Question
4. Business Cash Flows You have an opportunity to invest in a business with the following expected cash flows (in $000s): Initial Investment -$40,000 Year
4. Business Cash Flows
You have an opportunity to invest in a business with the following expected cash flows (in $000s):
| Initial Investment | -$40,000 |
| Year 1 | $4,000 |
| Year 2 | $8,000 |
| Year 3 | $24,000 |
| Year 4 | $12,000 |
If your opportunity cost is 2.50%, what is the present value (in $000s) of the cash flow stream from this business over 4 years?
| a. | $4,049.51 |
| b. | $4,333.27 |
| c. | $4,557.76 |
| d. | $4,674.75 |
| e. | $5,160.05 |
____ 5. Refer to the Business Cash Flow scenario above.
What is the future value (in $000s) of the cash flow stream above from this business over 4 years?
| a. | $4,049.51 |
| b. | $4,333.27 |
| c. | $4,557.76 |
| d. | $4,674.75 |
| e. | $5,160.05 |
College Savings Scenario
A couple's first child has just started kindergarten, and they have decided to save money for her college education. They have $1,032 invested so far. They are planning to invest an additional $300 each month for the next 13 years.
____ 6. If their investments have a return of 7.0%, compounded monthly, how much will they have at the end of 13 years, if they start today?
| a. | $78,556 |
| b. | $80,978 |
| c. | $79,000 |
| d. | $77,231 |
| e. | $81,461 |
____ 7. Refer to the College Savings scenario above.
If their investments have a return of 7.0%, compounded monthly, how much will they have at the end of 13 years, if they start a month from now?
| a. | $78,556 |
| b. | $80,978 |
| c. | $79,000 |
| d. | $77,231 |
| e. | $81,461 |
____ 8. Over the past 75 years, we have observed that investments with the highest average annual returns also tend to have the highest standard deviations of their annual returns. This observation supports the notion that there is a positive correlation between risk and return. Which of the following lists correctly ranks investments from lowest to highest returns and risk?
| a. | Long-term corporate bonds, large-company stocks, small-company stocks, U.S. Treasury bills |
| b. | U.S. Treasury bills, long-term corporate bonds, large-company stocks, small-company stocks |
| c. | U.S. Treasury bills, long-term corporate bonds, small-company stocks, large-company stocks |
| d. | Small-company stocks, long-term corporate bonds, large-company stocks, U.S. Treasury bills |
| e. | Small-company stocks, large-company stocks, long-term corporate bonds, U.S. Treasury bills |
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Information Technology Auditing
Authors: James A. Hall
4th edition
1133949886, 978-1305445154, 1305445155, 978-1133949886
