PRINCIPLES OF CORPORATE FINANCE PRACTICE SOLUTION QUESTIONS AND ANSWERS COMPLETE REVIEW WITH VERIFIED RESPONSES

PRINCIPLES OF CORPORATE FINANCE
PRACTICE SOLUTION QUESTIONS AND
ANSWERS COMPLETE REVIEW WITH
VERIFIED RESPONSES

●● ordinary perpetuity
Answer:


●● perpetuity due
Answer:


●● annuity
Answer:


●● annuity due
Answer: multiply the PV of the annuity by (1+r)


●● future value of annuity
Answer: multiply the PV of the annuity by (1+r)^t


●● growing annuity

, Answer:


●● continuously compounded interest rate
Answer: e^rt


●● Stakeholders
Answer: other parties affected by the company, such as customers,
employees, suppliers, the environment, communities, and taxpayers.


●● hurdle rate
Answer: minimum acceptable rate of return (the opportunity cost of
capital)


●● bond (formula)
Answer: PV (bond) = PV (annuity of coupon payments) + PV (final
payment of principal) = (coupon * t-year annuity factor) + (final
payment * discount factor)


●● premium bond
Answer: A bond that is priced above face value sells at a premium.
Investors in premium bonds face a capital loss over the life of the bond,
so the yield to maturity on a premium bond is less than the coupon rate.


●● par bond