Q: Which of the following is the correct formula for Free Cash Flow (FCF)?

$FCF = [EBIT \times (1 - T) + Depreciation] - [Capital\ Expenditures + Change\ in\ NOWC]$

Question 1

Which of the following is NOT an advantage of the corporate form of organization compared to a sole proprietorship?

Accepted Answer

Double taxation of earnings

Question 2

According to the stakeholder view of corporate governance, which of the following is considered a stakeholder of a corporation?

Accepted Answer

Shareholders, employees, customers, suppliers, and the public

Question 3

Which formula correctly calculates the present value (PV) of a single future cash flow?

Accepted Answer

$PV = \frac{FV}{(1 + r)^N}$

Question 4

A company reported net income of $350 million. Its retained earnings increased from $500 million to $650 million over the year. How much did the company pay in dividends?

Accepted Answer

$200$ million

Question 5

Moose Corp has an EBIT of $20,000,000, interest expense of $4,000,000, and a tax rate of 20%. What is its net income?

Accepted Answer

$12,800,000$

Question 6

You invest $2,000 in a bank account earning 6% annual interest, compounded annually. How much will you have after 5 years?

Accepted Answer

$2,676.45$

Question 7

If you want $20,000 in 4 years and can earn 12% annual interest, how much do you need to invest today?

Accepted Answer

$12,710.36$

Question 8

In 2002, Argentina had an APR of 90% compounded daily. What is the effective annual rate (EAR)?

Accepted Answer

$145.68\%$

Question 9

You want to accumulate $10,000 in 3 years by making monthly payments into an account earning 9% annual interest, compounded monthly. What should your monthly payment be?

Accepted Answer

$243.00$

Question 10

Which financial statement reconciles the beginning and ending balances of stockholders’ equity?

Accepted Answer

Statement of Stockholders’ Equity

Question 11

A stock’s actual market price is below its intrinsic value. What is a likely consequence?

Accepted Answer

The company may become a target for a hostile takeover

Question 12

You are considering buying 200 shares of Kforce Inc. (KFRC). The ask price is $27.25 and only 100 shares are available at this price. What is the minimum you will pay for 200 shares, assuming you buy at the ask?

Accepted Answer

$5,450$

Question 13

Which formula is used to calculate the effective annual rate (EAR) given an APR compounded $m$ times per year?

Accepted Answer

$EAR = (1 + \frac{APR}{m})^m - 1$

Question 14

Which of the following best describes a direct transfer of capital?

Accepted Answer

An individual loans money directly to a small business

Question 15

Which of the following is the correct formula for Free Cash Flow (FCF)?

Accepted Answer

$FCF = [EBIT 	imes (1 - T) + Depreciation] - [Capital\ Expenditures + Change\ in\ NOWC]$

Question 16

Which of the following scenarios is an example of an indirect transfer through a financial intermediary?

Accepted Answer

A pension fund collects money from participants and invests in various markets

Question 17

Which financial statement provides details about a company’s cash inflows and outflows during the year?

Accepted Answer

Statement of Cash Flows

Question 18

You win a lottery and can choose between $2,500,000 today or a 120-month annuity of $40,000 per month (first payment today). What is the annual interest rate built into the annuity?

Accepted Answer

$15.11\%$

Question 19

Elizabeth wants to withdraw $100,000 per year for 35 years after retiring in 25 years, and have $5,000,000 left at the end. If her fund earns 8% and she has $91,450 now, how much must she deposit at the end of each of the next 25 years?

Accepted Answer

$12,000.89$

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