AFM273 Study Guide - Final Guide: Income Statement, Opportunity Cost, Net Present Value

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM273
• Professor: Garvin Blair

Document Summary

Instructions: answer all questions in the space provided, show all of your calculations, the examination has 9 pages (not including this cover page). Standard size paper, double sided, hand-written, no photocopies. Question 1: 20 marks. (a) (4 marks) an investment under consideration has a payback of six years and a cost of ,000. Assume that cash ows are conventional (i. e. , this is a project in which an investment is made up-front and a positive payoff from that investment is realized later). The worst case is that the ,000 is paid back in full after 6 years and there are no further cash. The npv is then 49,000 + 49,000 (2 marks) The best case is in nite since there could be any positive payoff imaginable after the 6 year pay- back period. (2 marks) Page 1 of 9 (b) (5 marks) after getting into a motor cycle accident, brian has been offered two settlement claims to chose from.