3.Assume that you need to withdraw $1,000 from your savings account…
Question Answered step-by-step 3.Assume that you need to withdraw $1,000 from your savings account… 3. Assume that you need to withdraw $1,000 from your savings account every month for the next 5 years. The savings account earns 12% per year, compounded monthly. How much must you deposit today? A. $44,955.04 B. $3,604.78 C. $4,853.43 D. $60,000.00 E. none of the above 15. Which of the following is/are true of a Statement of Cash Flows? A. An increase in an asset is a source of funds. B. An increase in an asset is a use of funds. C. An increase in a liability is a source of funds. D. Both A and C are true. E. Both B and C are true. 20. Which of the following is/are true of a Statement of Cash Flows? A. The cash account should always be included as a source or use of funds. B. Retained earnings should be included as a source or use of funds. C. Instead of retained earnings, net income and dividends should be included as sources or uses of funds. D. Both A and C are true. E. None of the above is true. 21. Cash flows for two mutually exclusive projects are shown below.Project Omicron0 1 2 3 4|————— |————— |————— |—————- |-1000 575 625 750 1250 Project Beta0 1 2|————— |—————- |-500 275 325 What does it mean that the two projects are mutually exclusive? A. It means that the two projects have negative NPVs.B. It means that NSU Corporation can accept one or both of the projects.C. It means that NSU Corporation can accept Omicron or Beta, but not both.D. It means that Omicron and Beta will have the same IRRs.E. It means none of the above. 22. Refer to question #21. Omicron and Beta are examples of capital budgeting projects that have: A. size disparity. C. unequal lives. B. timing disparity. D. all of the above. E. none of the above. 23. Refer again to question #21. If Omicron and Beta were independent (rather than mutually exclusive), which of the following would be true? A. NSU Corporation could accept both Omicron and Beta. B. NSU Corporation could accept Omicron or Beta, but not both C. It would be necessary to adjust the cash flows using either the Replacement Chain Method or the Equivalent Annual Annuity (EAA) Method. D. Both A and C are true. E. Both B and C are true 24. The conflict between the goals of a firm’s owners and the goals of its non-owner managers is known as: A. the agency problem. B. being of little importance in most large U.S. firms. C. serious only when profits are declining. D. incompatibility. E. none of the above. 25. When is it appropriate to include sunk costs in the evaluation of a capital budgeting project? A. Include sunk costs when they are relatively large. B. Include sunk costs if doing so improves the project’s NPV. C. Include sunk costs if they are considered to be overhead costs. D. both A and B E. It is never appropriate to include sunk costs. 26. The wealth of the owners of a corporation is represented by:A. earnings per share.B. stock price.C. cash flow.D. profits.E. retained earnings 27. For a given present value (PV) calculation, which of the following is/are true? A. For any positive discount rate (required rate of return), the present value (PV) will always be greater than the future value (FV). B. For any positive discount rate (required rate of return), the present value (PV) will always be equal to the future value (FV).C. For any positive discount rate (required rate of return), the present value (PV) will always be less than the future value (FV).D. The discount rate (required rate of return) is unrelated to present value (PV).E. None of the above is true. 28. The value of any asset is dependent upon expected future cash flows and upon the investor’s required rate of return. All else being equal, a __________ required rate of return results in a _________ asset value. A. higher; higher B. higher; lower C. lower; higher D. lower; lower E. Both B and C are true. 29. You are using the Capital Asset Pricing Model (CAPM) to analyze a share of common stock. Your research tells you that the stock’s beta is ? = +1.54. What does this tell you about the stock that you are analyzing?A. The stock returns move together with the market overall.B. The stock returns move opposite from the market overall.C. The stock is riskier than the market overall.D. Both A and C are true of the stock.E. Both B and C are true of the stock. 30. Why must changes in depreciation expense be included in the operating cash flows of a capital budgeting project?A. Depreciation is a cash expense.B. All else equal, an increase in depreciation expense causes a decrease in taxes.C. All else equal, a decrease in depreciation expense causes a decrease in taxes.D. Changes in depreciation should not be included in the operating cash flows.E. Both A and B are true. 31. When calculating the “tax on sale” for a capital budgeting project:A. if the book value is greater than the sale price, the asset is being sold for a loss.B. if the book value is less than the sale price, the asset is being sold for a loss.C. if the asset is sold for a loss, then “tax on sale” is added.D. both A and C are true.E. both B and C are true. 32. ABC Company’s preferred stock pays an annual dividend of $50. If your required rate of return is 15% per year, what is the value of the preferred stock? A. $43.48 B. $3.33 C. $333.33 D. $57.50 E. none of the above 33. Refer to the preferred stock in #32 above. If ABC Company’s preferred stock is cumulative, which of the following statements is/are true? A. Since the preferred stock is cumulative, ABC Company can skip preferred dividends and never catch them up again. B. Since the preferred stock is cumulative, ABC Company can skip preferred dividends but must catch them up before paying coupon interest on its bonds. C. Since the preferred stock is cumulative, ABC Company can skip preferred dividends, but must catch them up before paying common stock dividends. D. Both A and B are true. E. None of the above is true. 34. If a company’s weighted average cost of capital (WACC) is greater than the internal rate of return (IRR) of a capital budgeting project, then: A. the project should be accepted. B. the project should be rejected. C. the project has a net present value (NPV) greater than zero. D. both A and C. E. both B and C. 35. If the net present value (NPV) of a capital budgeting project is greater than zero, then: A. the project’s value is less than its price. B. the project’s value is greater than its price. C. the project should be accepted. D. both A and C. E. both B and C. 36. For a capital budgeting project with a positive net present value (NPV), A. the project’s internal rate of return (IRR) is less than the WACC. B. the project’s internal rate of return (IRR) is greater than the WACC. C. the project’s internal rate of return (IRR) is equal to the WACC. D. the project’s internal rate of return (IRR) is equal to zero. E. none of the above is true. 37. When analyzing a capital budgeting expansion (new asset) project, which of the following should be included in the depreciable base? A. purchase new C. installation B. change in expenses D. both A and C E. all of the above 38. Which of the following is/are true for corporate bonds? A. If the investor’s required rate of return is greater than the bond’s coupon rate, then the value of the bond will be greater than par value. B. If the investor’s required rate of return is greater than the bond’s coupon rate, then the value of the bond will be less than par value. C. If the investor’s required rate of return is less than the bond’s coupon rate, then the value of the bond will be less than par value. D. Both A and C are true. E. None of the above is true. 39. Assume that you are estimating the value of a bond with the following characteristics: par value = $1,000 coupon rate = 7.25% per year payment schedule = semiannual maturity date = 5 ½ years required rate of return = 6.5% per year Since your required rate of return is 6.5% per year, which of the following will be true of the value of the bond?A. The value will be greater than par.B. The value will be equal to par.C. The value will be less than par.D. The value will be $1000.E. It is impossible to answer with the information given. 40. Assume that you are analyzing two independent capital budgeting projects – project AAA and project ZZZ – that both have positive net present values (NPV > 0). Which of the following is/are true of these two independent projects? A. Since both projects have positive net present values, they should both be accepted. B. Since both projects have positive net present value, they should both be rejected. C. Only the project with the higher net present value should be accepted. D. Only the project with the lower net present value should be accepted. E. None of the above statements is true. Business Finance FIN 3213 Share QuestionEmailCopy link Comments (0)
