Page 1

FIN 370T Assignment Week 1 Apply Exercise(All Possible Questions/Answers)

For more classes visit www.snaptutorial.com FIN 370T ASSIGNMENT Week 1 Apply: Week 1 Exercise Review the Week 1 “Knowledge Check” in Connect® in preparation for this Assignment . Complete the Week 1 “Exercise” in Connect®. Note: You have only one attempt available to complete this Assignment . Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date. Materials Learn: McGraw-Hill Connect® Access Maximizing owners’ equity value means carefully considering all of the following EXCEPT Multiple Choice how best to return the profits from those projects to the owners over time. which projects to invest in.


how to best bring additional funds into the firm. how best to increase the firm’s risk.

Not all cash a company generates will be returned to the investors. Which of the following will NOT reduce the amount of capital returned to the investors? Multiple Choice taxes dividends retained earnings


As individual legal entities, corporations assume liability for their own debts, so the shareholders hold Multiple Choice unlimited liability. shared liability. joint liability. only limited liability.

For corporations, maximizing the value of owner’s equity can also be stated as Multiple Choice maximizing the stock price. maximizing earnings per share. maximizing retained earnings. maximizing net income.


Which of the following is not an impact of the slowdown occurring in China’s economy? Multiple Choice falling community prices lower demand in materials such as steel, iron ore, and copper real estate market declining in Sydney, Australia money going out of Manhattan, New York

What is the debt ratio for a firm with an equity multiplier of 3.5? Multiple Choice 58.51 percent 66.25 percent 44.09 percent 71.43 percent


Which of the following refer to ratios that measure the relationship between a firm’s liquid (or current) assets and its current liabilities? Multiple Choice internal-growth market value liquidity cross-section

For publicly traded firms, which of these ratios measure what investors think of the company’s future performance and risk? Multiple Choice profitability ratios


liquidity ratios price value ratios market value ratios

Which of the following is the maximum growth rate that can be achieved by financing asset growth with new debt and retained earnings? Multiple Choice sustainable growth rate weighted growth rate internal growth rate retained earnings growth rate

To interpret financial ratios, managers, analysts, and investors use which of the following type of benchmarks?


Multiple Choice time series analysis time-industry analysis competitive analysis cross-industry analysis ********************************

FIN 370T Assignment Week 1 Apply: Finance and Financial Statement Analysis Homework(All Possible Questions/Answers)

For more classes visit www.snaptutorial.com FIN 370T ASSIGNMENT Week 1 Apply: Finance and Financial Statement Analysis Homework Review the Week 1 “Practice: Finance and Financial Statement Analysis Quiz” in Connect®. Complete the Week 1 “Apply: Finance and Financial Statement Analysis Homework” in Connect®.


Note: You have only one attempt available to complete this Assignment . Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.

Which of the following is the firm’s highest-level financial manager? Multiple Choice • chief executive officer • corporate governance • chief financial officer • board of directors


Which of these must effectively distribute capital between investors and companies? Multiple Choice • companies • individuals • international investors • financial institutions

Which of the following statements is correct? Multiple Choice • Financial managers double-check the accountant’s statements.


• Accountants are focused on what happened in the past. • Both accountants and financial managers use total quality management systems to standardize data. • Financial managers are focused on what happened in the past.

This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow. Multiple Choice • investment • real asset • financial asset


• financial markets

The portion of a company’s profits that are kept by the company rather than distributed to the stockholders as cash dividends is referred to as Multiple Choice • institutional investment. • restricted earnings. • venture capital. • retained earnings.


A potential future negative impact to value and/or cash flows is often discussed in terms of probability of loss and the expected magnitude of the loss. This is called Multiple Choice • risk. • options. • standard deviation. • coefficient of variation.


Which of the following is defined as a group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations? Multiple Choice • market instruments • financial markets • asset classes • investments

What is the difference in perspective between finance and accounting? Multiple Choice • ownership


• timing • liability • risk

This subarea of finance is important for adapting to the global economy. Multiple Choice • financial management • financial institutions and markets •


investments • international finance

For corporations, maximizing the value of owner’s equity can also be stated as Multiple Choice • maximizing net income. • maximizing retained earnings. • maximizing the stock price. • maximizing earnings per share.


Which of the following is NOT a function of the board of directors? Multiple Choice • evaluate the CEO • design compensation contracts for the CEO • provide reports to the auditors • hire the CEO


This is the set of laws, policies, incentives, and monitors designed to handle the issues arising from the separation of ownership and control. Multiple Choice • corporate governance • defined benefit plan • invisible hand • agency theory

Which of the following statements is incorrect? Multiple Choice •


Most sole proprietors raise money by borrowing from banks. • S corporations are considered a hybrid organization. • An advantage of sole proprietorships is that the owner has complete control. • Partnerships have unlimited liability.

Agency problems exist in which forms of business ownership? Multiple Choice • partnership • sole proprietorship •


corporation • S corporation

An angel investor differs from a venture capitalist because of the Multiple Choice • investment time frame. • voting rights. • type of investment. • size of investment.


Which statement is incorrect regarding hybrid organizations? Multiple Choice • They offer single taxation. • They offer limited risk to the owners. • They offer the same type of control as a sole proprietorship. • All of these choices are correct.


From a taxation perspective, the form of business organization with the highest business level taxes is the Multiple Choice • S corporation. • corporation. • sole proprietorship. • partnership.

Corporate stakeholders include all of the following EXCEPT Multiple Choice •


employees. • suppliers. • shareholders. • auditors.

From the perspective of ownership risk, the best form of business organization is the Multiple Choice • sole proprietorship. • partnership. •


corporation. • S corporation.

Which of the following is NOT considered a hybrid organization? Multiple Choice • all of these choices are correct. • limited partnership • S corporation • limited liability company • limited liability partnership


Which of these is the system of incentives and monitors that tries to overcome the agency problem? Multiple Choice • corporate Governance • checks and Balances • Security Exchange Commission • board of Directors


When determining a form of business organization, all of the following are considered EXCEPT Multiple Choice • the physical location of the business. • who owns the firm. • the tax ramifications. • the owners’ risks.

All of the following are an example of a fiduciary relationship EXCEPT Multiple Choice •


a financial advisor advises her clients. • the shareholder elects a board member. • a bank employee manages deposits. • a CEO manages the firm.

Restricted stock is Multiple Choice • a special type of stock that can be converted into corporate bonds after a specific amount of time has elapsed. • a special type of stock that is not transferable from the current holder to others until specific conditions are satisfied.


• a special type of stock that is a result of offering an employee stock ownership plan.

Which of the following refer to ratios that measure the relationship between a firm’s liquid (or current) assets and its current liabilities? Multiple Choice • liquidity • internal-growth • cross-section • market value


Which of the following measures the number of days accounts receivable are held before the firm collects cash from the sale? Multiple Choice • accounts receivable turnover • average payment period • accounts payable turnover • average collection period

Which ratio measures the number of dollars of operating earnings available to meet the firm’s interest dollars and other fixed charges?


Multiple Choice • fixed-charge coverage ratio • basic earning power • times interest earned • ROA

Which ratio measures the operating return on the firm’s assets irrespective of financial leverage and taxes? Multiple Choice • profit margin •


basic earning power ratio • operating leverage return • return on assets

A firm has EBIT of $1,000,000 and depreciation expense of $400,000. Fixed charges total $600,000. Interest expense totals $70,000. What is the firm’s fixed-charge coverage ratio? Multiple Choice • 2.45 times • 1.67 times • 1.00 times •


2.33 times

Which of these ratios measure the extent to which the firm uses debt (or financial leverage) versus equity to finance its assets? Multiple Choice • debt management ratios • financial ratios • liquidity ratios • equity ratios


A strong liquidity position means that Multiple Choice • the firm is able to meet its short-term obligations. • the firm pays out a large portion of its net income in the form of dividends. • the firm uses little debt in its capital structure. • the firm pays its creditors on time.

Which type of ratio measures the dollars of current assets available to pay each dollar of current liabilities? rev: 08_14_2018_QC_CS-133354 Multiple Choice


• internal-growth • current • cross-section • quick or acid-test

A firm has EBIT of $300,000 and depreciation expense of $12,000. Fixed charges total $44,000. Interest expense totals $7,000. What is the firm’s cash coverage ratio? Multiple Choice • 7.09 times • 3.76 times


• 7.25 times • 4.91 times Incorrect

Which of the following measures the number of dollars of sales produced per dollar of fixed assets? Multiple Choice • fixed asset to working capital ratio • fixed asset management ratio • sales to working capital ratio •


fixed asset turnover ratio

The term “capital structure” refers to Multiple Choice • the amount of current versus fixed assets on the balance sheet. • the amount of long-term debt versus equity on the balance sheet. • the amount of current versus long-term debt on the balance sheet.


A firm reported year-end cost of goods sold of $10 million. It listed $2 million of inventory on its balance sheet. Using a 365-day year, how many days did the firm’s inventory stay on the premises? Multiple Choice • 73 days • 2 days • 20 days • 18.25 days

Tops N Bottoms Corp. reported sales for 2018 of $50 million. Tops N Bottoms listed $4 million of inventory on its balance sheet. Using a 365day year, how many days did Tops N Bottoms’ inventory stay on the premises? How many times per year did Tops N Bottoms’ inventory turn over? Multiple Choice


• 29.2 days, 0.0345 times, respectively • 29.2 days, 12.5 times, respectively • 0.08 days, 12.5 times, respectively • 12.5 days, 29.2 times, respectively

Which ratio measures how many days inventory is held before the final product is sold? Multiple Choice •


total asset turnover • inventory turnover • days’ sales in inventory • inventory intensity ratio

Which ratio measures the number of dollars of operating earnings available to meet each dollar of interest obligations on the firm’s debt? Multiple Choice • times interest earned • ROA


• cash coverage ratio • fixed-charge coverage ratio

You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $100 million in assets with $90 million in debt and $10 million in equity. LotsofEquity, Inc. finances its $100 million in assets with $10 million in debt and $90 million in equity. What are the debt ratio, equity multiplier, and debt-to-equity ratio for the two firms? Multiple Choice • LotsofDebt: 90 percent, 10 times, 9 times, respectively; and LotsofEquity: 10 percent, 1.11 times, 0.1111 times, respectively • LotsofDebt: 10 percent, 1.11 times, 0.1111 times, respectively; and LotsofEquity: 90 percent, 10 times, 9 times, respectively


• LotsofDebt: 90 percent, 1.11 times, 0.1111 times, respectively; and LotsofEquity: 10 percent, 10 times, 9 times, respectively • LotsofDebt: 10 percent, 10 times, 9 times, respectively; and LotsofEquity: 90 percent, 1.11 times, 0.1111 times, respectively

A firm has an ACP of 38 days and its annual sales are $5.3 million. What is its account receivable balance? Multiple Choice • $759,021 • $619,304 • $551,781


• $692,098

Tina’s Track Supply’s market-to-book ratio is currently 4.5 times and PE ratio is 10.5 times. If Tina’s Track Supply’s common stock is currently selling at $100 per share, what is the book value per share and earnings per share? Multiple Choice • $9.5238, $22.2222, respectively • $1,050, $450, respectively • $450, $1,050, respectively • $22.2222, $9.5238, respectively


Bree’s Tennis Supply’s market-to-book ratio is currently 9.4 times and PE ratio is 20 times. If Bree’s Tennis Supply’s common stock is currently selling at $20.50 per share, what is the book value per share and earnings per share? Multiple Choice • $192.70, $410.00, respectively • $1.025, $2.1809, respectively • $410.00, $192.70, respectively • $2.1809, $1.025, respectively


An investor wanting large returns will be interested in companies that have Multiple Choice • high current ratios. • high times interest earned. • high ROEs. • high ROAs.

Which of the following measures the operating return on the firm’s assets, irrespective of financial leverage and taxes? Multiple Choice


• return on equity • basic earnings power ratio • return on assets • profit margin

For publicly traded firms, which of these ratios measure what investors think of the company’s future performance and risk? Multiple Choice • liquidity ratios •


profitability ratios • market value ratios • price value ratios

According to the list provided in the textbook, which of the following is NOT one of the cautions in using ratios to evaluate firm performance? rev: 07_10_2017_QC_CS-93252 Multiple Choice • The firm has different accounting procedures. • The firm has seasonal cash flow differences. •


The firm had a one-time event. • The firm has a different capital structure.

To interpret financial ratios, managers, analysts, and investors use which of the following type of benchmarks? Multiple Choice • competitive analysis • time series analysis • cross-industry analysis • time-industry analysis


Last year Mocha Java, Inc. had an ROA of 10 percent, a profit margin of 5 percent, and sales of $25 million. What is Mocha Java’s total assets? Multiple Choice • $0.125m. • $1.25m. • $12.5m. • $12m.


Last year Rain Repel Corporation had an ROE of 10 percent and a dividend payout ratio of 80 percent. What is the sustainable growth rate? Multiple Choice • 50.00 percent • 2.04 percent

44.44 percent

1.11 percent ********************************

FIN 370T Assignment Week 1 Practice: Finance and Financial Statement Analysis Quiz(All Possible Questions/Answers)

For more classes visit


www.snaptutorial.com FIN 370T ASSIGNMENT Week 1 Practice: Finance and Financial Statement Analysis Quiz Complete the Week 1 “Practice: Finance and Financial Statement Analysis Quiz” in Connect®. Note: You have unlimited attempts available to complete practice Assignment s. The highest scored attempt will be recorded. These Assignment s have earlier due dates, so plan accordingly. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.

Which of the following is the firm’s highest-level financial manager? Multiple Choice chief executive officer corporate governance chief financial officer board of directors


Which of these must effectively distribute capital between investors and companies? Multiple Choice companies individuals international investors financial institutions

Which of the following statements is correct? Multiple Choice Financial managers double-check the accountant’s statements. Accountants are focused on what happened in the past. Both accountants and financial managers use total quality management systems to standardize data.


Financial managers are focused on what happened in the past.

This is a general term for securities like stocks, bonds, and other assets that represent ownership in a cash flow. Multiple Choice investment real asset financial asset financial markets

The portion of a company’s profits that are kept by the company rather than distributed to the stockholders as cash dividends is referred to as Multiple Choice institutional investment.


restricted earnings. venture capital. retained earnings.

A potential future negative impact to value and/or cash flows is often discussed in terms of probability of loss and the expected magnitude of the loss. This is called Multiple Choice risk. options. standard deviation. coefficient of variation.


Which of the following is defined as a group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations? Multiple Choice market instruments financial markets asset classes investments

What is the difference in perspective between finance and accounting? Multiple Choice ownership timing liability risk


This subarea of finance is important for adapting to the global economy. Multiple Choice financial management financial institutions and markets investments international finance

For corporations, maximizing the value of owner’s equity can also be stated as Multiple Choice maximizing net income. maximizing retained earnings. maximizing the stock price.


maximizing earnings per share.

Which of the following is NOT a function of the board of directors? Multiple Choice evaluate the CEO design compensation contracts for the CEO provide reports to the auditors hire the CEO

This is the set of laws, policies, incentives, and monitors designed to handle the issues arising from the separation of ownership and control.


Multiple Choice corporate governance defined benefit plan invisible hand agency theory

Which of the following statements is incorrect? Multiple Choice Most sole proprietors raise money by borrowing from banks. S corporations are considered a hybrid organization. An advantage of sole proprietorships is that the owner has complete control. Partnerships have unlimited liability.


Agency problems exist in which forms of business ownership? Multiple Choice partnership sole proprietorship corporation S corporation

An angel investor differs from a venture capitalist because of the Multiple Choice investment time frame. voting rights. type of investment. size of investment.


Which statement is incorrect regarding hybrid organizations? Multiple Choice They offer single taxation. They offer limited risk to the owners. They offer the same type of control as a sole proprietorship. All of these choices are correct.

From a taxation perspective, the form of business organization with the highest business level taxes is the Multiple Choice S corporation. corporation. sole proprietorship.


partnership.

Corporate stakeholders include all of the following EXCEPT Multiple Choice employees. suppliers. shareholders. auditors.

From the perspective of ownership risk, the best form of business organization is the Multiple Choice sole proprietorship.


partnership. corporation. S corporation.

Which of the following is NOT considered a hybrid organization? Multiple Choice all of these choices are correct. limited partnership S corporation limited liability company limited liability partnership

Which of these is the system of incentives and monitors that tries to overcome the agency problem?


Multiple Choice corporate Governance checks and Balances Security Exchange Commission board of Directors

When determining a form of business organization, all of the following are considered EXCEPT Multiple Choice the physical location of the business. who owns the firm. the tax ramifications. the owners’ risks.


All of the following are an example of a fiduciary relationship EXCEPT Multiple Choice a financial advisor advises her clients. the shareholder elects a board member. a bank employee manages deposits. a CEO manages the firm.

Restricted stock is Multiple Choice a special type of stock that can be converted into corporate bonds after a specific amount of time has elapsed. a special type of stock that is not transferable from the current holder to others until specific conditions are satisfied. a special type of stock that is a result of offering an employee stock ownership plan.


Which of the following refer to ratios that measure the relationship between a firm’s liquid (or current) assets and its current liabilities? Multiple Choice liquidity internal-growth cross-section market value

Which of the following measures the number of days accounts receivable are held before the firm collects cash from the sale? Multiple Choice accounts receivable turnover average payment period


accounts payable turnover average collection period

Which ratio measures the number of dollars of operating earnings available to meet the firm’s interest dollars and other fixed charges? Multiple Choice fixed-charge coverage ratio basic earning power times interest earned ROA

Which ratio measures the operating return on the firm’s assets irrespective of financial leverage and taxes? Multiple Choice


profit margin basic earning power ratio operating leverage return return on assets

A firm has EBIT of $1,000,000 and depreciation expense of $400,000. Fixed charges total $600,000. Interest expense totals $70,000. What is the firm’s fixed-charge coverage ratio? Multiple Choice 2.45 times 1.67 times 1.00 times 2.33 times


Which of these ratios measure the extent to which the firm uses debt (or financial leverage) versus equity to finance its assets? Multiple Choice debt management ratios financial ratios liquidity ratios equity ratios

A strong liquidity position means that Multiple Choice the firm is able to meet its short-term obligations. the firm pays out a large portion of its net income in the form of dividends. the firm uses little debt in its capital structure. the firm pays its creditors on time.


Which type of ratio measures the dollars of current assets available to pay each dollar of current liabilities? rev: 08_14_2018_QC_CS-133354 Multiple Choice internal-growth current cross-section quick or acid-test

A firm has EBIT of $300,000 and depreciation expense of $12,000. Fixed charges total $44,000. Interest expense totals $7,000. What is the firm’s cash coverage ratio? Multiple Choice 7.09 times 3.76 times 7.25 times


4.91 times Incorrect

Which of the following measures the number of dollars of sales produced per dollar of fixed assets? Multiple Choice fixed asset to working capital ratio fixed asset management ratio sales to working capital ratio fixed asset turnover ratio

The term “capital structure� refers to Multiple Choice


the amount of current versus fixed assets on the balance sheet. the amount of long-term debt versus equity on the balance sheet. the amount of current versus long-term debt on the balance sheet.

A firm reported year-end cost of goods sold of $10 million. It listed $2 million of inventory on its balance sheet. Using a 365-day year, how many days did the firm’s inventory stay on the premises? Multiple Choice 73 days 2 days 20 days 18.25 days

Tops N Bottoms Corp. reported sales for 2018 of $50 million. Tops N Bottoms listed $4 million of inventory on its balance sheet. Using a 365-


day year, how many days did Tops N Bottoms’ inventory stay on the premises? How many times per year did Tops N Bottoms’ inventory turn over? Multiple Choice 29.2 days, 0.0345 times, respectively 29.2 days, 12.5 times, respectively 0.08 days, 12.5 times, respectively 12.5 days, 29.2 times, respectively

Which ratio measures how many days inventory is held before the final product is sold? Multiple Choice total asset turnover inventory turnover


days’ sales in inventory inventory intensity ratio

Which ratio measures the number of dollars of operating earnings available to meet each dollar of interest obligations on the firm’s debt? Multiple Choice times interest earned ROA cash coverage ratio fixed-charge coverage ratio

You are considering a stock investment in one of two firms (LotsofDebt, Inc. and LotsofEquity, Inc.), both of which operate in the same industry. LotsofDebt, Inc. finances its $100 million in assets with $90 million in debt and $10 million in equity. LotsofEquity, Inc. finances its $100


million in assets with $10 million in debt and $90 million in equity. What are the debt ratio, equity multiplier, and debt-to-equity ratio for the two firms? Multiple Choice LotsofDebt: 90 percent, 10 times, 9 times, respectively; and LotsofEquity: 10 percent, 1.11 times, 0.1111 times, respectively LotsofDebt: 10 percent, 1.11 times, 0.1111 times, respectively; and LotsofEquity: 90 percent, 10 times, 9 times, respectively LotsofDebt: 90 percent, 1.11 times, 0.1111 times, respectively; and LotsofEquity: 10 percent, 10 times, 9 times, respectively LotsofDebt: 10 percent, 10 times, 9 times, respectively; and LotsofEquity: 90 percent, 1.11 times, 0.1111 times, respectively

A firm has an ACP of 38 days and its annual sales are $5.3 million. What is its account receivable balance? Multiple Choice $759,021 $619,304


$551,781 $692,098

Tina’s Track Supply’s market-to-book ratio is currently 4.5 times and PE ratio is 10.5 times. If Tina’s Track Supply’s common stock is currently selling at $100 per share, what is the book value per share and earnings per share? Multiple Choice $9.5238, $22.2222, respectively $1,050, $450, respectively $450, $1,050, respectively $22.2222, $9.5238, respectively


Bree’s Tennis Supply’s market-to-book ratio is currently 9.4 times and PE ratio is 20 times. If Bree’s Tennis Supply’s common stock is currently selling at $20.50 per share, what is the book value per share and earnings per share? Multiple Choice $192.70, $410.00, respectively $1.025, $2.1809, respectively $410.00, $192.70, respectively $2.1809, $1.025, respectively

An investor wanting large returns will be interested in companies that have Multiple Choice high current ratios. high times interest earned. high ROEs. high ROAs.


Which of the following measures the operating return on the firm’s assets, irrespective of financial leverage and taxes? Multiple Choice return on equity basic earnings power ratio return on assets profit margin

For publicly traded firms, which of these ratios measure what investors think of the company’s future performance and risk? Multiple Choice liquidity ratios


profitability ratios market value ratios price value ratios

According to the list provided in the textbook, which of the following is NOT one of the cautions in using ratios to evaluate firm performance? rev: 07_10_2017_QC_CS-93252 Multiple Choice The firm has different accounting procedures. The firm has seasonal cash flow differences. The firm had a one-time event. The firm has a different capital structure.


To interpret financial ratios, managers, analysts, and investors use which of the following type of benchmarks? Multiple Choice competitive analysis time series analysis cross-industry analysis time-industry analysis

Last year Mocha Java, Inc. had an ROA of 10 percent, a profit margin of 5 percent, and sales of $25 million. What is Mocha Java’s total assets? Multiple Choice $0.125m. $1.25m. $12.5m. $12m.


Last year Rain Repel Corporation had an ROE of 10 percent and a dividend payout ratio of 80 percent. What is the sustainable growth rate? Multiple Choice 50.00 percent 2.04 percent

44.44 percent

1.11 percent

FIN 370T Assignment Week 2 Apply Exercise(All Possible Questions/Answers) http://www.snaptutorial.com/FIN%20370T/product-38719-FIN370T-Assignment-Week-2-Apply-Week-2-Exercise

For more classes visit


www.snaptutorial.com

FIN 370T ASSIGNMENT Week 2 Apply: Week 2 Exercise Review the Week 2 “Knowledge Check” in Connect® in preparation for this Assignment . Complete the Week 2 “Exercise” in Connect®. Note: You have only one attempt available to complete this Assignment . Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.


You are offered a choice between $770 today and $815 one year from today. Assume that interest rates are 4 percent. Which do you prefer? Multiple Choice

$770 today at 3 percent interest rates

$815 one year from today

They are equivalent to each other.

$770 today

If an average home in your town currently costs $250,000, and house prices are expected to grow at an average rate of 3 percent per year, what will a house cost in eight years? Multiple Choice


$255,033.41

$316,692.52

$314,928.01

$255,043.97

Which of the following statements is incorrect with respect to time lines? Multiple Choice

Cash flows we pay out are called outflows and designated with a negative number.

Cash flows we receive are called inflows and denoted with a positive number.


A helpful tool for organizing our analysis is the time line.

Interest rates are not included on our time lines.

People borrow money because they expect Multiple Choice

interest rates to rise.

the time value of money to apply only if they are saving money.

their purchases to give them the satisfaction in the future that compensates them for the interest payments charged on the loan.


that consumers don’t need to calculate the impact of interest on their purchases.

When your investment compounds, your money will grow in a(n) __________ fashion. Multiple Choice

exponential

static

linear

implied


What is the future value of $1,000 deposited for one year earning 5 percent interest rate annually? Multiple Choice

$1,050

$2,050

$1,000

$1,005


If an average home in your town currently costs $350,000, and house prices are expected to grow at an average rate of 3 percent per year, what will an average house cost in “5� years? Multiple Choice

$507,500.00

$405,745.93

$405,168.75

$402,500.00

A deposit of $500 earns 5 percent the first year, 6 percent the second year, and 7 percent the third year. What would be the third year future value? Multiple Choice


$615.62

$595.46

$671.02

$634.91

If an average home in your town currently costs $300,000, and house prices are expected to grow at an average rate of 5 percent per year, what will an average house cost in 10 years? Multiple Choice

$483,153.01


$507,593.74

$488,688.39

$450,000.00

We call the process of earning interest on both the original deposit and on the earlier interest payments Multiple Choice

multiplying.

discounting.

compounding.


computing.

How much would be in your savings account in 7 years after depositing $100 today if the bank pays 5 percent interest per year? Multiple Choice

$140.71

$814.20

$735.00

$135.00


What is the future value of $2,500 deposited for one year earning a 14 percent interest rate annually? Multiple Choice

$2,550

$3,150

$2,950

$2,850

What is the future value of $600 deposited for four years earning an 11 percent interest rate annually? Multiple Choice


$803.61

$910.84

$792.90

$899.23

What is the present value of a $250 payment in one year when the discount rate is 6 percent? Multiple Choice

$250.00


$245.00

$235.85

$265.00

What is the present value of a $750 payment made in three years when the discount rate is 5 percent? Multiple Choice

$868.22

$647.88

$712.50


$646.96

Approximately how many years does it take to double a $600 investment when interest rates are 6 percent per year? Multiple Choice

12 years

8 years

0.08 year

8.33 years


Approximately what rate is needed to double an investment over five years? Multiple Choice

8 percent

14.4 percent

15.8 percent

12.2 percent

Which of the following statements is correct? Multiple Choice


Discounting is finding the future value of an original investment.

$100 to be received in the future is worth more than that today since it could be invested and earn interest.

The Rule of 72 calculates the compounded return on investments.

$100 to be received in the future is worth less than that today since it could be invested and earn interest.

Approximately what interest rate is needed to double an investment over four years? Multiple Choice

4 percent


100 percent

25 percent

18 percent

What is the present value of a $600 payment in one year when the discount rate is 8 percent? Multiple Choice

$555.56

$575.09

$525.87


$498.61

A dollar paid (or received) in the future is Multiple Choice

not comparable to a dollar paid (or received) today.

worth as much as a dollar paid (or received) today.

worth more than a dollar paid (or received) today.

not worth as much as a dollar paid (or received) today.


What is the present value of a $500 payment in one year when the discount rate is 5 percent? Multiple Choice

$475.00

$476.19

$525.00

$500.00

Approximately what interest rate is needed to double an investment over eight years? Multiple Choice


8 percent

100 percent

9 percent

12 percent

What is the present value of a $200 payment made in three years when the discount rate is 8 percent? Multiple Choice

$158.77

$515.42


$251.94

$150.00

When calculating the number of years needed to grow an investment to a specific amount of money Multiple Choice

the interest rate has nothing to do with the length of the time period needed to achieve the growth.

the higher the interest rate, the shorter the time period needed to achieve the growth.

the lower the interest rate, the shorter the time period needed to achieve the growth.


the Rule of 72 is the only way to calculate the time period needed to achieve the growth.

Determine the interest rate earned on a $1,500 deposit when $1,680 is paid back in one year. Multiple Choice

89.00 percent

12.00 percent

0.89 percent

1.12 percent


Determine the interest rate earned on a $200 deposit when $208 is paid back in one year. Multiple Choice

2 percent

4 percent

104 percent

8 percent

Determine the interest rate earned on a $500 deposit when $650 is paid back in one year. Multiple Choice


0.77 percent

30.0 percent

77.0 percent

1.30 percent

Which of the following will increase the future value of an annuity? Multiple Choice

The number of periods increases.

The amount of the annuity increases.


The interest rate increases.

All of these choices are correct.

Level sets of frequent, consistent cash flows are called Multiple Choice

loans.

budgets.

bills.

annuities.


The length of time of the annuity is very important in accumulating wealth within an annuity. What other factor also has this effect? Multiple Choice

the future value

interest rate for compounding

the time line

the present value

When moving from the left to the right of a time line, we are using Multiple Choice


compound interest to calculate future values.

discounted cash flows to calculate present values.

simple interest to calculate future values.

only payments to calculate future values.

In order to discount multiple cash flows to the present, one would use Multiple Choice

the appropriate simple rate.

the appropriate discount rate.


the appropriate compound rate.

the appropriate tax rate.

What is the future value of a $500 annuity payment over eight years if interest rates are 14 percent? Multiple Choice

$6,750.14

$6,241.09

$6,809.72

$6,616.38


What is the future value of an $800 annuity payment over 15 years if the interest rates are 6 percent? Multiple Choice

$1,917.25

$7,002.99

$18,620.78

$12,720.00

When saving for future expenditures, we can add the ________ of contributions over time to see what the total will be worth at some point in time.


Multiple Choice

future value

present value

payment

time value to money

If the future value of an ordinary, 7-year annuity is $10,000 and interest rates are 4 percent, what is the future value of the same annuity due? Multiple Choice


$9,615.38

$10,700.00

$10,000.00

$10,400.00

If the present value of an ordinary, 4-year annuity is $1,000 and interest rates are 6 percent, what is the present value of the same annuity due? Multiple Choice

$943.40

$1,040.00


$1,000.00

$1,060.00

Your credit rating and current economic conditions will determine Multiple Choice

whether you get simple or compound interest.

the interest rate that a lender will offer.

how long discounting will affect you.


how long compounding will affect you.

What is the present value of a $300 annuity payment over 5 years if interest rates are 8 percent? Multiple Choice

$1,938.96

$440.80

$1,197.81

$204.17

If the future value of an ordinary, 11-year annuity is $5,575 and interest rates are 5.5 percent, what is the future value of the same annuity due?


Multiple Choice

$5,769.06

$5,881.63

$5,619.52

$5,947.88

What is the present value of a $1,100 payment made every year forever when interest rates are 4.5 percent? Multiple Choice

$11,100


$21,089.37

$22,963.14

$24,444.44

What is the present value of a $600 annuity payment over 4 years if interest rates are 6 percent? Multiple Choice

$757.49

$3,145.28

$475.26


$2,079.06

What is the present value, when interest rates are 10 percent, of a $75 payment made every year forever? Multiple Choice

$750.00

$1,000.00

$6.75

$675.00


If the future value of an ordinary, 4-year annuity is $1,000 and interest rates are 6 percent, what is the future value of the same annuity due? Multiple Choice

$943.40

$1,060.00

$1,040.00

$1,000.00

A loan is offered with monthly payments and a 14.5 percent APR. What is the loan’s effective annual rate (EAR)? Multiple Choice


15.50 percent

15.63 percent

15.13 percent

14.97 percent

When you get your credit card bill, if you make a payment larger than the minimum payment Multiple Choice

you will not affect the payoff time.

you are wasting your current consumption and making TVM not work for you.


you will increase the payoff time.

you will reduce the payoff time.

The simple form of an annualized interest rate is called the annual percentage rate (APR). The effective annual rate (EAR) is a Multiple Choice

less accurate measure of the interest rate paid for monthly compounding.

measure that only applies to mortgages.

more accurate measure of the interest rate paid for monthly compounding.


concept that is only used because the law requires it, and is of no use to a borrower.

Compounding monthly versus annually causes the interest rate to be effectively higher, and thus the future value Multiple Choice

grows.

is independent of the monthly compounding.

decreases.

is affected only if the calculation involves an annuity due.


A loan is offered with monthly payments and a 10 percent APR. What is the loan’s effective annual rate (EAR)? Multiple Choice

12.67 percent

10.00 percent

11.20 percent

10.47 percent

FIN 370T Assignment Week 2 Apply: Time Value of Money Homework(All Possible Questions/Answers)


http://www.snaptutorial.com/FIN%20370T/product-38717-FIN370T-Assignment-Week-2-Apply-Time-Value-of-MoneyHomework

For more classes visit www.snaptutorial.com

FIN 370T ASSIGNMENT Week 2 Apply: Time Value of Money Homework Review the Week 2 “Practice: Time Value of Money Quiz” in Connect®.


Complete the Week 2 “Apply: Time Value of Money Homework” in Connect®. Note: You have only one attempt available to complete Assignment s. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.

With regard to money deposited in a bank, future values are Multiple Choice are completely independent of present values. larger than present values. equal to present values. smaller than present values.

Time value of money concepts can be used by Multiple Choice CFOs and CEOs to make business decisions. individuals doing personal financial planning. All of these choices are correct.


investors calculating a return on an investment.

Which of the following statements is correct? Multiple Choice $100 to be received in the future is worth more than that today since it could be invested and earn interest. $100 to be received in the future is worth less than that today since it could be invested and earn interest. Discounting is finding the future value of an original investment. The Rule of 72 calculates the compounded return on investments.

What is the future value of $2,000 deposited for one year earning 6 percent interest rate annually? Multiple Choice $120 $4,120 $2,120


$2.000

How much would be in your savings account in 10 years after depositing $50 today if the bank pays 7 percent interest per year? Multiple Choice $35.00 $535.00 $690.82 $98.36

Which of the following statements is incorrect with respect to time lines? Multiple Choice Cash flows we receive are called inflows and denoted with a positive number. A helpful tool for organizing our analysis is the time line. Interest rates are not included on our time lines.


Cash flows we pay out are called outflows and designated with a negative number.

What is the future value of $700 deposited for one year earning 4 percent interest rate annually? Multiple Choice $1,428 $728 $28 $700

Approximately what interest rate is needed to double an investment over six years? Multiple Choice 6 percent 100 percent 12 percent


17 percent

What is the present value of a $750 payment made in three years when the discount rate is 5 percent? Multiple Choice $647.88 $712.50 $868.22 $646.96

How are present values affected by changes in interest rates? Multiple Choice One would need to know the future value in order to determine the impact. The higher the interest rate, the larger the present value will be. The lower the interest rate, the larger the present value will be.


Present values are not affected by changes in interest rates.

Approximately how many years does it take to double a $300 investment when interest rates are 8 percent per year? Multiple Choice 11 years 0.11 years 4.17 years 9 years

Approximately what rate is needed to double an investment over five years? Multiple Choice 14.4 percent 12.2 percent


8 percent 15.8 percent

The process of figuring out how much an amount that you expect to receive in the future is worth today is called Multiple Choice discounting. computing. multiplying. compounding.

Approximately what interest rate is needed to double an investment over eight years? Multiple Choice 12 percent


100 percent 8 percent 9 percent

You double your money in five years. The reason your return is not 20 percent per year is because: Multiple Choice it is probably a “fad� investment. it does not reflect the effect of the Rule of 72. it does not reflect the effect of discounting. it does not reflect the effect of compounding.

Determine the interest rate earned on a $1,500 deposit when $1,680 is paid back in one year. Multiple Choice 12.00 percent


1.12 percent 89.00 percent 0.89 percent

When calculating the number of years needed to grow an investment to a specific amount of money Multiple Choice the lower the interest rate, the shorter the time period needed to achieve the growth. the interest rate has nothing to do with the length of the time period needed to achieve the growth. the higher the interest rate, the shorter the time period needed to achieve the growth. the Rule of 72 is the only way to calculate the time period needed to achieve the growth.

Level sets of frequent, consistent cash flows are called


Multiple Choice annuities. bills. budgets. loans.

When saving for future expenditures, we can add the ________ of contributions over time to see what the total will be worth at some point in time. Multiple Choice present value future value payment time value to money

In order to discount multiple cash flows to the present, one would use Multiple Choice


the appropriate compound rate. the appropriate tax rate. the appropriate simple rate. the appropriate discount rate.

What is the future value of a $500 annuity payment over eight years if interest rates are 14 percent? Multiple Choice $6,809.72 $6,616.38 $6,750.14 $6,241.09

What is the future value of an $800 annuity payment over 15 years if the interest rates are 6 percent? Multiple Choice


$12,720.00 $7,002.99 $18,620.78 $1,917.25

What is the present value, when interest rates are 6.5 percent, of a $100 payment made every year forever? Multiple Choice $1,538.46 $650.00 $6.50 $1,000.00

Your credit rating and current economic conditions will determine Multiple Choice whether you get simple or compound interest.


the interest rate that a lender will offer. how long discounting will affect you. how long compounding will affect you.

What is the present value of a $300 annuity payment over 5 years if interest rates are 8 percent? Multiple Choice $440.80 $1,938.96 $204.17 $1,197.81

If the present value of an ordinary, 4-year annuity is $1,000 and interest rates are 6 percent, what is the present value of the same annuity due? Multiple Choice $1,000.00 $1,060.00


$943.40 $1,040.00

If the present value of an ordinary, 10-year annuity is $25,000 and interest rates are 7 percent, what is the present value of the same annuity due? Multiple Choice $24,997.51 $23,644.49 $26,750.00 $25,000.00

Compounding monthly versus annually causes the interest rate to be effectively higher, and thus the future value Multiple Choice is affected only if the calculation involves an annuity due. decreases.


grows. is independent of the monthly compounding.

Loan amortization schedules show Multiple Choice both the principal balance and interest paid per period. the interest paid per period only. the present value of the payments due. the principal balance paid per period only.

The simple form of an annualized interest rate is called the annual percentage rate (APR). The effective annual rate (EAR) is a Multiple Choice less accurate measure of the interest rate paid for monthly compounding. concept that is only used because the law requires it, and is of no use to a borrower.


more accurate measure of the interest rate paid for monthly compounding. measure that only applies to mortgages.

FIN 370T Assignment Week 2 Practice Time Value of Money Quiz(All Possible Questions/Answers) http://www.snaptutorial.com/FIN%20370T/product-38718-FIN370T-Assignment-Week-2-Practice-Time-Value-of-MoneyQuiz

For more classes visit www.snaptutorial.com


FIN 370T ASSIGNMENT Week 2 Practice Time Value of Money Quiz Complete the Week 2 “Practice: Time Value of Money Quiz” in Connect®. Note: You have unlimited attempts available to complete practice Assignment s. The highest scored attempt will be recorded. These Assignment s have earlier due dates, so plan accordingly. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.


You are offered a choice between $770 today and $815 one year from today. Assume that interest rates are 4 percent. Which do you prefer? Multiple Choice

$770 today at 3 percent interest rates

$815 one year from today

They are equivalent to each other.

$770 today

If an average home in your town currently costs $250,000, and house prices are expected to grow at an average rate of 3 percent per year, what will a house cost in eight years? Multiple Choice


$255,033.41

$316,692.52

$314,928.01

$255,043.97

Which of the following statements is incorrect with respect to time lines? Multiple Choice

Cash flows we pay out are called outflows and designated with a negative number.


Cash flows we receive are called inflows and denoted with a positive number.

A helpful tool for organizing our analysis is the time line.

Interest rates are not included on our time lines.

People borrow money because they expect Multiple Choice

interest rates to rise.

the time value of money to apply only if they are saving money.

their purchases to give them the satisfaction in the future that compensates them for the interest payments charged on the loan.


that consumers don’t need to calculate the impact of interest on their purchases.

When your investment compounds, your money will grow in a(n) __________ fashion. Multiple Choice

exponential

static

linear

implied


What is the future value of $1,000 deposited for one year earning 5 percent interest rate annually? Multiple Choice

$1,050

$2,050

$1,000

$1,005


If an average home in your town currently costs $350,000, and house prices are expected to grow at an average rate of 3 percent per year, what will an average house cost in “5� years? Multiple Choice

$507,500.00

$405,745.93

$405,168.75

$402,500.00

A deposit of $500 earns 5 percent the first year, 6 percent the second year, and 7 percent the third year. What would be the third year future value? Multiple Choice


$615.62

$595.46

$671.02

$634.91

If an average home in your town currently costs $300,000, and house prices are expected to grow at an average rate of 5 percent per year, what will an average house cost in 10 years? Multiple Choice

$483,153.01


$507,593.74

$488,688.39

$450,000.00

We call the process of earning interest on both the original deposit and on the earlier interest payments Multiple Choice

multiplying.

discounting.

compounding.


computing.

How much would be in your savings account in 7 years after depositing $100 today if the bank pays 5 percent interest per year? Multiple Choice

$140.71

$814.20

$735.00

$135.00


What is the future value of $2,500 deposited for one year earning a 14 percent interest rate annually? Multiple Choice

$2,550

$3,150

$2,950

$2,850

What is the future value of $600 deposited for four years earning an 11 percent interest rate annually? Multiple Choice


$803.61

$910.84

$792.90

$899.23

What is the present value of a $250 payment in one year when the discount rate is 6 percent? Multiple Choice

$250.00


$245.00

$235.85

$265.00

What is the present value of a $750 payment made in three years when the discount rate is 5 percent? Multiple Choice

$868.22

$647.88

$712.50


$646.96

Approximately how many years does it take to double a $600 investment when interest rates are 6 percent per year? Multiple Choice

12 years

8 years

0.08 year

8.33 years


Approximately what rate is needed to double an investment over five years? Multiple Choice

8 percent

14.4 percent

15.8 percent

12.2 percent

Which of the following statements is correct? Multiple Choice


Discounting is finding the future value of an original investment.

$100 to be received in the future is worth more than that today since it could be invested and earn interest.

The Rule of 72 calculates the compounded return on investments.

$100 to be received in the future is worth less than that today since it could be invested and earn interest.

Approximately what interest rate is needed to double an investment over four years? Multiple Choice

4 percent


100 percent

25 percent

18 percent

What is the present value of a $600 payment in one year when the discount rate is 8 percent? Multiple Choice

$555.56

$575.09

$525.87


$498.61

A dollar paid (or received) in the future is Multiple Choice

not comparable to a dollar paid (or received) today.

worth as much as a dollar paid (or received) today.

worth more than a dollar paid (or received) today.

not worth as much as a dollar paid (or received) today.


What is the present value of a $500 payment in one year when the discount rate is 5 percent? Multiple Choice

$475.00

$476.19

$525.00

$500.00

Approximately what interest rate is needed to double an investment over eight years? Multiple Choice


8 percent

100 percent

9 percent

12 percent

What is the present value of a $200 payment made in three years when the discount rate is 8 percent? Multiple Choice

$158.77

$515.42


$251.94

$150.00

When calculating the number of years needed to grow an investment to a specific amount of money Multiple Choice

the interest rate has nothing to do with the length of the time period needed to achieve the growth.

the higher the interest rate, the shorter the time period needed to achieve the growth.

the lower the interest rate, the shorter the time period needed to achieve the growth.


the Rule of 72 is the only way to calculate the time period needed to achieve the growth.

Determine the interest rate earned on a $1,500 deposit when $1,680 is paid back in one year. Multiple Choice

89.00 percent

12.00 percent

0.89 percent

1.12 percent


Determine the interest rate earned on a $200 deposit when $208 is paid back in one year. Multiple Choice

2 percent

4 percent

104 percent

8 percent

Determine the interest rate earned on a $500 deposit when $650 is paid back in one year. Multiple Choice


0.77 percent

30.0 percent

77.0 percent

1.30 percent

Which of the following will increase the future value of an annuity? Multiple Choice

The number of periods increases.

The amount of the annuity increases.


The interest rate increases.

All of these choices are correct.

Level sets of frequent, consistent cash flows are called Multiple Choice

loans.

budgets.

bills.

annuities.


The length of time of the annuity is very important in accumulating wealth within an annuity. What other factor also has this effect? Multiple Choice

the future value

interest rate for compounding

the time line

the present value

When moving from the left to the right of a time line, we are using Multiple Choice


compound interest to calculate future values.

discounted cash flows to calculate present values.

simple interest to calculate future values.

only payments to calculate future values.

In order to discount multiple cash flows to the present, one would use Multiple Choice

the appropriate simple rate.

the appropriate discount rate.


the appropriate compound rate.

the appropriate tax rate.

What is the future value of a $500 annuity payment over eight years if interest rates are 14 percent? Multiple Choice

$6,750.14

$6,241.09

$6,809.72

$6,616.38


What is the future value of an $800 annuity payment over 15 years if the interest rates are 6 percent? Multiple Choice

$1,917.25

$7,002.99

$18,620.78

$12,720.00

When saving for future expenditures, we can add the ________ of contributions over time to see what the total will be worth at some point in time.


Multiple Choice

future value

present value

payment

time value to money

If the future value of an ordinary, 7-year annuity is $10,000 and interest rates are 4 percent, what is the future value of the same annuity due? Multiple Choice


$9,615.38

$10,700.00

$10,000.00

$10,400.00

If the present value of an ordinary, 4-year annuity is $1,000 and interest rates are 6 percent, what is the present value of the same annuity due? Multiple Choice

$943.40

$1,040.00


$1,000.00

$1,060.00

Your credit rating and current economic conditions will determine Multiple Choice

whether you get simple or compound interest.

the interest rate that a lender will offer.

how long discounting will affect you.


how long compounding will affect you.

What is the present value of a $300 annuity payment over 5 years if interest rates are 8 percent? Multiple Choice

$1,938.96

$440.80

$1,197.81

$204.17

If the future value of an ordinary, 11-year annuity is $5,575 and interest rates are 5.5 percent, what is the future value of the same annuity due?


Multiple Choice

$5,769.06

$5,881.63

$5,619.52

$5,947.88

What is the present value of a $1,100 payment made every year forever when interest rates are 4.5 percent? Multiple Choice

$11,100


$21,089.37

$22,963.14

$24,444.44

What is the present value of a $600 annuity payment over 4 years if interest rates are 6 percent? Multiple Choice

$757.49

$3,145.28

$475.26


$2,079.06

What is the present value, when interest rates are 10 percent, of a $75 payment made every year forever? Multiple Choice

$750.00

$1,000.00

$6.75

$675.00


If the future value of an ordinary, 4-year annuity is $1,000 and interest rates are 6 percent, what is the future value of the same annuity due? Multiple Choice

$943.40

$1,060.00

$1,040.00

$1,000.00

A loan is offered with monthly payments and a 14.5 percent APR. What is the loan’s effective annual rate (EAR)? Multiple Choice


15.50 percent

15.63 percent

15.13 percent

14.97 percent

When you get your credit card bill, if you make a payment larger than the minimum payment Multiple Choice

you will not affect the payoff time.

you are wasting your current consumption and making TVM not work for you.


you will increase the payoff time.

you will reduce the payoff time.

The simple form of an annualized interest rate is called the annual percentage rate (APR). The effective annual rate (EAR) is a Multiple Choice

less accurate measure of the interest rate paid for monthly compounding.

measure that only applies to mortgages.

more accurate measure of the interest rate paid for monthly compounding.


concept that is only used because the law requires it, and is of no use to a borrower.

Compounding monthly versus annually causes the interest rate to be effectively higher, and thus the future value Multiple Choice

grows.

is independent of the monthly compounding.

decreases.

is affected only if the calculation involves an annuity due.


A loan is offered with monthly payments and a 10 percent APR. What is the loan’s effective annual rate (EAR)? Multiple Choice

12.67 percent

10.00 percent

11.20 percent

10.47 percent

FIN 370T Assignment Week 3 Apply: Bond Valuation and Stock Valuation Homework(All Possible Questions/Answers)


http://www.snaptutorial.com/FIN%20370T/product-38722-FIN370T-Assignment-Week-3-Apply-Bond-Valuation-and-StockValuation-Homework

For more classes visit www.snaptutorial.com

FIN 370T ASSIGNMENT Week 3 Apply: Bond Valuation and Stock Valuation Homework Review the Week 3 “Practice: Bond Valuation and Stock Valuation Quiz” in Connect®.


Complete the Week 3 “Apply: Bond Valuation and Stock Valuation Homework” in Connect®. Note: You have only one attempt available to complete Assignment s. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.

Determine the interest payment for the following three bonds: 4 percent coupon corporate bond (paid semi-annually), 4.75 percent coupon Treasury note, and a corporate zero coupon bond maturing in 15 years. (Assume a $1,000 par value.) Multiple Choice $20.00, $23.75, $150, respectively $4.00, $4.75, $0, respectively $40.00, $47.50, $0, respectively $20.00, $23.75, $0, respectively

Determine the interest payment for the following three bonds: 5.5 percent coupon corporate bond (paid semi-annually), 6.45 percent coupon Treasury note, and a corporate zero coupon bond maturing in 10 years. (Assume a $1,000 par value.) Multiple Choice


$27.50, $32.25, $100, respectively $27.50, $32.25, $0, respectively $5.50, $6.45, $0, respectively $55.00, $64.50, $0, respectively

Consider the following three bond quotes; a Treasury note quoted at 102.30, and a corporate bond quoted at 99.45, and a municipal bond quoted at 102.45. If the Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars? Multiple Choice $1,002.30, $994.50, $5,012.25 respectively $1,023.00, $994.50, $5,122.50, respectively $1,002.30, $1,000, $1,000, respectively $1,000, $1,000, $5,000, respectively

Which of these statements is false? Multiple Choice


The bond market is larger than the stock market. Bonds are always less risky than stocks. Bonds are more important capital sources than stocks for companies and governments. Some bonds offer high potential for rewards and, consequently, higher risk.

Which of the following issues Treasury Inflation Protected Securities (TIPS)? Multiple Choice Corporations Municipalities Nonprofits U.S. Treasury

A 2.95 percent TIPS has an original reference CPI of 180.2. If the current CPI is 205.1, what is the current interest payment and par value


of the TIPS? (Assume semi-annual interest payments and $1,000 par value.) Multiple Choice $1,138.18, $29.50, respectively $878.60, $16.79, respectively $1,000.00, $29.50, respectively $1,138.18, $16.79, respectively

A 2.5 percent TIPS has an original reference CPI of 170.4. If the current CPI is 205.7, what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.) Multiple Choice $1,207.16, $15.09, respectively $1,000, $7.16, respectively $1,207.16, $7.16, respectively $1,000, $15.09, respectively


A 3.25 percent TIPS has an original reference CPI of 194.1. If the current CPI is 210.3, what is the current interest payment? (Assume semi-annual interest payments and a par value of $1,000.) Multiple Choice $15.00 $31.54 $17.61 $16.25

A 3.75 percent TIPS has an original reference CPI of 183.9. If the current CPI is 214.7, what is the current interest payment? (Assume semi-annual interest payments and a par value of $1,000.) Multiple Choice $21.89 $43.78 $37.50 $18.75


A 3.75 percent TIPS has an original reference CPI of 175.8. If the current CPI is 207.7, what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.) Multiple Choice $1,000, $37.50, respectively $1,181.46, $37.50, respectively $1,000, $18.75, respectively $1,181.46, $22.15, respectively

Consider the following three bond quotes; a Treasury note quoted at 87.25, and a corporate bond quoted at 102.42, and a municipal bond quoted at 101.45. If the Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars? Multiple Choice $1,000, $1,000, $1,000, respectively $872.50, $1,024.20, $5,072.50, respectively $1,000, $1,024.20, $1,001.45, respectively $872.50, $1,000, $1,000, respectively


Which of the following is a true statement? Multiple Choice If interest rates fall, all bonds will enjoy rising values. If interest rates fall, corporate bonds will have decreasing values. If interest rates fall, no bonds will enjoy rising values. If interest rates fall, U.S. Treasury bonds will have decreasing values.

Which of the following bonds makes no interest payments? Multiple Choice Zero coupon bond A bond whose coupon rates are greater than market interest rates A bond whose coupon rate is equal to the market interest rates


A bond whose coupon rates are less than the market interest rates

If Zeus Energy bonds are upgraded from BBB- to BBB+, which of the following statements is true? Multiple Choice Interest rates required on new bond issue will increase. The current bond price will decrease. The current bond price will increase and interest rates on new bonds issue will decrease. The current bond price will decrease and interest rates on new bonds issue will increase.

Rank from lowest credit risk to highest credit risk the following bonds, with the same time to maturity, by their yield to maturity: Treasury bond with yield of 5.55 percent, IBM bond with yield of 7.95 percent, Trump Casino bond with a yield of 9.15 percent and Banc Ono bond with a yield of 6.12 percent.


Multiple Choice Treasury, Trump Casino, Banc Ono, IBM Treasury, Banc Ono, IBM, Trump Casino Trump Casino, IBM, Banc Ono, Treasury Trump Casino, Banc Ono, IBM, Treasury

Which of the following is an electronic stock market without a physical trading floor? Multiple Choice Mercantile Exchange Nasdaq Stock Market American Stock Exchange New York Stock Exchange


Individuals who use their own stock inventory and capital to buy and sell the stocks they represent are called: Multiple Choice brokers. none of the options. market makers. investors.

Sally has researched GLE and wants to pay no more than $50 for the stock. Currently, GLE is trading in the market for $54. Sally would be best served to: Multiple Choice buy using a limit order. buy using a market order. use the bid-ask spread to her advantage. None of the options.


Which of these investors earn returns from receiving dividends and from stock price appreciation? Multiple Choice Managers Bondholders Stockholders Investment bankers

GEN has 10 million shares outstanding and a stock price of $89.25. What is GEN’s market capitalization? Multiple Choice $89,250,000 \ $89,250,000,000 $892,500 $892,500,000


As residual claimants, which of these investors claim any cash flows to the firm that remain after the firm pays all other claims? rev: 07_10_2017_QC_CS-93259 Multiple Choice bondholders common stockholders creditors preferred stockholders

If on November 27, 2017, The Dow Jones Industrial Average closed at 12,958.44, which was up 215.04 that day. What was the return (in percent) of the stock market that day? Multiple Choice +1.69 percent


+0.017 percent −1.69 percent −0.017 percent

Dividend yield is defined as: Multiple Choice the last dividend paid expressed as a percentage of the current stock price. the last four quarters of dividend income expressed as a percentage of the par value of the stock. the last four quarters of dividend income expressed as a percentage of the current stock price. the next dividend to be paid expressed as a percentage of the current stock price.

Why is the ask price higher than the bid price?


Multiple Choice It represents the gain a market maker achieves. It represents the gain the stock seller achieves. It represents the gain all participants will achieve. It represents the gain the stock buy achieves.

JUJU’s dividend next year is expected to be $1.50. It is trading at $45 and is expected to grow at 9 percent per year. What is JUJU’s dividend yield and capital gain? Multiple Choice 9 percent; 3.33 percent 3.33 percent; 9 percent 6 percent; 1.5 percent 1.5 percent; 6 percent


If Target Corp. (TGT) recently earned a profit of $6.07 earnings per share and has a P/E ratio of 16.5. The dividend has been growing at a 10 percent rate over the past few years. If this growth continues, what would be the stock price in five years if the P/E ratio remained unchanged? What would the price be if the P/E ratio increased to 18 in five years? Multiple Choice $100.16, $109.26 respectively $261.30, $275.96 respectively $161.30, $175.96 respectively $259.78, $283.39 respectively

At your discount brokerage firm, it costs $7.95 per stock trade. How much money do you receive after selling 250 shares of General Electric (GE), which trades at $55.19? Multiple Choice $11,958.55 $13,789.55 $12,174.95


$14,037.95

You would like to buy shares of International Business Machines (IBM). The current bid and ask quotes are $103.25 and $103.30, respectively. You place a market buy-order for 200 shares that executes at these quoted prices. How much money did it cost to buy these shares? Multiple Choice $10,330.00 $20,650.00 $20,660.00 None of the options

JPM has earnings per share of $3.75 and P/E of 47. What is the stock price? Multiple Choice $112.98 $185.95 $176.25


$174.08

Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price? Multiple Choice $66.87 $4.51 $22.16 $0.22

FIN 370T Assignment Week 3 Apply Exercise(All Possible Questions/Answers)

For more classes visit www.snaptutorial.com FIN 370T ASSIGNMENT Week 3 Apply: Week 3 Exercise


Determine the interest payment for the following three bonds: 4 percent coupon corporate bond (paid semi-annually), 4.75 percent coupon Treasury note, and a corporate zero coupon bond maturing in 15 years. (Assume a $1,000 par value.) Multiple Choice $20.00, $23.75, $150, respectively $4.00, $4.75, $0, respectively $40.00, $47.50, $0, respectively $20.00, $23.75, $0, respectively

Determine the interest payment for the following three bonds: 5.5 percent coupon corporate bond (paid semi-annually), 6.45 percent coupon Treasury note, and a corporate zero coupon bond maturing in 10 years. (Assume a $1,000 par value.) Multiple Choice $27.50, $32.25, $100, respectively $27.50, $32.25, $0, respectively $5.50, $6.45, $0, respectively $55.00, $64.50, $0, respectively


Consider the following three bond quotes; a Treasury note quoted at 102.30, and a corporate bond quoted at 99.45, and a municipal bond quoted at 102.45. If the Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars? Multiple Choice $1,002.30, $994.50, $5,012.25 respectively $1,023.00, $994.50, $5,122.50, respectively $1,002.30, $1,000, $1,000, respectively $1,000, $1,000, $5,000, respectively

Which of these statements is false? Multiple Choice The bond market is larger than the stock market. Bonds are always less risky than stocks. Bonds are more important capital sources than stocks for companies and governments.


Some bonds offer high potential for rewards and, consequently, higher risk.

Which of the following issues Treasury Inflation Protected Securities (TIPS)? Multiple Choice Corporations Municipalities Nonprofits U.S. Treasury

A 2.95 percent TIPS has an original reference CPI of 180.2. If the current CPI is 205.1, what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.) Multiple Choice $1,138.18, $29.50, respectively $878.60, $16.79, respectively


$1,000.00, $29.50, respectively $1,138.18, $16.79, respectively

A 2.5 percent TIPS has an original reference CPI of 170.4. If the current CPI is 205.7, what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.) Multiple Choice $1,207.16, $15.09, respectively $1,000, $7.16, respectively $1,207.16, $7.16, respectively $1,000, $15.09, respectively

A 3.25 percent TIPS has an original reference CPI of 194.1. If the current CPI is 210.3, what is the current interest payment? (Assume semi-annual interest payments and a par value of $1,000.) Multiple Choice $15.00 $31.54


$17.61 $16.25

A 3.75 percent TIPS has an original reference CPI of 183.9. If the current CPI is 214.7, what is the current interest payment? (Assume semi-annual interest payments and a par value of $1,000.) Multiple Choice $21.89 $43.78 $37.50 $18.75

A 3.75 percent TIPS has an original reference CPI of 175.8. If the current CPI is 207.7, what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.) Multiple Choice $1,000, $37.50, respectively


$1,181.46, $37.50, respectively $1,000, $18.75, respectively $1,181.46, $22.15, respectively

Consider the following three bond quotes; a Treasury note quoted at 87.25, and a corporate bond quoted at 102.42, and a municipal bond quoted at 101.45. If the Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars? Multiple Choice $1,000, $1,000, $1,000, respectively $872.50, $1,024.20, $5,072.50, respectively $1,000, $1,024.20, $1,001.45, respectively $872.50, $1,000, $1,000, respectively

Which of the following is a true statement?


Multiple Choice If interest rates fall, all bonds will enjoy rising values. If interest rates fall, corporate bonds will have decreasing values. If interest rates fall, no bonds will enjoy rising values. If interest rates fall, U.S. Treasury bonds will have decreasing values.

Which of the following bonds makes no interest payments? Multiple Choice Zero coupon bond A bond whose coupon rates are greater than market interest rates A bond whose coupon rate is equal to the market interest rates A bond whose coupon rates are less than the market interest rates


If Zeus Energy bonds are upgraded from BBB- to BBB+, which of the following statements is true? Multiple Choice Interest rates required on new bond issue will increase. The current bond price will decrease. The current bond price will increase and interest rates on new bonds issue will decrease. The current bond price will decrease and interest rates on new bonds issue will increase.

Rank from lowest credit risk to highest credit risk the following bonds, with the same time to maturity, by their yield to maturity: Treasury bond with yield of 5.55 percent, IBM bond with yield of 7.95 percent, Trump Casino bond with a yield of 9.15 percent and Banc Ono bond with a yield of 6.12 percent. Multiple Choice Treasury, Trump Casino, Banc Ono, IBM Treasury, Banc Ono, IBM, Trump Casino Trump Casino, IBM, Banc Ono, Treasury


Trump Casino, Banc Ono, IBM, Treasury

Which of the following is an electronic stock market without a physical trading floor? Multiple Choice Mercantile Exchange Nasdaq Stock Market American Stock Exchange New York Stock Exchange

Individuals who use their own stock inventory and capital to buy and sell the stocks they represent are called: Multiple Choice brokers. none of the options.


market makers. investors.

Sally has researched GLE and wants to pay no more than $50 for the stock. Currently, GLE is trading in the market for $54. Sally would be best served to: Multiple Choice buy using a limit order. buy using a market order. use the bid-ask spread to her advantage. None of the options.

Which of these investors earn returns from receiving dividends and from stock price appreciation? Multiple Choice Managers Bondholders


Stockholders Investment bankers

GEN has 10 million shares outstanding and a stock price of $89.25. What is GEN’s market capitalization? Multiple Choice $89,250,000 \ $89,250,000,000 $892,500 $892,500,000

As residual claimants, which of these investors claim any cash flows to the firm that remain after the firm pays all other claims?


rev: 07_10_2017_QC_CS-93259 Multiple Choice bondholders common stockholders creditors preferred stockholders

If on November 27, 2017, The Dow Jones Industrial Average closed at 12,958.44, which was up 215.04 that day. What was the return (in percent) of the stock market that day? Multiple Choice +1.69 percent +0.017 percent −1.69 percent −0.017 percent


Dividend yield is defined as: Multiple Choice the last dividend paid expressed as a percentage of the current stock price. the last four quarters of dividend income expressed as a percentage of the par value of the stock. the last four quarters of dividend income expressed as a percentage of the current stock price. the next dividend to be paid expressed as a percentage of the current stock price.

Why is the ask price higher than the bid price? Multiple Choice It represents the gain a market maker achieves. It represents the gain the stock seller achieves. It represents the gain all participants will achieve.


It represents the gain the stock buy achieves.

JUJU’s dividend next year is expected to be $1.50. It is trading at $45 and is expected to grow at 9 percent per year. What is JUJU’s dividend yield and capital gain? Multiple Choice 9 percent; 3.33 percent 3.33 percent; 9 percent 6 percent; 1.5 percent 1.5 percent; 6 percent

If Target Corp. (TGT) recently earned a profit of $6.07 earnings per share and has a P/E ratio of 16.5. The dividend has been growing at a 10 percent rate over the past few years. If this growth continues, what would be the stock price in five years if the P/E ratio remained unchanged? What would the price be if the P/E ratio increased to 18 in five years?


Multiple Choice $100.16, $109.26 respectively $261.30, $275.96 respectively $161.30, $175.96 respectively $259.78, $283.39 respectively

At your discount brokerage firm, it costs $7.95 per stock trade. How much money do you receive after selling 250 shares of General Electric (GE), which trades at $55.19? Multiple Choice $11,958.55 $13,789.55 $12,174.95 $14,037.95

You would like to buy shares of International Business Machines (IBM). The current bid and ask quotes are $103.25 and $103.30, respectively.


You place a market buy-order for 200 shares that executes at these quoted prices. How much money did it cost to buy these shares? Multiple Choice $10,330.00 $20,650.00 $20,660.00 None of the options

JPM has earnings per share of $3.75 and P/E of 47. What is the stock price? Multiple Choice $112.98 $185.95 $176.25 $174.08


Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price? Multiple Choice $66.87 $4.51 $22.16 $0.22

FIN 370T Assignment Week 3 Practice: Bond Valuation and Stock Valuation Quiz(All Possible Questions/Answers) http://www.snaptutorial.com/FIN%20370T/product-38721-FIN370T-Assignment-Week-3-Practice-Bond-Valuation-and-StockValuation-Quiz

For more classes visit www.snaptutorial.com


FIN 370T ASSIGNMENT Week 3 Practice: Bond Valuation and Stock Valuation Quiz Complete the Week 3 “Practice: Bond Valuation and Stock Valuation Quiz” in Connect®. Note: You have unlimited attempts available to complete practice Assignment s. The highest scored attempt will be recorded. These Assignment s have earlier due dates, so plan accordingly. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.


Which of the following is a legal contract that outlines the precise terms between the issuer and the bondholder? Multiple Choice Indenture Enforcement codes Debenture Prospectus

Determine the interest payment for the following three bonds: 5.5 percent coupon corporate bond (paid semi-annually), 6.45 percent coupon Treasury note, and a corporate zero coupon bond maturing in 10 years. (Assume a $1,000 par value.) Multiple Choice $27.50, $32.25, $0, respectively $55.00, $64.50, $0, respectively $5.50, $6.45, $0, respectively $27.50, $32.25, $100, respectively


Many bonds are not callable, but for those that are, which of following is a common feature? Multiple Choice Called any time after 2 years of issuance. Called any time after 10 years of issuance. Called any time after 2 years from the time an investor buys the bond. Called any time after 10 years from the time an investor buys the bond.

A 3.75 percent TIPS has an original reference CPI of 175.8. If the current CPI is 207.7, what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.) Multiple Choice $1,181.46, $22.15, respectively $1,000, $37.50, respectively $1,181.46, $37.50, respectively $1,000, $18.75, respectively


Which of the following determines the dollar amount of interest paid to bondholders? Multiple Choice Call premium Market rate Coupon rate Original issue discount

A 3.75 percent TIPS has an original reference CPI of 183.9. If the current CPI is 214.7, what is the current interest payment? (Assume semi-annual interest payments and a par value of $1,000.) Multiple Choice $37.50 $18.75 $43.78 $21.89


Regarding a bond’s characteristics, which of the following is the principal loan amount that the borrower must repay? Multiple Choice Par or face value Call premium Time to maturity value Maturity date

Which of the following was the catalyst for the recent financial crisis? Multiple Choice Widespread layoffs due to illegal alien hiring. Corruption in the investment banking industry. All of the options were catalysts. Defaults on subprime mortgages.


Which of the following is NOT a factor that determines the coupon rate of a company’s bonds? Multiple Choice The level of interest rates in the overall economy at the time. The term of the loan. All of the options are factors that determine the coupon rate of a company’s bonds. The amount of uncertainty about whether the company will be able to make all the payments.

Consider the following three bond quotes; a Treasury note quoted at 102.30, and a corporate bond quoted at 99.45, and a municipal bond quoted at 102.45. If the Treasury and corporate bonds have a par value of $1,000 and the municipal bond has a par value of $5,000, what is the price of these three bonds in dollars? Multiple Choice $1,002.30, $1,000, $1,000, respectively $1,002.30, $994.50, $5,012.25 respectively $1,000, $1,000, $5,000, respectively $1,023.00, $994.50, $5,122.50, respectively


Bond prices are quoted in terms of which of the following? Multiple Choice Original issue discount Coupon rate in dollars Percent of par value Market rate in dollars

Which of the following is a debt security whose payments originate from other loans, such as credit card debt, auto loans, and home equity loans? Multiple Choice Asset-backed securities Junk bonds Credit quality securities Debentures


To compensate the bondholders for getting the bond called, the issuer pays which of the following? Multiple Choice Original issue premium Call premium Call feature Coupon rate

A 2.5 percent TIPS has an original reference CPI of 170.4. If the current CPI is 205.7, what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.) Multiple Choice $1,000, $15.09, respectively $1,207.16, $7.16, respectively $1,000, $7.16, respectively $1,207.16, $15.09, respectively


Determine the interest payment for the following three bonds: 2.5 percent coupon corporate bond (paid semi-annually), 3.15 percent coupon Treasury note, and a corporate zero coupon bond maturing in 10 years. (Assume a $1,000 par value.) Multiple Choice $12.50, $15.75, $100, respectively $25.00, $31.50, $0, respectively $2.50, $3.15, $0, respectively $12.50, $15.75, $0, respectively

A 2.95 percent TIPS has an original reference CPI of 180.2. If the current CPI is 205.1, what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.) Multiple Choice $878.60, $16.79, respectively


$1,138.18, $16.79, respectively $1,000.00, $29.50, respectively $1,138.18, $29.50, respectively

Determine the interest payment for the following three bonds: 4 percent coupon corporate bond (paid semi-annually), 4.75 percent coupon Treasury note, and a corporate zero coupon bond maturing in 15 years. (Assume a $1,000 par value.) Multiple Choice $20.00, $23.75, $150, respectively $20.00, $23.75, $0, respectively $4.00, $4.75, $0, respectively $40.00, $47.50, $0, respectively

Which of the following are main issuers of bonds?


Multiple Choice U.S. Treasury bonds Municipal bonds All of the options Corporate bonds

A 4.5 percent corporate coupon bond is callable in five years for a call premium of one year of coupon payments. Assuming a par value of $1,000, what is the price paid to the bondholder if the issuer calls the bond? Multiple Choice $45 $225 $1,045 $1,000


Calculate the price of a zero coupon bond that matures in 20 years if the market interest rate is 8.5 percent. (Assume annual compounding and a par value of $1,000.) Multiple Choice $995.62 $1,195.62 $195.62 $90.29

Which of the following terms is a comparison of market yields on securities, assuming all characteristics except maturity are the same? Multiple Choice Liquidity of interest rate risk Term structure of interest rates Interest rate risk Credit quality risk


Which of the following is used to compute bond cash interest payments? Multiple Choice Current yield. Coupon rate. Yield to maturity. None of the options.

What is the taxable equivalent yield on a municipal bond with a yield to maturity of 4.5 percent for an investor in the 39 percent marginal tax bracket? Multiple Choice 4.50 percent 7.38 percent 11.54 percent

1.76 percent


Which of the following bonds carry significant risk that the issuer will not make current or future payments? Multiple Choice Credit quality risk bonds Junk bonds Interest rate risk bonds Liquidity rate risk bonds

If Zeus Energy bonds are upgraded from BBB- to BBB+, which of the following statements is true? Multiple Choice The current bond price will decrease. The current bond price will decrease and interest rates on new bonds issue will increase. The current bond price will increase and interest rates on new bonds issue will decrease.


Interest rates required on new bond issue will increase.

Sally has researched GLE and wants to pay no more than $50 for the stock. Currently, GLE is trading in the market for $54. Sally would be best served to: Multiple Choice buy using a limit order. buy using a market order. use the bid-ask spread to her advantage. None of the options.

As residual claimants, which of these investors claim any cash flows to the firm that remain after the firm pays all other claims? rev: 07_10_2017_QC_CS-93259 Multiple Choice bondholders common stockholders


creditors preferred stockholders

GEN has 10 million shares outstanding and a stock price of $89.25. What is GEN’s market capitalization? Multiple Choice $892,500,000 $89,250,000 $892,500 $89,250,000,000

The NASDAQ Composite includes: Multiple Choice 30 of the largest (market capitalization) and most active companies in the U.S. economy. 500 firms that are the largest in their respective economic sectors.


500 firms that are the largest as ranked by Fortune Magazine. all of the stocks listed on the NASDAQ Stock Exchange.

Trading at physical exchanges like the New York Stock Exchange and the American Stock Exchange takes place: Multiple Choice at market markers. at brokers’ trading posts. at dealers’ trading posts. at dealers’ computers.

All of the following are stock market indices EXCEPT: Multiple Choice Nasdaq Composite Index. Dow Jones Industrial Average. Standard & Poor’s 500 Index.


Mercantile 1000.

If on November 26, 2017, The Dow Jones Industrial Average closed at 12,743.40, which was down 237.44 that day. What was the return (in percent) of the stock market that day? Multiple Choice +1.83 percent −0.02 percent −1.83 percent +0.02 percent

If on November 27, 2017, The Dow Jones Industrial Average closed at 12,958.44, which was up 215.04 that day. What was the return (in percent) of the stock market that day? Multiple Choice +0.017 percent


−1.69 percent +1.69 percent −0.017 percent

Which of these investors earn returns from receiving dividends and from stock price appreciation? Multiple Choice Stockholders Managers Investment bankers Bondholders

Individuals who use their own stock inventory and capital to buy and sell the stocks they represent are called: Multiple Choice brokers.


investors. market makers. none of the options.

Which of the following is an electronic stock market without a physical trading floor? Multiple Choice Mercantile Exchange American Stock Exchange Nasdaq Stock Market New York Stock Exchange

JUJU’s dividend next year is expected to be $1.50. It is trading at $45 and is expected to grow at 9 percent per year. What is JUJU’s dividend yield and capital gain? Multiple Choice 9 percent; 3.33 percent


1.5 percent; 6 percent 3.33 percent; 9 percent 6 percent; 1.5 percent

If Target Corp. (TGT) recently earned a profit of $6.07 earnings per share and has a P/E ratio of 16.5. The dividend has been growing at a 10 percent rate over the past few years. If this growth continues, what would be the stock price in five years if the P/E ratio remained unchanged? What would the price be if the P/E ratio increased to 18 in five years? Multiple Choice $161.30, $175.96 respectively $259.78, $283.39 respectively $100.16, $109.26 respectively $261.30, $275.96 respectively


If a preferred stock from Pfizer Inc. (PFE) pays $3.00 in annual dividends, and the required return on the preferred stock is 7 percent, what’s the value of the stock? Multiple Choice $21.00 $0.21 $0.43 $42.86

At your full-service brokerage firm, it costs $120 per stock trade. How much money do you receive after selling 200 shares of Ralph Lauren (RL), which trades at $85.13? Multiple Choice $16,906.00 $17,146.00 $17,026.00 $16,546.00


At your discount brokerage firm, it costs $7.95 per stock trade. How much money do you receive after selling 250 shares of General Electric (GE), which trades at $55.19? Multiple Choice $13,789.55 $12,174.95 $11,958.55 $14,037.95

JUJU’s dividend next year is expected to be $5.50. It is trading at $45 and is expected to grow at 4 percent per year. What is JUJU’s dividend yield and capital gain? Multiple Choice 12.22 percent; 4 percent 2.5 percent; 6 percent 4 percent; 12.22 percent 6 percent; 2.5 percent


You would like to buy shares of International Business Machines (IBM). The current bid and ask quotes are $96.17 and $96.24, respectively. You place a market buy-order for 100 shares that executes at these quoted prices. How much money did it cost to buy these shares? Multiple Choice $19,241.00 $9,624.00 $9,617.00 $7.00

The size of the firm measured as the current stock price multiplied by the number of shares outstanding is referred to as the firm’s: Multiple Choice book value. market capitalization.


market makers. constant growth model.

Investors sell stock at the: Multiple Choice broker price. dealer price. bid price. quoted ask price.

Stock valuation model dynamics make clear that lower discount rates lead to: Multiple Choice lower growth rates. higher growth rates. lower valuations. higher valuations.


You would like to sell 400 shares of International Business Machines (IBM). The current bid and ask quotes are $96.24 and $96.17, respectively. You place a limit sell-order at $96.20. If the trade executes, how much money do you receive from the buyer? Multiple Choice $38,496.00 $38,468.00 $38,480.00 $38,464.00

A preferred stock from DLC pays $5.10 in annual dividends. If the required return on the preferred stock is 12.1 percent, what is the value of the stock? Multiple Choice $240.97 $6.31 $42.15 $47.25


Ralph Lauren (RL) has earnings per share of $3.85 and a P/E ratio of 17.37. What is the stock price? Multiple Choice $0.22 $66.87 $22.16 $4.51

Many companies grow very fast at first, but slower future growth can be expected. Such companies are called: Multiple Choice constant growth rate firms. variable growth rate firms. Fortune 500 companies. blue chip companies.


FIN 370T Assignment Week 4 Apply Exercise(All Possible Questions/Answers) http://www.snaptutorial.com/FIN%20370T/product-38724-FIN370T-Assignment-Week-4-Apply-Week-4-Exercise

For more classes visit www.snaptutorial.com


FIN 370T ASSIGNMENT Week 4 Apply: Week 4 Exercise Review the Week 4 “Knowledge Check” in Connect® in preparation for this Assignment . Complete the Week 4 “Exercise” in Connect®. Note: You have only one attempt available to complete this Assignment . Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.

Which of the following is correct? Multiple Choice All of the statements are correct. In some years, long-term Treasury bonds performed better than stocks. Over a long time frame, stocks have performed better than long-term Treasury bonds. Average stock returns are not an indication of what an investor may earn in any one year.

The optimal portfolio for you will be: Multiple Choice the one that reflects the amount of risk that you are willing to take.


the one that offers the highest returns. the one that offers the lowest correlation. the one that offers the most diversification.

Year-to-date, Oracle had earned a 12.57 percent return. During the same time period, Valero Energy earned −9.32 percent and McDonald’s earned 3.45 percent. If you have a portfolio made up of 60 percent Oracle, 20 percent Valero Energy, and 20 percent McDonald’s, what is your portfolio return? Multiple Choice 6.70 percent 10.10 percent 6.37 percent 8.45 percent

Which of these is the reward for taking systematic stock market risk? Multiple Choice


Required return Risk premium Market risk premium Risk-free rate

You have a portfolio consisting of 20 percent Boeing (beta = 1.3) and 40 percent Hewlett-Packard (beta = 1.6) and 40 percent McDonald’s stock (beta = 0.7). How much market risk does the portfolio have? Multiple Choice This portfolio has 28 percent less risk than the general market. This portfolio has 18 percent more risk than the general market. This portfolio has 18 percent less risk than the general market. This portfolio has 28 percent more risk than the general market.

A company’s current stock price is $22.00 and its most recent dividend was $0.75 per share. Since analysts estimate the company will have a 12 percent growth rate, what is its expected return?


Multiple Choice 12.00 percent 15.82 percent 3.00 percent 3.48 percent

Which of the following will impact the cost of equity component in the weighted average cost of capital? Multiple Choice Beta All of the above Expected return on the market The risk-free rate

The reason that we do not use an after-tax cost of preferred stock is: Multiple Choice


because most of the investors in preferred stock do not pay tax on the dividends. because preferred dividends are paid out of before-tax income. None of the options are correct. because we can only estimate the marginal tax rate of the preferred stockholders.

Diddy Corp. stock has a beta of 1.0, the current risk-free rate is 5 percent, and the expected return on the market is 15.5 percent. What is Diddy’s cost of equity? Multiple Choice 14.20 percent 18.50 percent 16.30 percent 15.50 percent


Which of the following is a principle of capital budgeting which states that the calculations of cash flows should remain independent of financing? Multiple Choice Financing principle Separation principle Generally accepted accounting principle WACC principle ********************************

FIN 370T Assignment Week 4 Apply: Risk and the Cost of Capital Homework(All Possible Questions/Answers)

For more classes visit www.snaptutorial.com FIN 370T ASSIGNMENT Week 4 Apply: Risk and the Cost of Capital Homework Review the Week 4 “Practice: Risk and the Cost of Capital Quiz” in Connect®.


Complete the Week 4 “Apply: Risk and the Cost of Capital Homework” in Connect®. Note: You have only one attempt available to complete Assignment s. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.

Rx Corp. stock was $60.00 per share at the end of last year. Since then, it paid a $1.00 per share dividend last year. The stock price is currently $62.50. If you owned 400 shares of Rx, what was your percent return? Multiple Choice 1.67 percent 4.17 percent 5.83 percent 5.60 percent

TechNo stock was $25 per share at the end of last year. Since then, it paid a $1.50 per share dividend last year. The stock price is currently $23. If you owned 300 shares of TechNo, what was your percent return? Multiple Choice 6 percent


−2 percent 6.5 percent −8 percent

Which of these is a measure summarizing the overall past performance of an investment? Multiple Choice Dollar return Market return Average return Percentage return

Rank the following three stocks by their level of total risk, highest to lowest. Rail Haul has an average return of 8 percent and standard deviation of 10 percent. The average return and standard deviation of Idol Staff are 10 percent and 20 percent; and of Poker-R-Us are 6 percent and 15 percent. Multiple Choice


Idol Staff, Rail Haul, Poker-R-Us Rail Haul, Poker-R-Us, Idol Staff Poker-R-Us, Idol Staff, Rail Haul Idol Staff, Poker-R-Us, Rail Haul

Rank the following three stocks by their total risk level, highest to lowest. Night Ryder has an average return of 14 percent and standard deviation of 30 percent. The average return and standard deviation of WholeMart are 12 percent and 25 percent; and of Fruit Fly are 25 percent and 40 percent. Multiple Choice WholeMart, Fruit Fly, Night Ryder Night Ryder, WholeMart, Fruit Fly WholeMart, Night Ryder, Fruit Fly Fruit Fly, Night Ryder, WholeMart

MedTech Corp. stock was $50.95 per share at the end of last year. Since then, it paid a $0.45 per share dividend. The stock price is currently


$62.50. If you owned 500 shares of MedTech, what was your percent return? Multiple Choice 22.67 percent 23.55 percent 8.83 percent 7.20 percent

FedEx Corp. stock ended the previous year at $113.39 per share. It paid a $0.40 per share dividend last year. It ended last year at $126.69. If you owned 300 shares of FedEx, what was your dollar return and percent return? Multiple Choice $4,110; 12.08 percent $4,250; 12.29 percent $2,009; 9.13 percent $3,990; 11.73 percent


A stock has an expected return of 15 percent and a standard deviation of 20 percent. Long-term Treasury bonds have an expected return of 9 percent and a standard deviation of 11 percent. Given this data, which of the following statements is correct? Multiple Choice The stock investment has a better risk-return trade-off. The bond investment has a better risk-return trade-off. Both investments have the same diversifiable risk. The two assets have the same coefficient of variation.

Which of these is the portion of total risk that is attributable to overall economic factors? Multiple Choice Firm specific risk Total risk Market risk Modern portfolio risk


Which of these is the term for portfolios with the highest return possible for each risk level? Multiple Choice Modern portfolios Efficient portfolios Optimal portfolios Total portfolios

Modern portfolio theory is: Multiple Choice a concept and procedure for combining securities into a portfolio to minimize risk. a concept and procedure for combining securities into a portfolio to maximize volatility. a concept and procedure for combining securities into a portfolio to maximize return. a concept and procedure for combining securities into a portfolio to maximize dollar return.


If the risk-free rate is 8 percent and the market risk premium is 2 percent, what is the required return for the market? Multiple Choice 8 percent 6 percent 2 percent 10 percent

Compute the expected return given these three economic states, their likelihoods, and the potential returns:

Economic State Fast Growth

Probability

0.40

25 %

Slow Growth 0.55

12 %

Recession

−50 %

0.05

Return


________________________________________ Multiple Choice 29.0 percent −4.3 percent 19.1 percent 14.1 percent

If the risk-free rate is 10 percent and the market risk premium is 4 percent, what is the required return for the market? Multiple Choice 14 percent 4 percent 10 percent 7 percent


Which of the following is typically considered the return on U.S. government bonds and bills and equals the real interest plus the expected inflation premium? Multiple Choice Required return Market risk premium Risk-free rate Risk premium

Which of the following is a model that includes an equation that relates a stock’s required return to an appropriate risk premium? Multiple Choice Asset pricing Efficient markets Behavioral finance Beta


The annual return on the S&P 500 Index was 18.1 percent. The annual T-bill yield during the same period was 6.2 percent. What was the market risk premium during that year? Multiple Choice 6.2 percent 11.9 percent 18.1 percent 24.3 percent

Which of the following are the stocks of small companies that are priced below $1 per share? Multiple Choice Penny stocks Hedge fund stocks Stock market bubble stocks Bargain stocks


A company has a beta of 0.50. If the market return is expected to be 12 percent and the risk-free rate is 5 percent, what is the company’s required return? Multiple Choice 6.0 percent 11.0 percent 13.5 percent 8.5 percent

If the Japanese stock market bubble peaked at 37,500, and two and a half years later it had fallen to 25,900, what was the percentage decline? Multiple Choice −30.93 percent −69.07 percent −27.63 percent −10.31 percent


A company’s current stock price is $84.50 and it is likely to pay a $3.50 dividend next year. Since analysts estimate the company will have a 10 percent growth rate, what is its expected return? Multiple Choice 14.14 percent 10.00 percent 4.26 percent 4.14 percent

Shares of stock issued to employees that have limitations on when they can be sold are known as: Multiple Choice executive stock options. stock market bubble. restricted stock. privately held information.


Which of the following will directly impact the cost of equity? Multiple Choice Expected growth rate in sales Stock price Expected future tax rates Profit margins

Which of these makes this a true statement? The WACC formula: Multiple Choice uses the after-tax costs of capital to compute the firm’s weighted average cost of debt financing. is not impacted by taxes. focuses on operating costs only to keep them separate from financing costs. uses the pre-tax costs of capital to compute the firm’s weighted average cost of debt financing.


When firms use multiple sources of capital, they need to calculate the appropriate discount rate for valuing their firm’s cash flows as: Multiple Choice a simple average of the capital components costs. a sum of the capital components costs. they apply to each asset as they are purchased with their respective forms of debt or equity. a weighted average of the capital components costs

Which of the following is a true statement? Multiple Choice To estimate the before-tax cost of debt, we use the coupon rate on the firm’s existing debt. To estimate the before-tax cost of debt, we need to solve for the Yield to Call (YTC) on the firm’s existing debt. To estimate the before-tax cost of debt, we need to solve for the Yield to Maturity (YTM) on the firm’s existing debt. To estimate the before-tax cost of debt, we use the average rate on the firm’s existing debt.


JackITs has 5 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 20 thousand bonds. If the common shares are selling for $28 per share, the preferred shares are selling for $13.50 per share, and the bonds are selling for 98 percent of par, what would be the weight used for equity in the computation of JackITs’ WACC? Multiple Choice 83.08 percent 80.88 percent 91.19 percent 33.33 percent

TellAll has 10 million shares of common stock outstanding, 20 million shares of preferred stock outstanding, and 100 thousand bonds. If the common shares are selling for $32 per share, the preferred shares are selling for $20 per share, and the bonds are selling for 106 percent of par, what would be the weight used for preferred stock in the computation of TellAll’s WACC? Multiple Choice


55.55 percent 66.45 percent 48.43 percent 33.33 percent

ADK has 30,000 15-year 9 percent semi-annual coupon bonds outstanding. If the bonds currently sell for 90 percent of par and the firm pays an average tax rate of 32 percent, what will be the before-tax and after-tax component cost of debt? Multiple Choice 11.19 percent; 7.61 percent 9.85 percent; 6.70 percent 10.12 percent; 6.88 percent 10.32 percent; 7.02 percent

Flotation costs are: Multiple Choice


commissions to the underwriting firm that floats the issue. insignificant and can be assumed away. the difference between the bid-ask spread on the sale of the security. None of the options are correct. ********************************

FIN 370T Assignment Week 4 Practice: Risk and the Cost of Capital Quiz(All Possible Questions/Answers)

For more classes visit www.snaptutorial.com FIN 370T ASSIGNMENT Week 4 Practice: Risk and the Cost of Capital Quiz Complete the Week 4 “Practice: Risk and the Cost of Capital Quiz” in Connect®. Note: You have unlimited attempts available to complete practice Assignment s. The highest scored attempt will be recorded. These Assignment s have earlier due dates, so plan accordingly.


Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.

Rank the following three stocks by their total risk level, highest to lowest. Night Ryder has an average return of 14 percent and standard deviation of 30 percent. The average return and standard deviation of WholeMart are 12 percent and 25 percent; and of Fruit Fly are 25 percent and 40 percent. Multiple Choice Night Ryder, WholeMart, Fruit Fly WholeMart, Night Ryder, Fruit Fly WholeMart, Fruit Fly, Night Ryder Fruit Fly, Night Ryder, WholeMart

Which of these is the dollar return characterized as a percentage of money invested? Multiple Choice Dollar return Percentage return Market return


Average return

Rx Corp. stock was $60.00 per share at the end of last year. Since then, it paid a $1.00 per share dividend last year. The stock price is currently $62.50. If you owned 400 shares of Rx, what was your percent return? Multiple Choice 4.17 percent 5.83 percent 5.60 percent 1.67 percent

Which of these includes any capital gain (or loss) that occurred as well as any income that you received from a specific investment? Multiple Choice Portfolio Average return Dollar return


Market return

Which of the following is defined as the volatility of an investment, which includes firm specific risk as well as market risk? Multiple Choice Standard deviation Total risk Diversifiable risk Market risk

Which of these is a measure summarizing the overall past performance of an investment? Multiple Choice Dollar return Average return Percentage return Market return


Which of these statements is true? Multiple Choice When people purchase a stock, they know exactly what their dollar and percent return are going to be. When people purchase a stock, they do not know what their return is going to be-either short term or in the long run. Many people purchase stocks as they find comfort in the certainty for this safe form of investing. When people purchase a stock, they know the short-term return, but not the long-term return.

TechNo stock was $25 per share at the end of last year. Since then, it paid a $1.50 per share dividend last year. The stock price is currently $23. If you owned 300 shares of TechNo, what was your percent return? Multiple Choice −2 percent 6 percent −8 percent


6.5 percent

Which statement is true? Multiple Choice The larger the standard deviation, the lower the total risk. The larger the standard deviation, the more portfolio risk. The standard deviation is not an indication of total risk. The larger the standard deviation, the higher the total risk.

MedTech Corp. stock was $50.95 per share at the end of last year. Since then, it paid a $0.45 per share dividend. The stock price is currently $62.50. If you owned 500 shares of MedTech, what was your percent return? Multiple Choice 22.67 percent 7.20 percent 8.83 percent 23.55 percent


Sprint Nextel Corp. stock ended the previous year at $25.00 per share. It paid a $2.57 per share dividend last year. It ended last year at $18.89. If you owned 650 shares of Sprint, what was your dollar return and percent return? Multiple Choice $2,960; 11.13 percent −$3,960; −15.13 percent −$2,301; −14.16 percent −$4,960; −16.13 percent

FedEx Corp. stock ended the previous year at $113.39 per share. It paid a $0.40 per share dividend last year. It ended last year at $126.69. If you owned 300 shares of FedEx, what was your dollar return and percent return? Multiple Choice $2,009; 9.13 percent


$4,250; 12.29 percent $4,110; 12.08 percent $3,990; 11.73 percent

Rank the following three stocks by their risk-return relationship, best to worst. Rail Haul has an average return of 10 percent and standard deviation of 15 percent. The average return and standard deviation of Idol Staff are 15 percent and 25 percent; and of Poker-R-Us are 12 percent and 35 percent. Multiple Choice Idol Staff, Poker-R-Us, Rail Haul Poker-R-Us, Idol Staff, Rail Haul Rail Haul, Idol Staff, Poker-R-Us Idol Staff, Rail Haul, Poker-R-Us

A stock has an expected return of 15 percent and a standard deviation of 20 percent. Long-term Treasury bonds have an expected return of 9 percent and a standard deviation of 11 percent. Given this data, which of the following statements is correct?


Multiple Choice Both investments have the same diversifiable risk. The stock investment has a better risk-return trade-off. The bond investment has a better risk-return trade-off. The two assets have the same coefficient of variation.

A stock has an expected return of 12 percent and a standard deviation of 20 percent. Long-term Treasury bonds have an expected return of 9 percent and a standard deviation of 15 percent. Given this data, which of the following statements is correct? Multiple Choice The two assets have the same coefficient of variation. Both investments have the same diversifiable risk. The stock investment has a better risk-return trade-off. The bond investment has a better risk-return trade-off.

Year to date, Company Y had earned a 7 percent return. During the same time period, Company R earned 9.25 percent and Company C earned


−2.25 percent. If you have a portfolio made up of 35 percent Y, 40 percent R, and 25 percent C, what is your portfolio return? Multiple Choice 5.5875 percent 4.6667 percent 6.1667 percent 12.6625 percent

Which of these is the investor’s combination of securities that achieves the highest expected return for a given risk level? Multiple Choice Total portfolio Modern portfolio Optimal portfolio Efficient portfolio

If you invested $30,000 in Disney and $10,000 in Oracle and the two companies returned 6 percent and 12 percent respectively, what was your portfolio’s return?


Multiple Choice 9.0 percent 7.5 percent 18.0 percent 10.5 percent

The annual return on the S&P 500 Index was 18.1 percent. The annual T-bill yield during the same period was 6.2 percent. What was the market risk premium during that year? Multiple Choice 6.2 percent 18.1 percent 11.9 percent 24.3 percent


Which of the following is a true statement? Multiple Choice The risk and return that a firm experienced in the past is also the risk level for its future. Firms can quite possibly change their stocks’ risk level by substantially changing their business. If a firm takes on less risky new projects over time, the firm itself will become more risky. If a firm takes on riskier new projects over time, the firm itself will become less risky.

Compute the expected return given these three economic states, their likelihoods, and the potential returns: Economic State Fast Growth

Probability

0.3

40 %

Slow Growth 0.4

15 %

Recession

−15 %

0.3

Return

________________________________________


Multiple Choice 40.0 percent 18.3 percent 22.5 percent 13.5 percent

Compute the expected return given these three economic states, their likelihoods, and the potential returns: Economic State Fast Growth

0.1

Probability 50 %

Slow Growth 0.6

8

Recession

−10 %

0.3

Return

%

________________________________________

Multiple Choice 12.8 percent 6.8 percent


16.0 percent 22.7 percent

Which of the following is the average of the possible returns weighted by the likelihood of those returns occurring? Multiple Choice Expected return Required return Efficient return Market return

Which of these is the set of probabilities for all possible occurrences? Multiple Choice Stock market bubble Probability Market probabilities


Probability distribution

Which of the following is a model that includes an equation that relates a stock’s required return to an appropriate risk premium? Multiple Choice Asset pricing Behavioral finance Efficient markets Beta

Compute the expected return given these three economic states, their likelihoods, and the potential returns:

Economic State Fast Growth

Probability

0.40

25 %

Slow Growth 0.55

12 %

Recession

−50 %

0.05

Return


________________________________________ Multiple Choice 14.1 percent 19.1 percent 29.0 percent −4.3 percent

The average annual return on the S&P 500 Index from 1986 to 1995 was 17.6 percent. The average annual T-bill yield during the same period was 9.8 percent. What was the market risk premium during these 10 years? Multiple Choice 8.8 percent 7.8 percent 8.2 percent 9.8 percent


If the risk-free rate is 8 percent and the market risk premium is 2 percent, what is the required return for the market? Multiple Choice 6 percent 8 percent 2 percent 10 percent

You have a portfolio consisting of 20 percent Boeing (beta = 1.3) and 40 percent Hewlett-Packard (beta = 1.6) and 40 percent McDonald’s stock (beta = 0.7). How much market risk does the portfolio have? Multiple Choice This portfolio has 28 percent more risk than the general market. This portfolio has 18 percent more risk than the general market. This portfolio has 28 percent less risk than the general market. This portfolio has 18 percent less risk than the general market.


Which of these refers to something that has not been released to the public, but is known by few individuals, likely company insiders? Multiple Choice Insider trading Privately held information Restricted stock Audited financial statements

Which of the following is the asset pricing theory based on a beta, a measure of market risk? Multiple Choice Efficient market hypothesis Behavioral asset pricing model Capital asset pricing model Efficient markets asset pricing model


Netflix, Inc. has a beta of 3.61. If the market return is expected to be 13.2 percent and the risk-free rate is 7 percent, what is Netflix’s risk premium? Multiple Choice 29.38 percent 25.72 percent 22.38 percent 20.91 percent

Which of the following are the stocks of small companies that are priced below $1 per share? Multiple Choice Stock market bubble stocks Bargain stocks Penny stocks Hedge fund stocks


A company has a beta of 2.91. If the market return is expected to be 16 percent and the risk-free rate is 4 percent, what is the company’s risk premium? Multiple Choice 11.64 percent 34.92 percent 12.00 percent 22.91 percent

Shares of stock issued to employees that have limitations on when they can be sold are known as: Multiple Choice restricted stock. privately held information. stock market bubble. executive stock options.


ABC Inc. has a dividend yield equal to 3 percent and is expected to grow at a 7 percent rate for the next seven years. What is ABC’s required return? Multiple Choice 11 percent 10 percent 4 percent 5 percent

Which of the following is a true statement? Multiple Choice To estimate the before-tax cost of debt, we need to solve for the Yield to Maturity (YTM) on the firm’s existing debt. To estimate the before-tax cost of debt, we use the average rate on the firm’s existing debt. To estimate the before-tax cost of debt, we use the coupon rate on the firm’s existing debt. To estimate the before-tax cost of debt, we need to solve for the Yield to Call (YTC) on the firm’s existing debt.


Which of the following will impact the cost of equity component in the weighted average cost of capital? Multiple Choice The risk-free rate Expected return on the market Beta All of the above

Which of the following statements is correct? Multiple Choice All of the statements are correct. The weights of debt and equity should be based on the balance sheet because this is the most accurate assessment of the valuation. The weighted average cost of capital is calculated on a before-tax basis. An increase in the market risk premium is likely to increase the weighted average cost of capital.


Which of the following will directly impact the cost of equity? Multiple Choice Profit margins Stock price Expected growth rate in sales Expected future tax rates

When firms use multiple sources of capital, they need to calculate the appropriate discount rate for valuing their firm’s cash flows as: Multiple Choice a weighted average of the capital components costs. they apply to each asset as they are purchased with their respective forms of debt or equity. a sum of the capital components costs. a simple average of the capital components costs.


ADK has 30,000 15-year 9 percent annual coupon bonds outstanding. If the bonds currently sell for 111 percent of par and the firm pays an average tax rate of 36 percent, what will be the before-tax and after-tax component cost of debt? Multiple Choice 9 percent; 5.76 percent 7.91 percent; 5.06 percent 8.05 percent; 5.15 percent 7.74 percent; 4.95 percent

Uptown Inc. has preferred stock selling for 102 percent of par that pays a 6 percent annual coupon. What would be Uptown’s component cost of preferred stock? Multiple Choice 5.88 percent 1.02 percent 6.12 percent 6.00 percent


OMG Inc. has 4 million shares of common stock outstanding, 3 million shares of preferred stock outstanding, and 50 thousand bonds. If the common shares are selling for $21 per share, the preferred shares are selling for $10 per share, and the bonds are selling for 111 percent of par ($1,000), what weight should you use for debt in the computation of OMG’s WACC? Multiple Choice 25.79 percent 21.86 percent 29.86 percent 32.74 percent

JackITs has 5 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 20 thousand bonds. If the common shares are selling for $28 per share, the preferred shares are selling for $13.50 per share, and the bonds are selling for 98 percent of par, what would be the weight used for equity in the computation of JackITs’ WACC? Multiple Choice 83.08 percent


91.19 percent 33.33 percent 80.88 percent

An average of which of the following will give a fairly accurate estimate of what a project’s beta will be? Multiple Choice Pure-play proxies Flotation beta Proxy beta Weighted average beta

Marme Inc. has preferred stock selling for 137 percent of par that pays an 11 percent annual dividend. What would be Marme’s component cost of preferred stock? Multiple Choice 8.03 percent


11.00 percent 8.17 percent 10.16 percent

FarCry Industries, a maker of telecommunications equipment, has 6 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10 thousand bonds. If the common shares are selling for $27 per share, the preferred shares are selling for $15 per share, and the bonds are selling for 119 percent of par ($1,000), what weight should you use for debt in the computation of FarCry’s WACC? Multiple Choice 4.93 percent 5.81 percent 5.07 percent 6.30 percent

Which of these are fees paid by firms to investment bankers for issuing new securities?


Multiple Choice Interest expense User fees Flotation costs Seller financing charges

Which of the following is a principle of capital budgeting which states that the calculations of cash flows should remain independent of financing? Multiple Choice Generally accepted accounting principle Financing principle WACC principle Separation principle

FIN 370T Assignment Week 5 Apply Exercise(All Possible Questions/Answers)


http://www.snaptutorial.com/FIN%20370T/product-38728-FIN370T-Assignment-Week-5-Apply-Week-5-Exercise

For more classes visit www.snaptutorial.com

FIN 370T ASSIGNMENT Week 5 Apply: Week 5 Exercise Review the Week 5 “Knowledge Check” in Connect® in preparation for this Assignment . Complete the Week 5 “Exercise” in Connect®.


Note: You have only one attempt available to complete this Assignment . Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.

Equipment was purchased for $50,000 plus $2,500 in freight charges. Installation costs were $1,500 and sales tax totaled $1,000. Hiring a special consultant to provide advice during the selection of the equipment cost $3,000. What is this asset’s depreciable basis? Multiple Choice $58,000 $57,000 $51,000 $55,000

If a firm has already paid an expense or is obligated to pay one in the future, regardless of whether a particular project is undertaken, that expense is a: Multiple Choice committed cost.


sunk cost. complementary cost. obligated cost.

Effects that arise from a new product or service that decrease sales of the firm’s existing products or services are referred to as: Multiple Choice complementary effects. sunk effects. substitutionary effects. marginal effects.


Your company is considering a new project that will require $100,000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $25,000 using straight-line depreciation. The cost of capital is 11 percent, and the firm’s tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation. Multiple Choice $16,997.13 $15,017.54 $14,841.29 $13,607.52

Accelerated depreciation allows firms to: Multiple Choice receive less of the dollars of depreciation earlier in the asset’s life. receive more of the dollars of depreciation later in the asset’s life. receive more of the dollars of depreciation earlier in the asset’s life.


not pay any taxes during an asset’s life.

You are trying to pick the least expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $13,000 to purchase and which will have OCF of −$1,200 annually throughout the vehicle’s expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $23,000 to purchase and which will have OCF of −$550 annually throughout that vehicle’s expected five-year life. Both cars will be worthless at the end of their life. If you intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future, and if your business has a cost of capital of 16 percent, what is the difference in the EAC of the two cars? Multiple Choice $428.04 $586.07 $381.36 $601.51


Which of the following statements is correct? Multiple Choice A weakness of both payback and discounted payback is that neither accounts for cash flows received after the payback. Discounted payback uses a more aggressive reinvestment rate assumption than payback. Neither payback nor discounted payback uses time value of money concepts. None of the statements are correct.

Compute the NPV for Project X with the cash flows shown as follows if the appropriate cost of capital is 10 percent.


Time

0

1

2

Cash Flow – $ 100,000 $ 00 $ 10,000

3

4

36,000

$

200,000

$

210,0

________________________________________ Multiple Choice $262,622.77 $248,962.50 $183,507.96 $247,410.67

Compute the MIRR for Project Y and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent.

Time:

0

Cash flow:

1

2

−5,000

3

4 1,000

5 1,000

0

2,000

2,000


Multiple Choice 47.09 percent, accept 7.62 percent, reject 47.09 percent, reject 7.62 percent, accept

Compute the PI statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent.

Time:

0

Cash flow:

1

2

3

−75 −75 0

Multiple Choice 18.96 percent, accept 13.26 percent, accept

4

5 100 75 50


10 percent, reject 14.22 percent, accept

FIN 370T Assignment Week 5 Apply: Project Cash Flows and Capital Budgeting Homework(All Possible Questions/Answers) http://www.snaptutorial.com/FIN%20370T/product-38730-FIN370T-Assignment-Week-5-Apply-Project-Cash-Flows-andCapital-Budgeting-Homework

For more classes visit www.snaptutorial.com


FIN 370T ASSIGNMENT Week 5 Apply: Project Cash Flows and Capital Budgeting Homework Review the Week 5 “Practice: Project Cash Flows and Capital Budgeting Quiz” in Connect®. Complete the Week 5 “Apply: Project Cash Flows and Capital Budgeting Homework” in Connect®. Note: You have only one attempt available to complete Assignment s. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date


The process of estimating expected future cash flows of a project using only the relevant parts of the balance sheet and income statements is referred to as: Multiple Choice incremental cash flows. estimation and depreciation analysis. pro forma analysis. substitute and complement.

Coke is planning on marketing a new drink called Very Berry Coke which is a mixture of raspberry and blackberry flavors blended to perfection and added to the highly secret Coca-Cola formula. This new product is expected to reduce the sales of their existing product, Cherry Coke, by $10 million per year. This is an example of a: Multiple Choice substitutionary effect. pro forma effect. opportunity effect. complementary effect.


A new project would require an immediate increase in raw materials in the amount of $1,000. The firm expects that accounts payable will automatically increase $800. How much must the firm expect its investment in net working capital to change if they accept this project? Multiple Choice −$200 +$200 +$1,800 −$1,800

A local bank is contemplating adding a new ATM to their lobby. They will need another phone line to provide communications that has a monthly cost of $50 per month. This is an example of: Multiple Choice complementary costs. incremental cash flow.


sunk cost. none of the options.

Suppose you sell a fixed asset for $99,000 when its book value is $129,000. If your company’s marginal tax rate is 39 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)? Multiple Choice $110,700 $80,700 $84,800 $77,300

Suppose you sell a fixed asset for $99,000 when its book value is $75,000. If your company’s marginal tax rate is 39 percent, what is the gain or loss on the sale of the asset?


Multiple Choice $14,640 $10,300 $24,000 $11,600

To correctly project cash flows, we need to consider all of the factors EXCEPT: Multiple Choice the likely impact that the new service or product will have on the firm’s existing products’ cost and revenues. use of assets or employees already employed by the firm. the new product’s or service’s costs and revenues. All of the options are factors that need to be considered.


Which of these is the process of estimating expected future cash flows of a project using only the relevant parts of the balance sheet and income statements? Multiple Choice Substitutionary analysis Pro forma analysis Cash flow analysis Incremental cash flows

All of the following can be included in the depreciable basis of an asset EXCEPT: Multiple Choice sales tax. freight charges. variable costs. installation fees.


A new project would require an immediate increase in raw materials in the amount $6,000. The firm expects that accounts payable will automatically increase $2,000. How much must the firm expect its investment in net working capital to increase if they accept this project? Multiple Choice −$6,000 −$4,000 +$6,000 +$4,000

Accelerated depreciation allows firms to: Multiple Choice receive less of the dollars of depreciation earlier in the asset’s life. receive more of the dollars of depreciation later in the asset’s life. receive more of the dollars of depreciation earlier in the asset’s life. not pay any taxes during an asset’s life.


Your company is considering a new project that will require $250,000 of new equipment at the start of the project. The equipment will have a depreciable life of eight years and will be depreciated to a book value of $10,000 using straight-line depreciation. The cost of capital is 12 percent, and the firm’s tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation. Multiple Choice $50,669.93 $86,997.13 $75,017.54 $63,617.52

Section 179 allows a business, with certain restrictions, to do which of the following? Multiple Choice Get a government grant to purchase the asset. Expense the asset using double declining balance depreciation during the life of the asset. Offset the tax liability with the cost of the asset in the year of purchase. Expense the asset immediately in the year of purchase.


You are trying to pick the least expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $13,000 to purchase and which will have OCF of −$1,200 annually throughout the vehicle’s expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $23,000 to purchase and which will have OCF of −$550 annually throughout that vehicle’s expected five-year life. Both cars will be worthless at the end of their life. If you intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future, and if your business has a cost of capital of 16 percent, what is the difference in the EAC of the two cars? Multiple Choice $428.04 $586.07 $381.36 $601.51

Compute the NPV statistic for Project Y given the following cash flows if the appropriate cost of capital is 10 percent.


Project Y

Time

0

1

Cash Flow – $ 50,000 $ $ 20,000

2 7,000

3

$

4 $ 10,000

5 20,000

$

20,000

________________________________________ Multiple Choice $7.788.34 $107,788.34 −$19,594.29 $9.367.11

A capital budgeting technique that generates a decision rule and associated metric for choosing projects based on the total discounted value of their cash flows is referred to as: Multiple Choice MIRR. PI.


NPV. IRR.

Compute the NPV for Project X with the cash flows shown as follows if the appropriate cost of capital is 9 percent.

Time

0

Cash Flow – $ 5,000 $ 500

1

2 $

3

1,000 $ 500

4 $

5 2,000

________________________________________ Multiple Choice −$2,013.18 $486.29 $9,824.34 −$175.66

$

2,000


Compute the NPV statistic for Project X given the following cash flows if the appropriate cost of capital is 10 percent. Project X

Time

0

Cash Flow $ 36,000 $ 10,000

1 –$

2

3

100,000 $ 200,000

4 –

$

210,000

________________________________________ Multiple Choice $183,507.96 $262,622.77 $247,410.67 $248,962.50

Neither payback period nor discounted payback period techniques for evaluating capital projects account for:


Multiple Choice cash flows that occur during payback. cash flows that occur after payback. time value of money. market rates of return.

A firm is evaluating a potential investment that is expected to generate cash flows of $100 in years 1 through 4 and $400 in years 5 through 7. The initial investment is $750. What is the payback for this investment? Multiple Choice 4.88 years 5.88 years 5.48 years 4.48 years

Which of these describe groups or pairs of projects where you can accept one but not all?


Multiple Choice Mutually dependent Mutually exclusive Independent Dependent

Compute the NPV statistic for Project Y given the following cash flows if the appropriate cost of capital is 10 percent. Project Y

Time

0

1

Cash Flow – $ 8,000 $ $ 2,000

2 3,350

3

4 $

4,180

________________________________________ Multiple Choice $964.72 $894.37

$

1,520


$993.97 $1,008.03

Compute the discounted payback statistic for Project Y and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent and the maximum allowable discounted payback is three years.

Time:

0

Cash flow:

1

2

−5,000

Multiple Choice 3.45 years, accept 3.86 years, reject 3.86 years, accept 3.45 years, reject

3

4

5

500 2,000

3,000

1,500

500


Compute the MIRR statistic for Project I and note whether to accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 15 percent. Project I

Time

0

1

Cash Flow – $ 1,000 $ 300 $ 50

2 400

3

4 $

5

300

$

200

$

________________________________________ Multiple Choice The project’s MIRR is 17.17 percent and the project should be accepted. The project’s MIRR is 10.29 percent and the project should be rejected. The project’s MIRR is 12.67 percent and the project should be rejected. The project’s MIRR is 18.19 percent and the project should be accepted.

Which of these is a capital budgeting technique that generates a decision rule and associated metric for choosing projects based on the total discounted value of their cash flows?


Multiple Choice Net present value Discounted payback Profitability index Internal rate of return

Compute the IRR for Project X and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 9 percent.

Time:

0

Cash flow:

1

2

−1,000

Multiple Choice 9 percent, reject 16.61 percent, reject 9 percent, accept 16.61 percent, accept

3

4

5

−75 100 100 0

2,000


How many possible IRRs could you find for the following set of cash flows?

Time

0

Cash Flow $ 37,350

1 –$

2

3

201,000 $ 460,180

4 –

$

217,020

–$

5,000

________________________________________ Multiple Choice 1 4 2 3

Which of these is a capital budgeting technique that generates decision rules and associated metrics for choosing projects based upon the implicit expected geometric average of a project’s rate of return? Multiple Choice


Net present value Profitability index Internal rate of return Discounted payback

Compute the PI statistic for Project Z and advise the firm whether to accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent.

Project Z

Time

0

1

Cash Flow – $ 1,000 $ 300 $ 100

2 350

3

4 $

5

380

$

420

________________________________________ Multiple Choice The project’s PI is 16.48 percent and the project should be accepted.

$


The project’s PI is 8.48 percent and the project should be accepted. The project’s PI is 21.48 percent and the project should be accepted. The project’s PI is 8.48 percent and the project should be rejected.

Which of the following is a capital budgeting technique that converts a project’s cash flows using a more consistent reinvestment rate prior to applying the Internal Rate of Return, IRR, decision rule? Multiple Choice Discounted payback Modified internal rate of return Profitability index Net present value ********************************

FIN 370T Assignment Week 5 Practice: Project Cash Flows and Capital Budgeting Quiz(All Possible Questions/Answers)


For more classes visit www.snaptutorial.com FIN 370T ASSIGNMENT Week 5 Practice: Project Cash Flows and Capital Budgeting Quiz Complete the Week 5 “Practice: Project Cash Flows and Capital Budgeting Quiz” in Connect®. Note: You have unlimited attempts available to complete practice Assignment s. The highest scored attempt will be recorded. These Assignment s have earlier due dates, so plan accordingly. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.

Effects that arise from a new product or service that increase sales of the firm’s existing products or services are referred to as: Multiple Choice sunk effects. substitutionary effects. complementary effects. marginal effects.


A new project would require an immediate increase in raw materials in the amount $17,000. The firm expects that accounts payable will automatically increase $7,000. How much must the firm expect its investment in net working capital to increase if they accept this project? Multiple Choice $7,000 $10,000 $24,000 $17,000

A new project would require an immediate increase in raw materials in the amount of $12,000. The firm expects that accounts payable will automatically increase $8,500. How much must the firm expect its investment in net working capital to change if they accept this project? Multiple Choice −$20,500 +$3,500 +$20,000 −$3,500


All of the following can be included in the depreciable basis of an asset EXCEPT: Multiple Choice sales tax. variable costs. freight charges. installation fees.

A local bank is contemplating adding a new ATM to their lobby. They will need another phone line to provide communications that has a monthly cost of $50 per month. This is an example of: Multiple Choice none of the options. complementary costs. incremental cash flow. sunk cost.


Which of these is used as a measure of the total amount of available cash flow from a project? Multiple Choice Investment in operating capital Free cash flow Sunk cash flow Operating cash flow

Equipment was purchased for $45,000 plus $2,000 in freight charges. Installation costs were $1,500 and sales tax totaled $1,000. Hiring a special consultant to provide advice during the selection of the equipment cost $3,000. What is this asset’s depreciable basis? Multiple Choice $48,500 $51,500


$49,500 $52,500

Suppose you sell a fixed asset for $10,000 when its book value is $2,000. If your company’s marginal tax rate is 35 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)? Multiple Choice $6,500 $7,200 $5,200 $2,800

As new capital budgeting projects arise, we must estimate: Multiple Choice when such projects will require cash flows.


the cost of the stock being sold for the specific project. the float costs for financing the project. the cost of the loan for the specific project.

AB Mining Company just commissioned a firm to identify if an unused portion of their mine contains any silver or gold at a cost of $125,000. This is an example of a(n): Multiple Choice sunk cost. opportunity cost. relevant cash flow. incremental cash flow.

Effects that arise from a new product or service that decrease sales of the firm’s existing products or services are referred to as: Multiple Choice complementary effects.


marginal effects. sunk effects. substitutionary effects.

To correctly project cash flows, we need to consider all of the factors EXCEPT: Multiple Choice use of assets or employees already employed by the firm. All of the options are factors that need to be considered. the likely impact that the new service or product will have on the firm’s existing products’ cost and revenues. the new product’s or service’s costs and revenues.

Equipment was purchased for $50,000 plus $2,500 in freight charges. Installation costs were $1,500 and sales tax totaled $1,000. Hiring a special consultant to provide advice during the selection of the equipment cost $3,000. What is this asset’s depreciable basis?


Multiple Choice $58,000 $55,000 $57,000 $51,000

A new project would require an immediate increase in raw materials in the amount $6,000. The firm expects that accounts payable will automatically increase $2,000. How much must the firm expect its investment in net working capital to increase if they accept this project? Multiple Choice −$4,000 +$6,000 −$6,000 +$4,000


An asset’s cost plus the amounts you paid for items such as sales tax, freight charges, and installation and testing fees is referred to as the: ___________________. Multiple Choice sunk cost opportunity cost asset costing reference depreciable basis

If a firm has already paid an expense or is obligated to pay one in the future, regardless of whether a particular project is undertaken, that expense is a(n): Multiple Choice expensible item. opportunity cost. sunk cost. incremental cash outflow.


Suppose you sell a fixed asset for $75,000 when its book value is $80,000. If your company’s marginal tax rate is 35 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)? Multiple Choice $48,750 $80,000 $76,750 $5,000

Suppose you sell a fixed asset for $90,000 when its book value is $95,000. If your company’s marginal tax rate is 40 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)? Multiple Choice $5,000 $3,000 $95,000 $92,000


If a firm has already paid an expense or is obligated to pay one in the future, regardless of whether a particular project is undertaken, that expense is a: Multiple Choice obligated cost. sunk cost. committed cost. complementary cost.

Which of these is the process of estimating expected future cash flows of a project using only the relevant parts of the balance sheet and income statements? Multiple Choice Substitutionary analysis Pro forma analysis Incremental cash flows Cash flow analysis


With regard to depreciation, the time value of money concept tells us that: Multiple Choice delaying the depreciation expense is sometimes better. taking the depreciation expense sooner is always better. delaying the depreciation expense is always better. taking the depreciation expense sooner is sometimes better.

Which statement is true regarding cost-cutting proposals? Multiple Choice The main benefits come from the change in sales due to the response from the cost-cutting proposal. The main benefits come only from changes in costs. The main benefits come only from changes in sales.


The main benefits are from changes in sales and changes in costs.

Your company is considering a new project that will require $100,000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $25,000 using straight-line depreciation. The cost of capital is 11 percent, and the firm’s tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation. Multiple Choice $14,841.29 $15,017.54 $13,607.52 $16,997.13

Accelerated depreciation allows firms to: Multiple Choice


receive more of the dollars of depreciation earlier in the asset’s life. receive more of the dollars of depreciation later in the asset’s life. not pay any taxes during an asset’s life. receive less of the dollars of depreciation earlier in the asset’s life.

You are trying to pick the least expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $13,000 to purchase and which will have OCF of −$1,200 annually throughout the vehicle’s expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $23,000 to purchase and which will have OCF of −$550 annually throughout that vehicle’s expected five-year life. Both cars will be worthless at the end of their life. If you intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future, and if your business has a cost of capital of 12 percent, what is the difference in the EAC of the two cars? Multiple Choice $413.25 $317.88 $310.38 $361.13


A disadvantage of the payback statistic is that: Multiple Choice it does not reflect the time value of money. it does not give an indication of the project’s riskiness. it does not consider cash flows beyond the payback period. All of the options are disadvantages of payback.

Compute the MIRR statistic for Project I and note whether to accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 15 percent. Project I

Time

0

1

Cash Flow – $ 1,000 $ 300 $ 50

2 400

3

4 $

5

300

________________________________________

$

200

$


Multiple Choice The project’s MIRR is 18.19 percent and the project should be accepted. The project’s MIRR is 10.29 percent and the project should be rejected. The project’s MIRR is 17.17 percent and the project should be accepted. The project’s MIRR is 12.67 percent and the project should be rejected.

Compute the payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent and the maximum allowable payback is five years.

Time:

0

Cash flow:

1

2

3

−75 −75 0

Multiple Choice 3.67 years, accept 3.67 years, reject 4.67 years, reject

4

5 100 75 50


4.67 years, accept

All of the following are strengths of payback EXCEPT: Multiple Choice its benchmark is not determined by a relevant external constraint. it incorporates the time value of money. it uses a conservative reinvestment rate. none of the options.

Compute the NPV for Project X with the cash flows shown as follows if the appropriate cost of capital is 9 percent.

Time

0

Cash Flow – $ 5,000 $ 500

1

2 $

3

1,000 $ 500

4 $

5 2,000

$

2,000


________________________________________ Multiple Choice −$2,013.18 $9,824.34 $486.29 −$175.66

Compute the discounted payback statistic for Project Y and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent and the maximum allowable discounted payback is three years.

Time:

0

Cash flow:

1

2

−5,000

Multiple Choice 3.86 years, reject 3.45 years, reject 3.45 years, accept

3

4

5

500 2,000

3,000

1,500

500


3.86 years, accept

All of the following are strengths of NPV EXCEPT: Multiple Choice it works equally well for independent and mutually exclusive projects. managers have a preference for using a statistic that is in percent instead of dollars. it uses a conservative reinvestment rate assumption. these are all strengths of the NPV statistic.

Which of the following is a technique for evaluating capital projects that is particularly useful when firms face time constraints in repaying investors? Multiple Choice Profitability index Payback Net present value


Internal rate of return

Compute the NPV for Project X with the cash flows shown as follows if the appropriate cost of capital is 10 percent.

Time

0

1

Cash Flow – $ 100,000 $ 00 $ 10,000

2 36,000

3

4 $

200,000

________________________________________ Multiple Choice $262,622.77 $247,410.67 $248,962.50 $183,507.96

$

210,0


Compute the NPV statistic for Project Y given the following cash flows if the appropriate cost of capital is 10 percent. Project Y

Time

0

1

Cash Flow – $ 8,000 $ $ 2,000

2 3,350

3

4 $

4,180

$

1,520

________________________________________ Multiple Choice $1,008.03 $993.97 $964.72 $894.37

A project costs $91,000 today and is expected to generate cash flows of $11,000 per year for the next 20 years. The firm has a cost of capital of 8 percent. Should this project be accepted, and why? Multiple Choice


Yes, the project should be accepted since it has a NPV = $15,391.23. Yes, the project should be accepted since it has a NPV = $13,610.89. Yes, the project should be accepted since it has a NPV = $16,999.62. None of the options are correct.

Which of the following is a technique for evaluating capital projects that tells how long it will take a firm to earn back the money invested in a project plus interest at market rates? Multiple Choice Net present value Profitability index Discounted payback Payback

Compute the discounted payback statistic for Project X and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent and the maximum allowable discounted payback is three years.


Time:

0

Cash flow:

1

2

3

−1,000

4

5

500 480 400 300 150

Multiple Choice 3.49 years, reject 4.98 years, reject 2.98 years, accept 2.49 years, accept

Compute the NPV for Project X and accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent.

Time:

0

Cash flow:

1

$136.90

3

−75 −75 0

Multiple Choice $14.22

2

4

5 100 75 50


$12.93 $62.07

Compute the NPV statistic for Project X given the following cash flows if the appropriate cost of capital is 10 percent. Project X

Time

0

Cash Flow $ 36,000 $ 10,000

1 –$

2

3

100,000 $ 200,000

4 –

$

210,000

________________________________________ Multiple Choice $183,507.96 $262,622.77 $248,962.50 $247,410.67


Which of these describe groups or pairs of projects where you can accept one but not all? Multiple Choice Dependent Mutually exclusive Mutually dependent Independent

Which of these are sets of cash flows where all the initial cash flows are negative and all the subsequent ones are either zero or positive? Multiple Choice Non-normal cash flows Time line cash flows Normal cash flows Expected cash flows


A decision rule and associated methodology for converting the NPV statistic into a rate-based metric is referred to as: Multiple Choice MIRR. NPV. profitability index. discounted payback.

Compute the PI statistic for Project Z and advise the firm whether to accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent.

Project Z

Time

0

1

Cash Flow – $ 1,000 $ 300 $ 100

2 350

3

4 $

380

5 $

420

$


________________________________________ Multiple Choice The project’s PI is 21.48 percent and the project should be accepted. The project’s PI is 8.48 percent and the project should be accepted. The project’s PI is 16.48 percent and the project should be accepted. The project’s PI is 8.48 percent and the project should be rejected.

The benchmark for the profitability index (PI) is the: Multiple Choice zero or anything larger than zero. managers’ maximum number of years. cost of capital. zero or anything less than zero.

Compute the IRR statistic for Project X and note whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent.


Time:

0

Cash flow:

1

2

3

−75 −75 0

4

5 100 75 50

Multiple Choice 10 percent, reject 13.26 percent, reject 13.26 percent, accept 10 percent, accept

Which of these is a capital budgeting technique that generates a decision rule and associated metric for choosing projects based on the total discounted value of their cash flows? Multiple Choice Net present value Profitability index Internal rate of return Discounted payback


Which of these is a capital budgeting technique that generates decision rules and associated metrics for choosing projects based upon the implicit expected geometric average of a project’s rate of return? Multiple Choice Profitability index Internal rate of return Net present value Discounted payback

Which of the following best describes the NPV profile? Multiple Choice A graph of a project’s NPV as a function of possible IRRs. A graph of a project’s NPV over time. A graph of a project’s NPV as a function of possible capital costs. None of the statements are correct.


All of the following are strengths of NPV EXCEPT: Multiple Choice it works equally well for independent and mutually exclusive projects. managers have a preference for using a statistic that is in percent instead of dollars. it uses a conservative reinvestment rate assumption. these are all strengths of the NPV statistic. ********************************

FIN 370T Entire Course

For more classes visit www.snaptutorial.com FIN 370 Week 1 Practice: Week 1 Knowledge Check FIN 370 Week 1 Apply: Week 1 Exercise FIN 370 Week 2 Practice: Week 2 Knowledge Check


FIN 370 Week 3 Practice: Week 3 Knowledge Check FIN 370 Week 1 Apply: Finance and Financial Statement Analysis Homework FIN 370 Week 1 Practice: Finance and Financial Statement Analysis Quiz FIN 370 Week 2 Apply: Time Value of Money Homework FIN 370 Week 2 Practice Time Value of Money Quiz FIN 370 Week 2 Apply: Week 2 Exercise FIN 370 Week 3 Apply: Week 3 Exercise FIN 370 Week 3 Practice: Bond Valuation and Stock Valuation Quiz FIN 370 Week 3 Apply: Bond Valuation and Stock Valuation Homework FIN 370 Week 4 Practice: Week 4 Knowledge Check FIN 370 Week 4 Apply: Week 4 Exercise FIN 370 Week 4 Practice: Risk and the Cost of Capital Quiz FIN 370 Week 4 Apply: Risk and the Cost of Capital Homework FIN 370 Week 5 Practice Knowledge Check FIN 370 Week 5 Apply: Week 5 Exercise FIN 370 Week 5 Practice: Project Cash Flows and Capital Budgeting Quiz FIN 370 Week 5 Apply: Project Cash Flows and Capital Budgeting Homework ********************************


FIN 370T Week 1 Practice Knowledge Check(All Possible Questions/Answers)

For more classes visit www.snaptutorial.com FIN 370T ASSIGNMENT Week 1 Practice: Week 1 Knowledge Check Complete the Week 1 “Knowledge Check” in Connect®. Note: You have unlimited attempts available to complete this practice Assignment . The highest scored attempt will be recorded. These Assignment s have earlier due dates, so plan accordingly. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.

MC Qu. 1-14 Which of the following managers would… Which of the following managers would NOT use finance? Multiple Choice


human resource managers marketing managers operational managers all of these choices are .

MC Qu. 1-11 Which of the following is defined‌ Which of the following is defined as a group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same laws and regulations? Multiple Choice market instruments investments financial markets asset classes


MC Qu. 1-63 An angel investor differs from a‌ An angel investor differs from a venture capitalist because of the Multiple Choice size of investment. voting rights. type of investment. investment time frame.

MC Qu. 1-18 This type of business organization is‌ This type of business organization is entirely legally independent from its owners. Multiple Choice hybrid organizations


partnership sole proprietorship public corporations

MC Qu. 1-67 Which of these is the system‌ Which of these is the system of incentives and monitors that tries to overcome the agency problem? Multiple Choice checks and Balances Security Exchange Commission board of Directors corporate Governance


MC Qu. 1-54 From the perspective of control, the‌ From the perspective of control, the best form of business organization is the Multiple Choice corporation. partnership. S corporation.

sole proprietorship.

MC Qu. 1-19 Which of the following is‌ Which of the following is NOT considered a hybrid organization? Multiple Choice


limited liability partnership limited liability company limited partnership all of these choices are . S corporation

MC Qu. 1-1 The increase in oil production in‌ The increase in oil production in the United States characterizes which of the following key financial concepts presented in this book? Multiple Choice the Rule of 72 time value of money capital budgeting

risk and return


MC Qu. 1-59 All of the following are an‌ All of the following are an example of a fiduciary relationship EXCEPT Multiple Choice a financial advisor advises her clients. a CEO manages the firm. the shareholder elects a board member. a bank employee manages deposits.

MC Qu. 3-85 Which ratio assesses how efficiently a‌


Which ratio assesses how efficiently a firm uses its fixed assets? Multiple Choice capital intensity ratio current ratio fixed asset turnover average collection period

MC Qu. 3-90 A firm reported working capital of‌ A firm reported working capital of $5.5 million and fixed assets of $20 million. Its fixed asset turnover was 1.2 times. What was the firm’s sales to working capital ratio? Multiple Choice 4.36 times

6.03 times 2.21 times 5.19 times


MC Qu. 3-103 Which ratio measures the number of‌ Which ratio measures the number of dollars of operating cash available to meet each dollar of interest and other fixed charges that the firm owes? Multiple Choice fixed-charge coverage ratio cash coverage ratio operating coverage ratio times interest earned

MC Qu. 3-25 You are evaluating the balance sheet‌ You are evaluating the balance sheet for Blue Jays Corporation. From the balance sheet you find the following balances: cash and marketable securities = $200,000, accounts receivable = $800,000, inventory =


$1,000,000, accrued wages and taxes = $250,000, accounts payable = $400,000, and notes payable = $300,000. What are Blue Jays’ current ratio, quick ratio, and cash ratio, respectively? Multiple Choice 3.07692, 1.53846, 0.30769 1.05263, 1.05263, 0.21053 2.10526, 1.05263, 0.21053 3.07692, 1.05263, 0.30769

MC Qu. 3-6 Which of the following ratios measure‌ Which of the following ratios measure how efficiently a firm uses its assets, as well as how efficiently the firm manages its accounts payable? Multiple Choice quick or acid-test cash internal-growth asset management


MC Qu. 3-20 For publicly traded firms, which of… For publicly traded firms, which of these ratios measure what investors think of the company’s future performance and risk? Multiple Choice profitability ratios liquidity ratios price value ratios market value ratios

MC Qu. 3-116 Which ratio measures the overall return… Which ratio measures the overall return on the firm’s assets including financial leverage and taxes?


Multiple Choice basic earning power ROE ROA profit margin

MC Qu. 3-112 The maximum growth rate that can‌ The maximum growth rate that can be achieved by financing asset growth with internal financing or retained earnings is called the Multiple Choice internal growth rate. sustainable growth rate. retention rate. operating expansion rate.


MC Qu. 3-22 Which of the following is the‌ Which of the following is the maximum growth rate that can be achieved by financing asset growth with new debt and retained earnings? Multiple Choice weighted growth rate internal growth rate sustainable growth rate retained earnings growth rate

MC Qu. 3-23 To interpret financial ratios, managers, analysts,‌


To interpret financial ratios, managers, analysts, and investors use which of the following type of benchmarks? Multiple Choice time series analysis cross-industry analysis time-industry analysis competitive analysis

MC Qu. 3-42 Last year Poncho Villa Corporation had‌ Last year Poncho Villa Corporation had an ROA of 16 percent and a dividend payout ratio of 25 percent. What is the internal growth rate? Multiple Choice 13.64 percent 33.33 percent 25.40 percent 1.19 percent


FIN 370T Week 2 Practice Knowledge Check(All Possible Questions/Answers) http://www.snaptutorial.com/FIN%20370T/product-38713-FIN370T-Assignment-Week-2-Practice-Week-2-Knowledge-Check

For more classes visit www.snaptutorial.com


FIN 370T ASSIGNMENT Week 2 Practice: Week 2 Knowledge Check Complete the Week 2 “Knowledge Check” in Connect®. Note: You have unlimited attempts available to complete this practice Assignment . The highest scored attempt will be recorded. These Assignment s have earlier due dates, so plan accordingly. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date. Materials Learn: McGraw-Hill Connect® Access MC Qu. 4-16 What is the future value of…


What is the future value of $1,000 deposited for one year earning 5 percent interest rate annually? Multiple Choice $1,005 $1,000 $2,050 $1,050

MC Qu. 4-5 We call the process of earning‌ We call the process of earning interest on both the original deposit and on the earlier interest payments Multiple Choice discounting. computing. multiplying. compounding.

MC Qu. 4-71 A deposit of $500 earns 5‌


A deposit of $500 earns 5 percent the first year, 6 percent the second year, and 7 percent the third year. What would be the third year future value? Multiple Choice

$595.46 $634.91 $671.02 $615.62

MC Qu. 4-9 With regard to money deposited in‌ With regard to money deposited in a bank, future values are Multiple Choice smaller than present values. are completely independent of present values. equal to present values. larger than present values.


MC Qu. 4-17 What is the future value of‌ What is the future value of $2,000 deposited for one year earning 6 percent interest rate annually? Multiple Choice $4,120 $2.000 $120 $2,120

MC Qu. 4-10 A dollar paid (or received) in‌ A dollar paid (or received) in the future is Multiple Choice not comparable to a dollar paid (or received) today. worth as much as a dollar paid (or received) today.


worth more than a dollar paid (or received) today. not worth as much as a dollar paid (or received) today.

MC Qu. 4-29 Approximately how many years does it‌ Approximately how many years does it take to double a $300 investment when interest rates are 8 percent per year? Multiple Choice

9 years 11 years 4.17 years 0.11 years

MC Qu. 4-7 The interest rate, i, which we‌


The interest rate, i, which we use to calculate present value, is often referred to as the Multiple Choice compound rate. dividend. multiplier. discount rate.

MC Qu. 4-73 What is the present value of‌ What is the present value of a $600 payment in one year when the discount rate is 8 percent? Multiple Choice

$525.87 $575.09 $555.56 $498.61


MC Qu. 4-78 Approximately what rate is needed to‌ Approximately what rate is needed to double an investment over five years? Multiple Choice

12.2 percent 8 percent 15.8 percent 14.4 percent

MC Qu. 4-79 Determine the interest rate earned on‌ Determine the interest rate earned on an $800 deposit when $808 is paid back in one year. Multiple Choice

100 percent


15 percent 10 percent 1 percent

MC Qu. 4-109 You double your money in 5… You double your money in five years. The reason your return is not 20 percent per year is because: Multiple Choice

it is probably a “fad” investment. it does not reflect the effect of the Rule of 72. it does not reflect the effect of compounding.

it does not reflect the effect of discounting.


MC Qu. 5-146 Which of the following will increase‌ Which of the following will increase the future value of an annuity? Multiple Choice

The number of periods increases. The amount of the annuity increases. The interest rate increases. All of these choices are .

MC Qu. 5-22 What is the future value of‌ What is the future value of a $1,000 annuity payment over 4 years if the interest rates are 8 percent? Multiple Choice

$4,506.11

$9,214.20


$4,320.00 $3,312.10

MC Qu. 5-74 If the present value of an‌ If the present value of an ordinary, 8-year annuity is $12,500 and interest rates are 9.1 percent, what is the present value of the same annuity due? Multiple Choice

$14,114.80 $14,211.90 $13,941.90 $13,637.50

MC Qu. 5-147 Which of the following will increase‌ Which of the following will increase the present value of an annuity? Multiple Choice


The effective rate is calculated over fewer years. The amortization schedule decreases. The interest rate decreases.

The number of periods decreases.

MC Qu. 5-30 If the future value of an‌ If the future value of an ordinary, 7-year annuity is $10,000 and interest rates are 4 percent, what is the future value of the same annuity due? Multiple Choice

$10,700.00 $10,000.00 $10,400.00

$9,615.38


MC Qu. 5-31 If the future value of an… If the future value of an ordinary, 4-year annuity is $1,000 and interest rates are 6 percent, what is the future value of the same annuity due? Multiple Choice

$943.40 $1,000.00 $1,040.00 $1,060.00

MC Qu. 5-33 A loan is offered with monthly… A loan is offered with monthly payments and a 6.5 percent APR. What is the loan’s effective annual rate (EAR)? Multiple Choice 5.69 percent 12.63 percent


7.28 percent 6.697 percent

MC Qu. 5-15 People refinance their home‌ People refinance their home mortgages Multiple Choice

when rates fall and rise. whenever they need to, independent of rates. when rates fall. when rates rise.

FIN 370T Week 3 Practice Knowledge Check(All Possible Questions/Answers) http://www.snaptutorial.com/FIN%20370T/product-38714-FIN370T-Assignment-Week-3-Practice-Week-3-Knowledge-Check


For more classes visit www.snaptutorial.com

FIN 370T ASSIGNMENT Week 3 Practice: Week 3 Knowledge Check Complete the Week 3 “Knowledge Check” in Connect®. Note: You have unlimited attempts available to complete this practice Assignment . The highest scored attempt will be recorded. These Assignment s have earlier due dates, so plan accordingly. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.


MC Qu. 7-67 Which of the following is NOT‌ Which of the following is NOT true about EE savings bonds? Multiple Choice

These are tax deferred investments. Interest payments are received annually but are tax deductible.

About one in six Americans owns a savings bond. Paper bonds sell for one-half of their face value.

MC Qu. 7-4 Which of the following is a legal‌ Which of the following is a legal contract that outlines the precise terms between the issuer and the bondholder?


Multiple Choice

Prospectus Enforcement codes Debenture Indenture

MC Qu. 7-125 A 4.15 percent TIPS has an‌ A 4.15 percent TIPS has an original reference CPI of 182.1. If the current CPI is 188.3, what is the par value of the TIPS? Multiple Choice

$1,000.00 $1,004.75 $967.07


$1,034.05

MC Qu. 7-124 A 2.95 percent TIPS has an‌ A 2.95 percent TIPS has an original reference CPI of 180.2. If the current CPI is 205.1, what is the current interest payment and par value of the TIPS? (Assume semi-annual interest payments and $1,000 par value.) Multiple Choice

$878.60, $16.79, respectively $1,000.00, $29.50, respectively $1,138.18, $29.50, respectively $1,138.18, $16.79, respectively


MC Qu. 7-81 A 5.125 percent TIPS has an‌ A 5.125 percent TIPS has an original reference CPI of 191.8. If the current CPI is 188.3, what is the par value of the TIPS? Multiple Choice

$992.75 $981.75

$1,018.60 $1,042.95

MC Qu. 7-38 Calculate the price of a zero‌ Calculate the price of a zero coupon bond that matures in 10 years if the market interest rate is 6 percent. (Assume semi-annual compounding and $1,000 par value.)


Multiple Choice

$1,000.00 $553.68

$558.66 $940.00

MC Qu. 7-18 Which of the following terms means‌ Which of the following terms means the chance that future interest payments will have to be reinvested at a lower interest rate? Multiple Choice

Credit quality risk Interest rate risk


Reinvestment rate risk

Liquidity rate risk

MC Qu. 7-43 What’s the taxable equivalent yield on a municipal… What’s the taxable equivalent yield on a municipal bond with a yield to maturity of 3.9 percent for an investor in the 35 percent marginal tax bracket? Multiple Choice

1.09% 6.00%

11.14% 3.90%


MC Qu. 7-21 Which of the following is an‌ Which of the following is an important advantage to the issuer of a bond with a call provision? Multiple Choice

They allow for refinancing opportunities.

They are able to avoid reinvestment rate risk. They are able to avoid interest rate risk. They are able to reduce their credit risk.


Which of the following are backed only by the reputation and financial stability of the corporation? Multiple Choice

Both debentures and unsecured bonds

Debentures None of the options Unsecured bonds

Which of the following terms is the chance that the bond issuer will not be able to make timely payments? Multiple Choice

Interest rate risk Liquidity of interest rate risk


Term structure of interest rates Credit quality risk

As residual claimants, which of these investors claim any cash flows to the firm that remain after the firm pays all other claims? rev: 07_10_2017_QC_CS-93259 Multiple Choice

preferred stockholders creditors common stockholders

bondholders


All of the following are stock market indices EXCEPT: Multiple Choice

Dow Jones Industrial Average. Standard & Poor’s 500 Index. Nasdaq Composite Index. Mercantile 1000.

You would like to sell 400 shares of International Business Machines (IBM). The current bid and ask quotes are $96.24 and $96.17,


respectively. You place a limit sell-order at $96.20. If the trade executes, how much money do you receive from the buyer? Multiple Choice

$38,464.00 $38,496.00 $38,468.00 $38,480.00

Investors sell stock at the: Multiple Choice

dealer price. broker price.


bid price.

quoted ask price.

At your discount brokerage firm, it costs $9.95 per stock trade. How much money do you need to buy 100 shares of Ralph Lauren (RL), which trades at $85.13? Multiple Choice

$8,503.05 $8,503.00 $9,508.00 $8,522.95


A preferred stock from DLC pays $5.10 in annual dividends. If the required return on the preferred stock is 12.1 percent, what is the value of the stock? Multiple Choice

$42.15 $47.25 $240.97 $6.31

At your discount brokerage firm, it costs $10.50 per stock trade. How much money do you need to buy 100 shares of Apple (AAPL), which trades at $202.64? Multiple Choice


$21,314.00 $20,274.50

$20,253.50 In $20,264.00

JPM has earnings per share of $3.75 and P/E of 47. What is the stock price? Multiple Choice

$185.95 $174.08 $112.98


$176.25

Pfizer, Inc. (PFE) has earnings per share of $2.09 and a P/E ratio of 11.02. What is the stock price? Multiple Choice

$18.97 $5.27 $23.03

$0.19

FIN 370T Week 4 Practice Knowledge Check(All Possible Questions/Answers)


http://www.snaptutorial.com/FIN%20370T/product-38723-FIN370T-Assignment-Week-4-Practice-Week-4-Knowledge-Check

For more classes visit www.snaptutorial.com

FIN 370T ASSIGNMENT Week 4 Practice: Week 4 Knowledge Check Complete the Week 4 “Knowledge Check” in Connect®. Note: You have unlimited attempts available to complete this practice Assignment . The highest scored attempt will be recorded. These Assignment s have earlier due dates, so plan accordingly. Grades must


be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.

Which of the following is correct? Multiple Choice If you observe a high variability in a stock’s returns you can infer that the stock is very risky. All of the statements are correct. There is a positive relationship between risk and return. Total risk is measured by the standard deviation.

Which of these is the dollar return characterized as a percentage of money invested? Multiple Choice Dollar return Market return


Percentage return Average return

Which of the following is a measurement of the co-movement between two variables that ranges between -1 and +1? Multiple Choice Standard deviation Correlation Coefficient of variation Total risk

Which of these is defined as a combination of investment assets held by an investor?


Multiple Choice All of the options Portfolio Market basket Bundle

Modern portfolio theory is: Multiple Choice a concept and procedure for combining securities into a portfolio to maximize dollar return. a concept and procedure for combining securities into a portfolio to minimize risk. a concept and procedure for combining securities into a portfolio to maximize return. a concept and procedure for combining securities into a portfolio to maximize volatility.


Which of these is the investor’s combination of securities that achieves the highest expected return for a given risk level? Multiple Choice Modern portfolio Total portfolio Optimal portfolio Efficient portfolio

If the risk-free rate is 8 percent and the market risk premium is 2 percent, what is the required return for the market? Multiple Choice 6 percent 8 percent


10 percent 2 percent

The annual return on the S&P 500 Index was 12.4 percent. The annual T-bill yield during the same period was 5.7 percent. What was the market risk premium during that year? Multiple Choice 5.7 percent 12.4 percent 18.1 percent 6.7 percent


A company has a beta of 0.25. If the market return is expected to be 8 percent and the risk-free rate is 2 percent, what is the company’s required return? Multiple Choice 3.50 percent 4.00 percent 13.50 percent 1.50 percent

If the Japanese stock market bubble peaked at 37,500, and two and a half years later it had fallen to 25,900, what was the percentage decline? Multiple Choice −10.31 percent −30.93 percent −27.63 percent −69.07 percent


Whenever a set of stock prices go unnaturally high and subsequently crash down, the market experiences what we call a(n): Multiple Choice irrational behavior. financial meltdown. none of the options. stock market bubble.

ABC Inc. has a dividend yield equal to 3 percent and is expected to grow at a 7 percent rate for the next seven years. What is ABC’s required return?


Multiple Choice 5 percent 4 percent 11 percent 10 percent

A company’s current stock price is $65.40 and it is likely to pay a $2.25 dividend next year. Since analysts estimate the company will have an 11.25 percent growth rate, what is its expected return? Multiple Choice 14.69 percent 3.61 percent 3.44 percent 11.25 percent


Which of the following will impact the cost of equity component in the weighted average cost of capital? Multiple Choice All of the above The risk-free rate Expected return on the market Beta


Apple’s 9 percent annual coupon bond has 10 years until maturity and the bonds are selling in the market for $890. The firm’s tax rate is 36 percent. What is the firm’s after-tax cost of debt? Multiple Choice 6.95 percent 10.86 percent 9.81 percent 3.91 percent

FarCry Industries, a maker of telecommunications equipment, has 6 million shares of common stock outstanding, 1 million shares of preferred stock outstanding, and 10 thousand bonds. If the common shares are selling for $27 per share, the preferred shares are selling for $15 per share, and the bonds are selling for 119 percent of par ($1,000), what weight should you use for debt in the computation of FarCry’s WACC? Multiple Choice 5.81 percent 4.93 percent


6.30 percent 5.07 percent

Diddy Corp. stock has a beta of 1.0, the current risk-free rate is 5 percent, and the expected return on the market is 15.5 percent. What is Diddy’s cost of equity? Multiple Choice 14.20 percent 15.50 percent 18.50 percent 16.30 percent


ADK has 30,000 15-year 9 percent annual coupon bonds outstanding. If the bonds currently sell for 111 percent of par and the firm pays an average tax rate of 36 percent, what will be the before-tax and after-tax component cost of debt? Multiple Choice 9 percent; 5.76 percent 7.74 percent; 4.95 percent 7.91 percent; 5.06 percent 8.05 percent; 5.15 percent

When we adjust the WACC to reflect flotation costs, this approach: Multiple Choice raises only the cost of external equity. reduces each capital source’s effective cost. raises each capital source’s effective cost. reduces the cost of debt.


Which of these is an estimated WACC computed using some sort of proxy for the average equity risk of the projects in a particular division? Multiple Choice Divisional WACC Pure-play WACC Average WACC Proxy WACC ********************************

FIN 370T Week 5 Practice Knowledge Check(All Possible Questions/Answers)

For more classes visit www.snaptutorial.com


FIN 370T ASSIGNMENT Week 5 Practice: Week 5 Knowledge Check Complete the Week 5 “Knowledge Check” in Connect®. Note: You have unlimited attempts available to complete this practice Assignment . The highest scored attempt will be recorded. These Assignment s have earlier due dates, so plan accordingly. Grades must be transferred manually to eCampus by your instructor. Don’t worry, this might happen after your due date.

Suppose you sell a fixed asset for $90,000 when its book value is $95,000. If your company’s marginal tax rate is 40 percent, what will be the effect on cash flows of this sale (i.e., what will be the after-tax cash flow of this sale)? Multiple Choice $92,000 $3,000 $95,000 $5,000


If a firm has already paid an expense or is obligated to pay one in the future, regardless of whether a particular project is undertaken, that expense is a: Multiple Choice sunk cost. committed cost. obligated cost. complementary cost.

Which of the following measures the operating cash flow a project produces minus the necessary investment in operating capital, and is as valid for proposed new projects as it is for the firm’s current operations? Multiple Choice Sunk cash flow Investment in operating capital


Operating cash flow Free cash flow

Concerning incremental project cash flow, which of these is a cost one would never count as an expense of the project? Multiple Choice Taxes paid Operating expenses of the project Financing costs Initial investment

A new project would require an immediate increase in raw materials in the amount $17,000. The firm expects that accounts payable will


automatically increase $7,000. How much must the firm expect its investment in net working capital to increase if they accept this project? Multiple Choice $7,000 $17,000 $10,000 $24,000

When looking at which of these types of projects, one must consider any cash flows that arise from surrendering old equipment before the end of its useful life? Multiple Choice Cost-cutting projects Incremental projects Replacement projects New projects


Section 179 allows a business, with certain restrictions, to do which of the following? Multiple Choice Get a government grant to purchase the asset. Expense the asset using double declining balance depreciation during the life of the asset. Offset the tax liability with the cost of the asset in the year of purchase. Expense the asset immediately in the year of purchase.

Which statement is true regarding cost-cutting proposals? Multiple Choice The main benefits come only from changes in costs.


The main benefits come only from changes in sales. The main benefits come from the change in sales due to the response from the cost-cutting proposal. The main benefits are from changes in sales and changes in costs.

Your company is considering a new project that will require $100,000 of new equipment at the start of the project. The equipment will have a depreciable life of 10 years and will be depreciated to a book value of $25,000 using straight-line depreciation. The cost of capital is 11 percent, and the firm’s tax rate is 34 percent. Estimate the present value of the tax benefits from depreciation. Multiple Choice $16,997.13 $15,017.54 $14,841.29 $13,607.52


You are trying to pick the least expensive car for your new delivery service. You have two choices: the Scion xA, which will cost $13,000 to purchase and which will have OCF of −$1,200 annually throughout the vehicle’s expected life of three years as a delivery vehicle; and the Toyota Prius, which will cost $23,000 to purchase and which will have OCF of −$550 annually throughout that vehicle’s expected five-year life. Both cars will be worthless at the end of their life. If you intend to replace whichever type of car you choose with the same thing when its life runs out, again and again out into the foreseeable future, and if your business has a cost of capital of 12 percent, what is the difference in the EAC of the two cars? Multiple Choice $413.25 $317.88 $361.13 $310.38


Compute the payback statistic for Project Y and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 11 percent and the maximum allowable payback is one year.

Time:

0

Cash flow:

1

2

−100

3

4

5

75 100 300 75 200

Multiple Choice 1.25 years, reject 1.33 years, accept 1.25 years, accept 2.25 years, accept

Compute the NPV statistic for Project Y given the following cash flows if the appropriate cost of capital is 10 percent. Project Y


Time

0

1

Cash Flow – $ 8,000 $ $ 2,000

2 3,350

3

4 $

4,180

$

1,520

________________________________________ Multiple Choice $964.72 $993.97 $1,008.03 $894.37

Compute the discounted payback statistic for Project Y and recommend whether the firm should accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent and the maximum allowable discounted payback is three years.


Time:

0

Cash flow:

1

2

3

−5,000

4

5

500 2,000

3,000

1,500

500

Multiple Choice 3.45 years, accept 3.86 years, reject 3.86 years, accept 3.45 years, reject

Compute the NPV statistic for Project X given the following cash flows if the appropriate cost of capital is 12 percent. Project X

Time

0

Cash Flow $ 15,000 –$

1 – 1,000

2 $

6,000

3

4 $

10,000

$

12,000


________________________________________ Multiple Choice $37,505.96 $6,234.93 $7,505.96 $8,417.80

Compute the NPV statistic for Project X given the following cash flows if the appropriate cost of capital is 10 percent. Project X

Time

0

Cash Flow $ 36,000 $ 10,000

1 –$

2

3

100,000 $ 200,000

4 –

$

210,000

________________________________________


Multiple Choice $247,410.67 $248,962.50 $262,622.77 $183,507.96

Which of the following is a capital budgeting technique that converts a project’s cash flows using a more consistent reinvestment rate prior to applying the Internal Rate of Return, IRR, decision rule? Multiple Choice Modified internal rate of return Discounted payback Net present value Profitability index


Compute the PI statistic for Project Z and advise the firm whether to accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 10 percent.

Project Z

Time

0

1

Cash Flow – $ 1,000 $ 300 $ 100

2 350

3

4 $

5

380

$

420

________________________________________ Multiple Choice The project’s PI is 16.48 percent and the project should be accepted. The project’s PI is 21.48 percent and the project should be accepted. The project’s PI is 8.48 percent and the project should be rejected.

$


The project’s PI is 8.48 percent and the project should be accepted.

Which of the following best describes the NPV profile? Multiple Choice A graph of a project’s NPV as a function of possible IRRs. Incorrect A graph of a project’s NPV over time. A graph of a project’s NPV as a function of possible capital costs. None of the statements are correct.

Compute the PI statistic for Project Q and advise the firm whether to accept or reject the project with the cash flows shown as follows if the appropriate cost of capital is 12 percent.


Project Q

Time

0

1

Cash Flow – $ 1,000 $ 300 $ 100

2 250

3

4 $

5

180

$

420

$

________________________________________ Multiple Choice The project’s PI is −11.70 percent and the project should be rejected. The project’s PI is 3.70 percent and the project should be accepted. The project’s PI is 5.70 percent and the project should be accepted. The project’s PI is −8.70 percent and the project should be rejected.

How many possible IRRs could you find for the following set of cash flows?


Time

0

1

Cash Flow – $ 10,000 $ $ 2,000

2

3

4

5,350

$

4,180

________________________________________ Multiple Choice 3 1 2 Unable to determine unless we have the cost of capital.

********************************

$

1,520

Profile for McdonaldRy61

FIN 370T Education Specialist / snaptutorial.com  

FIN 370T ASSIGNMENT Week 1 Apply: Week 1 Exercise Review the Week 1 “Knowledge Check” in Connect® in preparation for this Assignment .

FIN 370T Education Specialist / snaptutorial.com  

FIN 370T ASSIGNMENT Week 1 Apply: Week 1 Exercise Review the Week 1 “Knowledge Check” in Connect® in preparation for this Assignment .

Advertisement