Test Bank For Corporate Finance A Focused Approach - 6th - 2017 All Chapters - 9781305637108.pdf

Corporate Finance j




Test Bank
j




ByjS AMUE

L j A.jVIGNE




TrinityjBusinessjSchooljT
HEj U NIVERSITY j OFj DUBLIN



AjcollectionjofjExercisejQuestionsjforjthejCorporatejFinancejM
odule.


S EPTEMBER 2018 J




Calculatorj Required

,
, TABLE OF C ONTENTSJ J




Page

1 NetjPresentjValuejCalculation 1
1.1 BulletjInvestmentj . j.j . j. j. j. j. j. j. j. j. j.j . j. j. j. j. j. j. j. j. j.j . j. j. j. j. j. j. j. j. j.j . j. j. j. j. j. j.j 1
1.1.1 Calculation:jWhatjprofit,jifjany,jwouldjyoujrealisejwithjthisjinvestment?j . 1
1.1.2 Theory:jDefinejthejconceptjofjNetjPresentjValue!j . j. j. j. j. j.j . j. j. j. j. j. j. j. j. j.j 1
1.1.3 Calculation:jWhatjisjthejNetjPresentjValuejofjthejProject?jShouldjyoujinvest? 2
1.1.4 Calculation:j Whatj isj thej ratej ofj returnj ofj thej investment?j . j.j . j. j. j. j. j. j. j.j 2
1.2 BulletjInvestmentj . j.j .j .j .j .j .j .j .j .j . j.j .j .j .j .j .j .j .j .j . j.j .j .j .j .j .j .j .j .j . j.j .j .j .j .j .j .j . 3
1.2.1 Calculation:jWhatjprofit,jifjany,jwouldjyoujrealisejwithjthisjinvestment?j . 3
1.2.2 Theory:jDefinejthejconceptjofjNetjPresentjValue!j . j. j. j. j. j.j . j. j. j. j. j. j. j. j. j.j 3
1.2.3 Calculation:jWhatjisjthejNetjPresentjValuejofjthejProject?jShouldjyoujinvest? 3
1.2.4 Calculation:j Whatj isj thej ratej ofj returnj ofj thej investment?j . j.j . j. j. j. j. j. j. j.j 3
1.3 BulletjInvestmentj . j.j .j .j .j .j .j .j .j .j . j.j .j .j .j .j .j .j .j .j . j.j .j .j .j .j .j .j .j .j . j.j .j .j .j .j .j .j . 5
1.3.1 Calculation:jWhatjprofit,jifjany,jwouldjyoujrealisejwithjthisjinvestment?j . 5
1.3.2 Theory:jDefinejthejconceptjofjNetjPresentjValue!j . j. j. j. j. j.j . j. j. j. j. j. j. j. j. j.j 5
1.3.3 Calculation:jWhatjisjthejNetjPresentjValuejofjthejProject?jShouldjyoujinvest? 5
1.3.4 Calculation:j Whatj isj thej ratej ofj returnj ofj thej investment?j . j.j . j. j. j. j. j. j. j.j 5
1.4 BulletjInvestmentj . j.j .j .j .j .j .j .j .j .j . j.j .j .j .j .j .j .j .j .j . j.j .j .j .j .j .j .j .j .j . j.j .j .j .j .j .j .j . 7
1.4.1 Calculation:jWhatjprofit,jifjany,jwouldjyoujrealisejwithjthisjinvestment?j . 7
1.4.2 Theory:jDefinejthejconceptjofjNetjPresentjValue!j . j. j. j. j. j.j . j. j. j. j. j. j. j. j. j.j 7
1.4.3 Calculation:jWhatjisjthejNetjPresentjValuejofjthejProject?jShouldjyoujinvest? 7
1.4.4 Calculation:j Whatj isj thej ratej ofj returnj ofj thej investment?j . j.j . j. j. j. j. j. j. j.j 7
1.5 Three-yearjInvestmentj . j. j. j. j. j. j. j.j . j. j. j. j. j. j. j. j. j.j . j. j. j. j. j. j. j. j. j.j . j. j. j. j. j. j. j.j 9
1.5.1 Calculation:jWhatjprofit,jifjany,jwouldjyoujrealisejwithjthisjinvestment?j . 9
1.5.2 Theory:jDefinejthejconceptjofjNetjPresentjValue!j . j. j. j. j. j.j . j. j. j. j. j. j. j. j. j.j 9
1.5.3 Calculation:jWhatjisjthejNetjPresentjValuejofjthejProject?jShouldjyoujinvest? 9
1.5.4 Calculation:j Whatj isj thej ratej ofj returnj ofj thej investment?j . j.j . j. j. j. j. j. j. j.j 9
1.6 Three-yearjInvestmentj .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j . 11
1.6.1 Calculation:jWhatjprofit,jifjany,jwouldjyoujrealisejwithjthisjinvestment?j . 11
1.6.2 Theory:j Definejthejconceptj ofj Netj Presentj Value!j .j .j .j .j .j .j .j .j .j .j .j .j .j .j .j . 11

i

, TABLEj OFj CONTENTS



1.6.3 Calculation:jWhatjisjthejNetjPresentjValuejofjthejProject?jShouldjyoujinvest?j 11
1.6.4 Calculation:j Whatj isj thej ratej ofj returnj ofj thej investment? .........................................11
1.7 Three-yearj Investment ................................................................................................................. 13
1.7.1 Calculation:jWhatjprofit,jifjany,jwouldjyoujrealisejwithjthisjinvestment?j . 13
1.7.2 Theory:jDefinejthejconceptjofjNetjPresentjValue!........................................................ 13
1.7.3 Calculation:jWhatjisjthejNetjPresentjValuejofjthejProject?jShouldjyoujinvest?j 13
1.7.4 Calculation:j Whatj isj thej ratej ofj returnj ofj thej investment? ........................................ 13
1.8 Realj Estatej Investment ................................................................................................................ 15
1.8.1 Calculation:j Whatjisjthej Netj Presentj Valuej ofjthejProject? ........................................ 15
1.8.2 Calculation:jWhatjprofit,jifjany,jwouldjyoujrealisejwithjthisjinvestment?j . 15
1.8.3 Theory:jDefinejthejconceptjofjNetjPresentjValue!........................................................ 15
1.9 Realj Estatej Investment ................................................................................................................ 16
1.9.1 Calculation:j Whatjisjthej Netj Presentj Valuej ofjthejProject? ........................................ 16
1.9.2 Calculation:jWhatjprofit,jifjany,jwouldjyoujrealisejwithjthisjinvestment?j . 16
1.9.3 Theory:jDefinejthejconceptjofjNetjPresentjValue!........................................................ 16
1.10 Netj Presentj Valuej andj Uncertainj Payments ..............................................................................17
1.10.1 Calculation:j Whatj isj thej Netj Presentj Valuej ofj thisj investment? ...............................17
1.10.2 Theory:jDefinejthejconceptjofjOpportunityjCostsjinjthejconceptjofjcorporatej finance! 17
1.11 Netj Presentj Valuej andj Uncertainj Payments ............................................................................. 18
1.11.1 Calculation:j Whatj isj thej Netj Presentj Valuej ofj thisj investment? .............................. 18
1.11.2 Theory:jDefinejthejconceptjofjOpportunityjCostsjinjthejconceptjofjcorporatej finance! 18
1.12 Netj Presentj Valuej andj Uncertainj Payments ............................................................................. 19
1.12.1 Calculation:j Whatj isj thej Netj Presentj Valuej ofj thisj investment? .............................. 19
1.12.2 Theory:jDefinejthejconceptjofjOpportunityjCostsjinjthejconceptjofjcorporatej finance! 19
1.13 Netj Presentj Valuej andj Uncertainj Payments ............................................................................. 20
1.13.1 Calculation:j Whatj isj thej Netj Presentj Valuej ofj thisj investment? .............................. 20
1.13.2 Theory:jDefinejthejconceptjofjOpportunityjCostsjinjthejconceptjofjcorporatej finance! 20
1.14 Netj Presentj Valuej andj Uncertainj Payments ..............................................................................21
1.14.1 Calculation:j Whatj isj thej Netj Presentj Valuej ofj thisj investment? ...............................21
1.14.2 Theory:jDefinejthejconceptjofjOpportunityjCostsjinjthejconceptjofjcorporatej finance! 21


2 Termj Structurej ofj Interestj Rates 23
2.1 Changingj interestj rates ................................................................................................................. 23



2.1.1 Calculation:jIfj youj borrowj £100jforj 2jyearsjatj2%,jhowj muchj doj youj have
tojpayjback? ........................................................................................................................ 23
2.1.2 Calculation:j Howj muchj moneyj wouldj youj makej onj thej moneyj marketj if


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