Here are the 40 Questions. Have a total of 1:25 mins

Question 1 (3 points) 1 A typical loan arrangement requires the same monthly payment at the end of each month for a certain period. This type of cash flow stream is called _____. Question 1 options: a perpetuity. an ordinary annuity. an annuity due. multiple uneven cash flows. Save Question 2 (3 points) 2 If you deposit $7,000 at the end of each year for the next 24 years into an account paying 7.7% interest, how much will you have in the account in 24 years? Question 2 options: 1) $448,334 2) $255,550 3) $672,500 4) $336,250 Save Question 3 (3 points) 3 You need to borrow $64,000 to buy an SUV. The current loan rate is 6.5% compounded monthly and you want to pay the loan off in equal monthly payments over 6 years. How much will your monthly payment be? Question 3 options: 1) $602.47 2) $1,075.84 3) $1,366.31 4) $559.43 Save Question 4 (3 points) 4 What is the present value of a 15-year ordinary annuity with annual payments of $10,000, if the discount rate is 5.7 percent? Round it to two decimal places, and do not include the $ sign or comma, e.g., 123456.45. Your Answer: Question 4 options: Answer Save Question 5 (3 points) 5 Suppose you borrow $24,000 from your bank to buy a car. You agree to pay $463.25 per month for 60 months. What is the APR for the loan? Question 5 options: 1) 7.85% 2) 7.28% 3) 6.23% 4) 5.93% Save Question 6 (3 points) 6 Suppose you have just bought a 18-year, 6% semiannual coupon bond. Your purchasing price of the bond implies that the current YTM is 8%. Put the total number of coupon payments during the 18 year period in box 1 below, the dollar amount of each coupon payment in box 2 (do not include the $ sign, and in box 3, put the dollar amount that you will receive at maturity (again do not include the $ sign). Question 6 options: Blank # 1 Blank # 2 Blank # 3 Save Question 7 (3 points) 7 The value of any investment is found by Question 7 options: computing the net cash flows that investment generates computing the present value of the future cash flows the investment will generate computing the future value of all cash flows determining the opportunity cost of the investment Save Question 8 (3 points) 8 Bat Company's BBB 10% bonds have a face value of $1,000 and pay interest semi-annually. They mature in 15 years, and their YTM is currently 8%. What is the price of a Bat Company Bond? Question 8 options: 1) $1,172.92 2) $572.67 3) $1,121.80 4) $556.98 Save Question 9 (3 points) 9 A stock just paid a dividend of $1.45, has a required rate of return of 16%, and a constant dividend growth rate of 4%. What price should this stock be selling for? Question 9 options: $12.57 $6.41 $15.71 $9.68 Save Question 10 (3 points) 10 Colstate Corp. has just paid a dividend (D0) of $3.3 and expects to grow at a constant rate of 6 percent. If your required rate of return is 9 percent, what is the expected price of the stock three years from now (P3)? Round it to two decimal places, e.g., 12.95. Your Answer: Question 10 options: Answer Save Question 11 (3 points) 11 A firm has an issue of $1000 par value bonds with a 6 percent coupon. The issue pays interest annually and has 14 years remaining to its maturity date. If bonds of the same risk are currently earning 9.3 percent, what is the price of the bond? Round it two decimial places, and do not include the $ sign, e.g., 935.67. Your Answer: Question 11 options: Answer Save Question 12 (3 points) 12 Which of the followings is not true? Question 12 options: Common stock represents ownership and thus has voting rights. Common stock dividends are tax-deductable. Stockholders elect the members of the board of directors Common stock has no maturity. Save Question 13 (3 points) 13 You have the following information on the cash flows of a project M. Compute the NPV for the project, if the cost of capital is 14%. Year Project M 0 ($58,000) 1 17,000 2 17,000 3 21,000 4 21,000 5 26,000 Question 13 options: $25,936 $12,433 $32,892 $10,104 Save Question 14 (3 points) 14 You have the following information on a project's cash flows. The project's required rate is 12%. Year Cash flows 0 -$86,000 1 23,000 2 28,000 3 38,000 4 58,000 The project's profitablity index is ____ . Round it to two decimal places. Your Answer: Question 14 options: Answer Save Question 15 (3 points) 15 A company is evaluating a new 5-year project. A cash flows analysis on the project reveals that during the first year, the project has projected sales of $131,000, costs of $76,300, and depreciation of $6,600. The tax rate is 35 percent. Calculate operating cash flow for the year. (Do not include the dollar signs ($). Round your answers to the nearest whole dollar amount. (e.g., 32)) Your Answer: Question 15 options: Answer Save Question 16 (3 points) 16 Mountain Tops Inc. currently sells 9,000 motor homes per year at $60,000 each. The company wants to introduce a new portable camper to expand its product lines; upon the introduction, it expects to sell 15,000 of these campers per year at $14,000 each. However, due to this new product introduction, the sales of its motor homes would decline by 2,700 units per year. What should be the amount to use as the annual sales figure when evaluating this camper project? Round it to a whole dollar. Your Answer: Question 16 options: Answer Save Question 17 (3 points) 17 Kelly's Corner Bakery purchased a lot in Columbus City five years ago at a cost of $740,000. Today, that lot has a market value of $960,000. At the time of the purchase, the company spent $55,000 to level the lot and another $5,800 to install storm drains. The company now wants to build a new facility on that site. The building cost is estimated at $1,450,000. The amount should be used as the initial cash outflow for this project is $____. Put a positive dollar amount, and round it to a whole dollar, e.g., 123456. Your Answer: Question 17 options: Answer Save Question 18 (3 points) 18 Bernie's Beverages purchased some fixed assets classified as 5-year property for MACRS. The assets cost $110,000. The book value of the asset at year 3 will be $____. Round it to a whole dollar. MACRS 5-year property Year Rate 1 20.00% 2 32.00% 3 19.20% 4 11.52% 5 11.52% 6 5.76% Your Answer: Question 18 options: Answer Save Question 19 (3 points) 19 Which one of the following statements about the payback method is not true? Question 19 options: The payback method is simple and easy to understand One of its strengths is that it considers entire cash flows. The payback method represents the number of years it takes a project to recover its initial investment. There is no economic rational that links the payback method to shareholder wealth maximization. Save Question 20 (3 points) 20 A company estimates that its required rate of return is 12 percent. Which of the following projects should the company accept, if all these projects are independent? Question 20 options: Project A requires an initial investment of $2,000,000 and generates a NPV of $200. Project B has an IRR of 11.5 percent. Project C requires an initial investment of $1,000,000 and generates an IRR of 11 percent. None of the above. Save Question 21 (3 points) 21 Which one of the followings is not true about capital budgeting? Question 21 options: It involves identifying projects that will add to the firm's value. It involves large capital investments. Capital budgeting decisions can be easily reversed at any time. It allows the firm's management to analyze potential business opportunities and decide on which ones to undertake. Save Question 22 (3 points) 22 A project has an up-front cost of $1,000,000. The project's cost of capital is 12 percent and its net present value is $10. Which of the following statements is not true? Question 22 options: The project should be rejected since its NPV of $10 is so small relative to the project cost. The project's internal rate of return is greater than 12 percent, its cost of capital. The project should be accepted since it has a positive NPV, however small it is. Accepting the project will increase the firm value of the company. Save Question 23 (3 points) 23 You have the following information on the cash flows of a project. What is the IRR of the project? Year Project M 0 ($31,000) 1 17,000 2 17,000 3 21,000 Question 23 options: 33.7% 18.2% 12.9% 28.9% Save Question 24 (3 points) 24 When analyzing a potential project, depreciation costs become important because _______. Question 24 options: depreciation costs themselves are cash flows. depreciation costs allow firms to allocate a large expenditure over a long period of time. depreciation cost saves income taxes, which is a relevant cash flow. depreciation costs increases the project costs over a longer period of time. Save Question 25 (3 points) 25 You have the following information on a project's cash flows. What is the payback period? Year Cash flows 0 -100,000 1 25,000 2 25,000 3 30,000 4 35,000 5 55,000 Question 25 options: 3.35 3.57 3.86 4.1 Save Question 26 (3 points) 26 Suppose a capital project has a 17% IRR. Which of the followings is most true? Question 26 options: The project should be accepted if the required return is 18% If the required return is 17%, the project should have a negative NPV. The project is expected to have a 17% annual rate of return on investment during its life. The project should be rejected if the IRR is less than its profit margin based on the income statement. Save Question 27 (3 points) 27 Columbus Prime Properties, Inc owns a two-story building in the uptown Columbus, GA. The company has a tenant in the first floor. The company is considering an offer from a potential tenant for an annual lease on the second floor. If the company decides to lease the second floor, it expects to incur, among other things, a total of $6,000 annual maintenance costs for the entire building, which currently costs $5,000 a year with only one tenant in the first floor. How much of the maintenance costs should the company consider in the capital budgeting analysis on the new lease? Question 27 options: $6,000 $3,000 $1,000 $0 Save Question 28 (3 points) 28 When evaluating potential projects, which of the following factors should be incorporated as part of a project's estimated cash flows? Question 28 options: Any sunk costs that were incurred in the past prior to considering the proposed project. Any opportunity costs that are incurred if the project is undertaken. Any incremental after-tax cash flows associated with the project being considered. Statements b and c are correct. Save Question 29 (3 points) 29 Speck Inc. purchased a tract of land 3 years ago at a cost of $280,000. Speck is now considering building a new manufacturing plant on the land. A recent appraisal put the land's value at $435,000, for which the company is assumed to be able to sell it if necessary. What amount relative to the land (ignoring any tax implications) should be included in the capital budgeting analysis on whether to accept or reject the project? Question 29 options: Zero $280,000 $435,000 $280,000 plus interest for three years Save Question 30 (3 points) 30 Wonder Shampoo, Inc. is considering launching a new shampoo product in the coming year. The new shampoo project requires $7.4 million capital investments at time zero, which will be depreciated based on the 3-year MACRS shown below. This project is expected to generate new sales of $7 million each year with $4 million cost a year. What is the operating cash flow for year 1 if the firm's tax rate is 40%? 3-Year MACRS Year Percentage 1 33% 2 45% 3 15% 4 7% total 100% Question 30 options: 1) $1.555 million. 2) $1.972 million. 3) $2.777 million. 4) $3.527 million. Save Question 31 (3 points) 31 Strong Steel, Inc. is considering launching a new product in the coming year. This new 4-year project will cost $6,500,000 of capital investments at time zero, which will be depreciated over the 4 year period based on the 3-year MACRS. Upon the project termination in year 4, the company expects to sell the assets for $580,000 salvage value. The firm has a 30 percent tax rate. What is the after-tax salvage value of the asset at year 4? Question 31 options: $304,500 $280,140 $507,500 $406,000 Save Question 32 (3 points) 32 Amazing Tires is considering opening a new facility to meet demand for the next 5 years. It will require initial capital expenditures of $5 million at time zero to open the facility. After 5 years the facility will be sold, and the after tax salvage value is expected to be $1.1 million. The initial investment in NOWC will be $770,000. Amazing expects to recover its NOWC investments at the end of the project. Operating cash flows of $1.2 million per year are expected for each year of the 5 year project. What is the Total Cash flow for the last year of the project (Year 5)? Question 32 options: $1,995,500 $2,333,200 $4,144,500 $3,070,000 Save Question 33 (3 points) 33 Given the following probability distribution, what is the expected return of security J? (Expresss your answer in percentage and round it two decimal places, but do not include the percent sign, %, i.e., 4.65) StatePi rJ 1 0.2 7% 2 0.6 15% 3 0.2 17% Your Answer: Question 33 options: Answer Save Question 34 (3 points) 34 Jason purchased a stock for $48 one year ago. The stock is now worth $50. During the year, the stock paid a dividend of $3.50. What is the percentage total holding period return to Jason from owning the stock? (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16)) Your Answer: Question 34 options: Answer Save Question 35 (3 points) 35 Which of the following asset classes has the lowest risk/return combination? Question 35 options: Short-term Treasury securities Large company stock portfolio. Long-term corporate bonds. Small stock portfolio. Save Question 36 (3 points) 36 Which of the followings are necessary components in estimating a project's relevant cash flows? I. Depreciation tax shield II. Capital expenditures III. Changes in working capital IV. Interest expense on new debt used to finance the project Question 36 options: I, II, III and IV I and III only I and II only I, II and III only Save Question 37 (3 points) 37 A stock has a beta of 1.0, the expected return on the market is 12 percent, and the risk-free rate is 5 percent. The expected return on this stock must be ______ percent. (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16)) Your Answer: Question 37 options: Answer Save Question 38 (3 points) 38 The principle of diversification tells us that: Question 38 options: concentrating an investment in two or three large stocks will eliminate all of your risk. spreading an investment across five diverse companies will not lower your overall risk at all. spreading an investment across many diverse assets will eliminate all of your risk. spreading an investment across many diverse assets will eliminate some of your risk. Save Question 39 (3 points) 39 In the Capital Asset Pricing Model (CAPM), beta measures Question 39 options: the firmrisk of an asset. the diversifiable risk of an asset the standard deviation of a single asset. the systematic risk of an asset. Save Question 40 (3 points) 40 You are contemplating a $100,000 investment portfolio containing three different assets. You plan to invest $20,000, $50,000, and $30,000 in assets A, B, and C, respectively. A, B, and C have expected annual returns of 15%, 17%, and 11%, respectively. What is the expected return of this portfolio? Your Answer: Question 40 options: Answer Save