I. Choose the correct answer. (15 Marks) 1. The total amount due at…
Question Answered step-by-step I. Choose the correct answer. (15 Marks) 1. The total amount due at… I. Choose the correct answer. (15 Marks) 1. The total amount due at the end of the investment is called the —————– . (A) Future Value (B) Present Value (C) Time Value (D) Annunity Due2. The ——————- of an investment is the present value of the expected cash flows, less the cost of the investment. (A) NPV (B) IRR (C) Payback Period (D) ROE 3. ———————– is the time it takes to recover its initial investment.(A) NPV (B) IRR (C) Payback Period (D) ROE 4. ——————— refers to the original sale of securities by governments and corporations.(A) Primary market (B) Secondary market (C) Capital market(D) Money market5. —————– is a measure of profit per dollar of assets.(A) Dividend (B) EPS (C) ROE (D) ROA6. ——————— refers to an infinite series of equal payments, that is, it is an annuity that lasts forever.(A) Perpeturity (B) Annurity (C) NPV (D) IRR 7. ——————- is a technique that expresses each financial statement item as a percent of a base amount. (A) Ratio analysis (B) Vertical analysis (C) Break-even analysis (D) Horizontal analysis8. —————— Measures the ability of the company to survive over a long period of time.(A) Liquidity (B) Profitability (C) Solvency (D) Efficiency 9. The term —————— refers to the original amount borrowed or invested.(A) simple interest (B) principal (C) compound interest (D) future value 10. The term ——————— is also referred to as the discount rate, the cost of capital, the opportunity cost of capital, and the required return.(A) interest rate (B) time value of money (C) compounding (D) present value II. Write short notes on any four of the following: (a) Debt Capital Vs Equity Capital (b) Common Stock Vs Preferred Stock (c) Primary Market Vs Secondary Market (d) NPV Vs IRR (10 Marks)III. The company that you are working in has three projects in hand which it can consider. Table 1 depicts the cash flows of these three different projects. They are Project Alpha, Beta and Charlie. The cash flows for the next five years are provided in Table 1. Table 1: Cash Flows of Three Different Projects PeriodProjectAlpha ($)ProjectBeta ($)ProjectCharlie ($)Year 0(30,000)(30,000)(30,000)Year 115,00015,00015,000Year 215,00016,0000Year 315,00010,00015,000Year 415,00012,0000Year 515,00015,00018,000 The firm’s cost of capital is 12 percent for each project.The questions to be answered are: Calculate the payback period for each project.Calculate NPV for each project.Which are the projects that are considered as viable in accordance to the NPV rule?Calculate profitability index for each project.Calculate the IRR for each project.The company only has funds to finance two of the projects. Which two projects should be financed? Business Finance FINANCE 251 Share QuestionEmailCopy link Comments (0)
