6.Which one of the following statements concerning net present value is correct?

An investment should be accepted if, and only if, the NPV is exactly equal to zero.

An investment with greater discounted cash inflows than discounted cash outflows will always have a positive NPV.

An investment should be accepted if the NPV is negative and rejected if it is positive.

An investment should be accepted only if the PI is equal to the initial cash flow.

Any project that has negative cash flows for any time period after the initial investment should be rejected.

7.Which of these are arguments that support the position that the efficient market hypothesis fails in actual application?

I. Arbitrage may involve risk associated with illegal activities II. Investors may be irrational III. Irrationalities are caused by system errors IV. Irrationality may be related across exchanges

I and II only

I, II, and IV only

II only

I, II, III, and IV

II, III, and IV only

8.

The Java House Inc. reported the following results at the end of 2016. What was the cash flow to the firms creditors in 2016?

$250

$200

$750

$350

$500

Toy World is considering a project that provides an annual cash inflow of $150,000 for the first six years and $200,000 per year for Year 7 through Year 9. The project requires an initial investment of $1 million and the firms required return for this project is 10 percent. What is the internal rate of return of the project?

9.44 percent

11.36 percent

8.41 percent

12.44 percent

10.51 percent

LIAS Inc. bonds have a face value of $1,000, mature in 10 years, pay interest semiannually, and have a coupon rate of 9.0 percent. If the market rate of return is 6.0 percent, what is the current price of this bond?

$721

$828

$955

$1,223

$1,056

2016 Income Statement (S in thousand) Sales Cost of goods sold Other expenses Depreciation Other income EBIT Interest Taxable income Current taxes Deferred taxes Net income 10,000 7,000 500 1,000 100 1,600 750 850 255 25 570 2015 & 2016 Balance Sheets (S in thousand) 2015 2016 2016 Cash Accounts receivables6,5007,000 Inventory Total 5,500 100 3,000 5,000 5,100Accounts payable 6,000 125 45,00045,500 2,925 3,550 57,00058,100 10,500 10,500 Deferred taxes 22,000 22,600Long-term debt Common stock Net fixed assets Total assets 35.00035,500Retained earnings 57,00058,100Total liabilities & equity 3,400