback period by incorporating The time value of money;
Conventional Cash Flow
a cash flow pattern consisting of an initial cash outflow that is followed by one or more cash inflows
Finance Balance Sheet
A balance sheet that is based on market values of expected cash flows
Steps to value an asset
The loan Pricing Model
Kl = PR + DRP + MAT
Term Loan
A business loan with a maturity greater than 1 year
Shelf Registration
A type of SEC registration that allows firms to register to sell securities over a two-year period and,
during that time, take the securities "off the shelf" and sell them as needed
General Cash Offer (Procedure)
1. Type of security and amount to be raised
2. Approvals
3. Registration
4. Offer Price
5. Closing
General Cash Offer
Sale of securities open to all investors by an already-public company
Cost of an IPO
1. Underwriting
2. Out of pocket expense
3. Underpricing
Underwriting syndicate
A group of underwriters that join forces to reduce underwriting risk
Best Effort Underwriting
underwriting agreement in which the underwriter does not agree to purchase the securities at a
particular price but promises only to make its "best effort" to sell as much of the issue as possible above
a certain price
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, Firm Commitment Underwriting
the type of underwriting in which the underwriter buys the entire issue, assuming full financial
responsibility for any unsold shares
Sarbanes-Oxley Act
1. Reduce agency costs in corporations
2. Restoring ethical conduct within the business
3. Improving the integrity of the accounting reporting systems within the firms.
Types of ethical conflicts
1. Agency Costs
2. Conflicts of Interest
3. Informational Asymmetry
Capital Markets
Markets that trade debt (bonds) and equity (stock) instruments with maturities of more than one year
Net working capital
current assets - current liabilities
Sole Proprietorship
a business owned and managed by a single individual
Partnership
a business organization owned by two or more persons who agree on a specific division of
responsibilities and profits
LLP/LLC
A hybrid organization that offers the same liability protection as a corporation but may be taxed as
either a partnership or a corporation.
Sarbanes-Oxley Act (Overarching Strategies)
1. Ensure greater board independence
2. Establish internal accounting controls
3. Establish compliance programs
4. Establish an ethics program
5. Expand the audit committee's oversight powers
Productive Assets
the long-term tangible and intangible assets a firm uses to generate cash flows
Residual Cash Flows
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