FINC 3610 Final Test Questions and Answers Already Passed Latest Update 2025-2026
The internal rate of return (IRR) rule states that - Answers An investment is acceptable if its IRR
exceeds the required return. If not, it should be rejected
The difference between the market value of an investment and its cost is its - Answers Net
present value
The present value of an investment's future cash flows divided by its initial cost is its - Answers
Profitability index
The discount rate that makes the net present value of an investment exactly equal to zero is the
- Answers Internal rate of return
The fundamental goal of financial management should be to - Answers Maximize the current
value per share of the existing stock
A proposed project lasts 3 years, Has the same risk as the firm's current operations, and has an
initial investment of 500,000. The project's after-tax cash flows are estimated at 120,000 for
year 1, 240,000 for year 2, and 240,000 for year 3. The firm has a target debt/equity ratio of 0.6.
The firm's cost of equity is 15% and the yield to maturity on its debt is 8%. The firm's marginal
tax rate is 35%/ What is the NPV of this project? - Answers -24,600
For a project with conventional cash flows, if the profitability index is greater than 1, then -
Answers The NPV is greater than zero
An insurance company promises to pay Jane 1 million on her 65th birthday in return for a one-
time payment of 125,000 today. (Jane just turned 30) At what rate of interest would Jane be
indifferent as to wether to accept the company's offer or invest the premium on her own? -
Answers 6.1%
Vito Corleone will loan you money on a "four-for-Five" arrangement (I.e. for every $4 he gives you
today, you give him $5 one week from now). What is the APR of this loan? - Answers 1,300%
You are advising a friend who is deciding whether or not to drop one of the courses in which he
is currently enrolled. If he drops the course, he will forfeit the money spent on tuition. Which of
the following statements regarding the drop decision would you not include in your analysis
because it is inconsistent with capital budgeting principles?
l. Remaining in the class means you must give up your part-time job.
ll. The tuition cost for the class was outrageous, 1,000 per credit hour
lll. If you drop the class, you can sell the textbook now for 30 at the bookstore - Answers ll only
The internal rate of return (IRR) rule states that - Answers An investment is acceptable if its IRR
exceeds the required return. If not, it should be rejected
The difference between the market value of an investment and its cost is its - Answers Net
present value
The present value of an investment's future cash flows divided by its initial cost is its - Answers
Profitability index
The discount rate that makes the net present value of an investment exactly equal to zero is the
- Answers Internal rate of return
The fundamental goal of financial management should be to - Answers Maximize the current
value per share of the existing stock
A proposed project lasts 3 years, Has the same risk as the firm's current operations, and has an
initial investment of 500,000. The project's after-tax cash flows are estimated at 120,000 for
year 1, 240,000 for year 2, and 240,000 for year 3. The firm has a target debt/equity ratio of 0.6.
The firm's cost of equity is 15% and the yield to maturity on its debt is 8%. The firm's marginal
tax rate is 35%/ What is the NPV of this project? - Answers -24,600
For a project with conventional cash flows, if the profitability index is greater than 1, then -
Answers The NPV is greater than zero
An insurance company promises to pay Jane 1 million on her 65th birthday in return for a one-
time payment of 125,000 today. (Jane just turned 30) At what rate of interest would Jane be
indifferent as to wether to accept the company's offer or invest the premium on her own? -
Answers 6.1%
Vito Corleone will loan you money on a "four-for-Five" arrangement (I.e. for every $4 he gives you
today, you give him $5 one week from now). What is the APR of this loan? - Answers 1,300%
You are advising a friend who is deciding whether or not to drop one of the courses in which he
is currently enrolled. If he drops the course, he will forfeit the money spent on tuition. Which of
the following statements regarding the drop decision would you not include in your analysis
because it is inconsistent with capital budgeting principles?
l. Remaining in the class means you must give up your part-time job.
ll. The tuition cost for the class was outrageous, 1,000 per credit hour
lll. If you drop the class, you can sell the textbook now for 30 at the bookstore - Answers ll only
