Finc 3610 Sirmeans Final exam Questions With Complete
Solutions
A firm evaluates all of its projects by using the NPV decision
rule.
Year Cash Flow
0 -$31,000
1 24,000
2 16,000
3 11,000
At a required return of 38 percent, what is the NPV for this
project? Correct Answers NPV=$-1,021.52
A stakeholder is... Correct Answers Any person or entity other
than a stockholder or creditor who potentially has a claim on the
cash flows of a firm.
Ackerman Co. has 6 percent coupon bonds on the market with
thirteen years left to maturity. The bonds make annual
payments. If the bond currently sells for $907.03, what is its
YTM? Assume a par value of $1,000. Correct Answers N=13
I/Y(YTM)=? 7.12%
PV= -907.03
PMT=60
FV=1000
An investment project has annual cash inflows of $5,200,
$6,300, $7,100, and $8,400, and a discount rate of 19 percent.
What is the discounted payback period for these cash flows if
the initial cost is $8,000? Correct Answers chegg it
,An investment project provides cash inflows of $650 per year
for 9 years. What is the project payback period if the initial cost
is 3,640? Correct Answers For an initial cost of $3,640, the
payback period is:
Payback = $3,640 / $650 = 5.6 years
Apocalyptica Corp. pays a constant $28 dividend on its stock.
The company will maintain this dividend for the next 10 years
and will then cease paying dividends forever.
If the required return on this stock is 6 percent, what is the
current share price? Correct Answers N=10
I/Y=6%
PV=? 206.08
PMT=28
FV=0
Ashes Divide Corporation has bonds on the market with 15
years to maturity, a YTM of 6.4 percent, and a current price of
$1,286.50. The bonds make semiannual payments. What must
the coupon rate be on these bonds? Correct Answers N=30
I/Y=3.2
PV=-1286.50
PMT=? (47*2)=94 make that a %= 9.4%(coupon rate)
FV=1,000
Assets in the balance sheet are listed in order of: Correct
Answers Liquidity
Barcain Credit Corp. wants to earn an effective annual return on
its consumer loans of 14 percent per year. The bank uses daily
, compounding on its loans. What is the APR of these loans?
Correct Answers We can convert the EAR to an APR as
follows:
EAR = [1 + (APR/m)]m - 1
APR = m[(1 + EAR)1/m - 1]
APR = 365[(1.14)1/365 - 1] = .1311 or 13.11%
Bilbo Baggins wants to save money to meet three objectives.
First, he would like to be able to retire 30 years from now with
retirement income of $29,000 per month for 25 years, with the
first payment received 30 years and 1 month from now. Second,
he would like to purchase a cabin in Rivendell in 20 years at an
estimated cost of $1,034,000. Third, after he passes on at the end
of the 25 years of withdrawals, he would like to leave an
inheritance of $750,000 to his nephew Frodo. He can afford to
save $1,800 per month for the next 20 years.
If he can earn a 10 percent EAR before he retires and a 8 percent
EAR after he retires, how much will he have to save each month
in years 21 through 30? Correct Answers look it up
$16,447.30
Corporate dividends are: Correct Answers Taxable as personal
income when received by shareholders even though that income
was taxed at the corporate level.
Dinero Bank offers you a $36,000, 8-year term loan at 8 percent
annual interest. What will your annual loan payment be?
Correct Answers N=8
I/Y=8
PV==36,000
Solutions
A firm evaluates all of its projects by using the NPV decision
rule.
Year Cash Flow
0 -$31,000
1 24,000
2 16,000
3 11,000
At a required return of 38 percent, what is the NPV for this
project? Correct Answers NPV=$-1,021.52
A stakeholder is... Correct Answers Any person or entity other
than a stockholder or creditor who potentially has a claim on the
cash flows of a firm.
Ackerman Co. has 6 percent coupon bonds on the market with
thirteen years left to maturity. The bonds make annual
payments. If the bond currently sells for $907.03, what is its
YTM? Assume a par value of $1,000. Correct Answers N=13
I/Y(YTM)=? 7.12%
PV= -907.03
PMT=60
FV=1000
An investment project has annual cash inflows of $5,200,
$6,300, $7,100, and $8,400, and a discount rate of 19 percent.
What is the discounted payback period for these cash flows if
the initial cost is $8,000? Correct Answers chegg it
,An investment project provides cash inflows of $650 per year
for 9 years. What is the project payback period if the initial cost
is 3,640? Correct Answers For an initial cost of $3,640, the
payback period is:
Payback = $3,640 / $650 = 5.6 years
Apocalyptica Corp. pays a constant $28 dividend on its stock.
The company will maintain this dividend for the next 10 years
and will then cease paying dividends forever.
If the required return on this stock is 6 percent, what is the
current share price? Correct Answers N=10
I/Y=6%
PV=? 206.08
PMT=28
FV=0
Ashes Divide Corporation has bonds on the market with 15
years to maturity, a YTM of 6.4 percent, and a current price of
$1,286.50. The bonds make semiannual payments. What must
the coupon rate be on these bonds? Correct Answers N=30
I/Y=3.2
PV=-1286.50
PMT=? (47*2)=94 make that a %= 9.4%(coupon rate)
FV=1,000
Assets in the balance sheet are listed in order of: Correct
Answers Liquidity
Barcain Credit Corp. wants to earn an effective annual return on
its consumer loans of 14 percent per year. The bank uses daily
, compounding on its loans. What is the APR of these loans?
Correct Answers We can convert the EAR to an APR as
follows:
EAR = [1 + (APR/m)]m - 1
APR = m[(1 + EAR)1/m - 1]
APR = 365[(1.14)1/365 - 1] = .1311 or 13.11%
Bilbo Baggins wants to save money to meet three objectives.
First, he would like to be able to retire 30 years from now with
retirement income of $29,000 per month for 25 years, with the
first payment received 30 years and 1 month from now. Second,
he would like to purchase a cabin in Rivendell in 20 years at an
estimated cost of $1,034,000. Third, after he passes on at the end
of the 25 years of withdrawals, he would like to leave an
inheritance of $750,000 to his nephew Frodo. He can afford to
save $1,800 per month for the next 20 years.
If he can earn a 10 percent EAR before he retires and a 8 percent
EAR after he retires, how much will he have to save each month
in years 21 through 30? Correct Answers look it up
$16,447.30
Corporate dividends are: Correct Answers Taxable as personal
income when received by shareholders even though that income
was taxed at the corporate level.
Dinero Bank offers you a $36,000, 8-year term loan at 8 percent
annual interest. What will your annual loan payment be?
Correct Answers N=8
I/Y=8
PV==36,000
