Filters
Question type
Study Flashcards

Use the information for the question(s) below. Use the information for the question(s) below. -If WiseGuy Inc.uses the payback period rule to choose projects,which of the projects will rank highest? A) Project A B) Project B C) Project C D) Project D E) Project E -If WiseGuy Inc.uses the payback period rule to choose projects,which of the projects will rank highest?


A) Project A
B) Project B
C) Project C
D) Project D
E) Project E

F) C) and D)
G) A) and B)

Correct Answer

verifed

verified

An investor has a budget of $10 million.He can invest in the projects shown above.If the cost of capital is 6%,what investment or investments should he make? A) Project A B) Project B C) Project C D) Project B and Project D E) Project C and Project D An investor has a budget of $10 million.He can invest in the projects shown above.If the cost of capital is 6%,what investment or investments should he make?


A) Project A
B) Project B
C) Project C
D) Project B and Project D
E) Project C and Project D

F) B) and E)
G) A) and E)

Correct Answer

verifed

verified

A company that creates education products is planning to create a suite of books to help customers prepare for high-stakes tests for entry into college and grad school.They have 33 in-house writers to create these books.Due to the expertise needed in creating this content it will not be possible to hire temporary writers within the planned time-frame.Which projects should be undertaken? A) Prep for the College Entry Test and Prep for the Law School Entry Test B) Prep for the College Entry Test and Prep for the Grad School Entry Test C) Prep for the Dental School Entry Test,Prep for the Grad School Entry Test,and Prep for the Medical School Entry Test D) Prep for the Grad School Entry Test,Prep for the Law School Entry Test,and Prep for the Medical School Entry Test E) Prep for the Dental School Entry Test,Prep for the Grad School Entry Test,and Prep for the Law School Entry Test A company that creates education products is planning to create a suite of books to help customers prepare for high-stakes tests for entry into college and grad school.They have 33 in-house writers to create these books.Due to the expertise needed in creating this content it will not be possible to hire temporary writers within the planned time-frame.Which projects should be undertaken?


A) Prep for the College Entry Test and Prep for the Law School Entry Test
B) Prep for the College Entry Test and Prep for the Grad School Entry Test
C) Prep for the Dental School Entry Test,Prep for the Grad School Entry Test,and Prep for the Medical School Entry Test
D) Prep for the Grad School Entry Test,Prep for the Law School Entry Test,and Prep for the Medical School Entry Test
E) Prep for the Dental School Entry Test,Prep for the Grad School Entry Test,and Prep for the Law School Entry Test

F) C) and D)
G) A) and C)

Correct Answer

verifed

verified

Use the information for the question(s)below. Your firm is preparing to open a new retail strip mall and you have multiple businesses that would like lease space in it.Each business will pay a fixed amount of rent each month plus a percentage of the gross sales generated each month.The cash flows from each of the businesses has approximately the same amount of risk.The business names,square footage requirements,and monthly expected cash flows for each of the businesses that would like to lease space in your strip mall are provided below: Use the information for the question(s)below. Your firm is preparing to open a new retail strip mall and you have multiple businesses that would like lease space in it.Each business will pay a fixed amount of rent each month plus a percentage of the gross sales generated each month.The cash flows from each of the businesses has approximately the same amount of risk.The business names,square footage requirements,and monthly expected cash flows for each of the businesses that would like to lease space in your strip mall are provided below: -If your new strip mall will have 15,000 square feet of retail space available to be leased,to which businesses should you lease and why? -If your new strip mall will have 15,000 square feet of retail space available to be leased,to which businesses should you lease and why?

Correct Answer

verifed

verified

blured image So we select projects based u...

View Answer

An investor is considering the two investments shown above.Which of the following statements about these investments is TRUE?


A) The investor should take investment A since it has a greater net present value (NPV) .
B) The investor should take investment A since it has a greater internal rate of return (IRR) .
C) The investor should take investment B since it has a greater net present value (NPV) .
D) The investor should take investment B since it has a greater internal rate of return (IRR) .
E) Neither investment should be taken since they both have a negative net present value (NPV) .

F) A) and D)
G) A) and C)

Correct Answer

verifed

verified

A lawn maintenance company compares two ride-on mowers-the Excelsior,which has an expected working-life of six years,and the Grassassinator,which has a working life of four years.After examining the equivalent annual annuities of each mower,the company decides to purchase the Excelsior.Which of the following,if TRUE,would be most likely to make them change that decision?


A) Fuel prices are expected to rise and raise the annual running costs of all mowers.
B) The mower is only expected to be needed for three years.
C) The prices of equivalent mowers are expected to grow in the future as lawnmower manufacturers consolidate.
D) The number of customers requiring lawn-mowing services is expected to sharply increase in the near future.
E) Mower technology is expected to improve significantly in the near future.

F) B) and D)
G) B) and C)

Correct Answer

verifed

verified

A lottery winner can take $6 million now or be paid $600,000 at the end of each of the next 16 years.The winner calculates the internal rate of return (IRR) of taking the money at the end of each year and,estimating that the discount rate across this period will be 6%,decides to take the money at the end of each year.Was her decision correct?


A) Yes,because it agrees with the Net Present Value rule.
B) Yes,because it agrees with the payback rule.
C) Yes,because it agrees with both the Net Present Value rule and the payback rule.
D) No,because it disagrees with the Net Present Value rule.
E) No,because it disagrees with the payback rule.

F) B) and E)
G) A) and B)

Correct Answer

verifed

verified

A small department store in a mall has the opportunity to rent an additional 20,000 square feet of space for five years.It can divide up this space between the above new departments.Each department will require a different amount of space,and each department is expected to make a yearly profit as shown,for each of the next five years.The discount rate is 10%.Based on this information,what departments should be added? A) Pet,Fabrics,Hardware,and Shoe Repair B) Fabrics,Luggage,Hardware,Watches,and Shoe Repair C) Pets,Fabrics,Book,and Luggage D) Pet,Fabrics,Luggage,Hardware,and Shoe Repair E) Fabrics,Book,Luggage and Shoe Repair A small department store in a mall has the opportunity to rent an additional 20,000 square feet of space for five years.It can divide up this space between the above new departments.Each department will require a different amount of space,and each department is expected to make a yearly profit as shown,for each of the next five years.The discount rate is 10%.Based on this information,what departments should be added?


A) Pet,Fabrics,Hardware,and Shoe Repair
B) Fabrics,Luggage,Hardware,Watches,and Shoe Repair
C) Pets,Fabrics,Book,and Luggage
D) Pet,Fabrics,Luggage,Hardware,and Shoe Repair
E) Fabrics,Book,Luggage and Shoe Repair

F) A) and B)
G) A) and E)

Correct Answer

verifed

verified

Use the information for the question(s) below. Use the information for the question(s) below. -The owner of a hair salon spends $1,000,000 to renovate its premises,estimating that this will increase her cash flow by $220,000 per year.She constructs the above graph,which shows the net present value (NPV) as a function of the discount rate.At what dollar value should the NPV profile cross the vertical axis? A) $780,000 B) $1,000,000 C) $220,000 D) The vertical axis crossing point cannot be calculated since the cash inflows are a perpetuity. E) Cannot be determined because inadequate information is given. -The owner of a hair salon spends $1,000,000 to renovate its premises,estimating that this will increase her cash flow by $220,000 per year.She constructs the above graph,which shows the net present value (NPV) as a function of the discount rate.At what dollar value should the NPV profile cross the vertical axis?


A) $780,000
B) $1,000,000
C) $220,000
D) The vertical axis crossing point cannot be calculated since the cash inflows are a perpetuity.
E) Cannot be determined because inadequate information is given.

F) All of the above
G) B) and E)

Correct Answer

verifed

verified

The cash flows for four projects are shown below,along with the cost of capital for these projects.If these projects are mutually exclusive,which one should be taken?


A) The cash flows for four projects are shown below,along with the cost of capital for these projects.If these projects are mutually exclusive,which one should be taken? A) Cost of Capital: 6% B) Cost of Capital: 7% C) Cost of Capital: 8% D) Cost of Capital: 9% E) Cost of Capital: 8% Cost of Capital: 6%
B) The cash flows for four projects are shown below,along with the cost of capital for these projects.If these projects are mutually exclusive,which one should be taken? A) Cost of Capital: 6% B) Cost of Capital: 7% C) Cost of Capital: 8% D) Cost of Capital: 9% E) Cost of Capital: 8% Cost of Capital: 7%
C) The cash flows for four projects are shown below,along with the cost of capital for these projects.If these projects are mutually exclusive,which one should be taken? A) Cost of Capital: 6% B) Cost of Capital: 7% C) Cost of Capital: 8% D) Cost of Capital: 9% E) Cost of Capital: 8% Cost of Capital: 8%
D) The cash flows for four projects are shown below,along with the cost of capital for these projects.If these projects are mutually exclusive,which one should be taken? A) Cost of Capital: 6% B) Cost of Capital: 7% C) Cost of Capital: 8% D) Cost of Capital: 9% E) Cost of Capital: 8% Cost of Capital: 9%
E) The cash flows for four projects are shown below,along with the cost of capital for these projects.If these projects are mutually exclusive,which one should be taken? A) Cost of Capital: 6% B) Cost of Capital: 7% C) Cost of Capital: 8% D) Cost of Capital: 9% E) Cost of Capital: 8% Cost of Capital: 8%

F) C) and D)
G) B) and D)

Correct Answer

verifed

verified

What is the general shape of the net present value (NPV)profile?

Correct Answer

verifed

verified

The net present value (NPV)pro...

View Answer

You are considering an investment opportunity that will cost you $50,000 up front,and return two payments of $30,000,with the first payment 4 years from today.What is the IRR for this investment?


A) 3.4%
B) 4.1%
C) 7.6%
D) 20%
E) 15%

F) A) and B)
G) All of the above

Correct Answer

verifed

verified

Mary is in contract negotiations with a publishing house for her new novel.She has two options.She may be paid $100,000 up front,and receive royalties that are expected to total $26,000 at the end of each of the next five years.Alternatively,she can receive $200,000 up front and no royalties.Which of the following investment rules would indicate that she should take the former deal,given a discount rate of 8%? Mary is in contract negotiations with a publishing house for her new novel.She has two options.She may be paid $100,000 up front,and receive royalties that are expected to total $26,000 at the end of each of the next five years.Alternatively,she can receive $200,000 up front and no royalties.Which of the following investment rules would indicate that she should take the former deal,given a discount rate of 8%? A) Rule I only B) Rule III only C) Rules II and III D) Rules I and II E) Rules I and III


A) Rule I only
B) Rule III only
C) Rules II and III
D) Rules I and II
E) Rules I and III

F) C) and D)
G) B) and C)

Correct Answer

verifed

verified

You are considering an investment opportunity that will cost you $20,000 up front,but return $5,000 per year for the next 10 years.What is the IRR for this investment?


A) 21.4%
B) 250%
C) 20%
D) 25%
E) 22.5%

F) A) and E)
G) B) and E)

Correct Answer

verifed

verified

Preference for cash today versus cash in the future in part determines net present value (NPV).

A) True
B) False

Correct Answer

verifed

verified

An investor has the opportunity to invest in four new retail stores.The amount that can be invested in each store,along with the expected cash flow at the end of the first year,the growth rate of the concern,and the cost of capital is shown for each case.It is assumed each investment will operate in perpetuity after the initial investment.Which investment should the investor choose?


A) Initial investment: $100,000; Cash flow in year 1: $12,000; Growth Rate: 1.25%; Cost of Capital: 9.0%
B) Initial investment: $90,000; Cash flow in year 1: $10,000; Growth Rate: 1.50%; Cost of Capital: 9.0%
C) Initial investment: $80,000; Cash flow in year 1: $8000; Growth Rate: 1.75%; Cost of Capital:8.0%
D) Initial investment: $60,000; Cash flow in year 1: $6000; Growth Rate: 2.50%; Cost of Capital: 7.5%
E) Initial investment: $50,000; Cash flow in year 1: $5,000; Growth rate: 2.00%; Cost of Capital: 7.0%

F) B) and E)
G) A) and E)

Correct Answer

verifed

verified

You wish to buy a new lawnmower and you are deciding between a gas powered lawn mower and an electric mower.The electric mower costs $275 more than the gas mower,but you estimate that it will save you $40 per year by using cheaper electricity relative to gasoline.If the expected lifetime of both mowers is 30 years,and the cost of capital of 5%,what is the NPV of getting an electric mower instead of a gas mower?


A) $40
B) $340
C) -$235
D) -$275
E) $925

F) B) and D)
G) A) and B)

Correct Answer

verifed

verified

A local government awards a landscaping company a contract worth $1.2 million per year for five years for maintaining public parks.The landscaping company will need to buy some new machinery before they can take on the contract.If the cost of capital is 7%,what is the most that this equipment could cost if the contract is to be worthwhile for the landscaping company?


A) $4.55 million
B) $4.61 million
C) $4.92 million
D) $5.26 million
E) $6.00 million

F) C) and E)
G) A) and E)

Correct Answer

verifed

verified

Most corporations measure the value of a project in terms of which of the following?


A) discount value
B) discount factor
C) future value (FV)
D) present value (PV)
E) market value

F) C) and E)
G) D) and E)

Correct Answer

verifed

verified

Use the table for the question(s) below. Consider the following two projects: Use the table for the question(s) below. Consider the following two projects: -Assume that projects Alpha and Beta are mutually exclusive.The correct investment decision and the best rational for that decision is to: A) invest in project Beta,since NPV<sub>Beta</sub> > 0. B) invest in project Alpha,since NPV<sub>Beta</sub> < NPV<sub>Alpha</sub>. C) invest in project Beta,since IRR<sub>Beta</sub> > IRR<sub>Alpha</sub>. D) invest in project Beta,since NPV<sub>Beta</sub> > NPV<sub>Alpha </sub>> 0. E) invest in project Alpha,since IRR<sub>Alpha</sub> > IRR<sub>Beta</sub>. -Assume that projects Alpha and Beta are mutually exclusive.The correct investment decision and the best rational for that decision is to:


A) invest in project Beta,since NPVBeta > 0.
B) invest in project Alpha,since NPVBeta < NPVAlpha.
C) invest in project Beta,since IRRBeta > IRRAlpha.
D) invest in project Beta,since NPVBeta > NPVAlpha > 0.
E) invest in project Alpha,since IRRAlpha > IRRBeta.

F) A) and E)
G) C) and E)

Correct Answer

verifed

verified

Showing 41 - 60 of 136

Related Exams

Exam 1

Corporate Finance and the Financial Manager

93 Questions

Exam 2

Introduction to Financial Statement Analysis

122 Questions

Exam 3

The Valuation Principle: the Foundation of Financial Decision Making

120 Questions

Exam 4

The Time Value of Money

101 Questions

Exam 5

Interest Rates

118 Questions

Exam 6

Bonds

122 Questions

Exam 7

Valuing Stocks

122 Questions

Exam 9

Fundamentals of Capital Budgeting

108 Questions

Exam 10

Risk and Return in Capital Markets

101 Questions

Exam 11

Systematic Risk and the Equity Risk Premium

102 Questions

Exam 12

Determining the Cost of Capital

107 Questions

Exam 13

Risk and the Pricing of Options

112 Questions

Exam 14

Raising Equity Capital

106 Questions

Exam 15

Debt Financing

112 Questions

Exam 16

Capital Structure

114 Questions

Exam 17

Payout Policy

101 Questions

Exam 18

Financial Modelling and Pro Forma Analysis

124 Questions

Exam 19

Working Capital Management

122 Questions

Exam 20

Short-Term Financial Planning

105 Questions

Exam 21

Risk Management

111 Questions

Exam 22

International Corporate Finance

113 Questions

Exam 23

Leasing

88 Questions

Exam 24

Mergers and Acquisitions

80 Questions

Exam 25

Corporate Governance

53 Questions

Show Answer