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1. Which of the following would be included among the investment numbers of a capital budget?

A. Purchase price of the asset

B. Trade- in value of an asset being replaced

C. Investment tax credit from acquistion

D. Installation costs of the machinery

E. All of the above

2. A valuation determines whether a merger should occur; legalities determine what form the business combination should be.

A. True

B. False

3. A FRICTO analysis enables prudent mangers to assess important issues in asset financing

A. True

B. False

4. Timing issues involve:

A. The costs of the alternative forms of capital

B. Sequencing the alternatives, once funding amouts are known

C. None of the above

D. A & B

5. The present value of a cash flow allows an investor to assess:

A. The present value of a future cash flow

B. The value of a stream of cash flows in terms of the best and most certain alternative

C. What equivalent present payment would be equally acceptable in lieu of the investment consideration

D. A & B

E. A, B, & C

6. Hypothesis that are formed during the qualitative analysis cannot be verfied when the analyst reviews the firm's historical performance.

A. True

B. False

7. If a company consistently uses hurdle rates that are higher than its marginal cost of capital, then:

A. It will certainly increase its earnings

B. It may have fewer and fewer investment activities

C. The risk of the firm will decrease

D. A & C

E. B & C

8. If mangers have discovered an actractive investment but financing opportunities are not good as they have been, they should probaly not delay the acqusition since financing and investment decisions should not be mixed.

A. True

B. False

9. The ratio which many observers use to quantify the stock maerkt's opinion of a firm is the:

A. ROE

B. EPS

C. D/E

D. E/A

E. None of the above

10. In a staple predictable industry an average of the previous 10 year's sales growth figures probably a less accurate forcast than assuming the avg. level of sales next year as in the current year.

A. True

B. False

11. The utility of sensitivity analysis is great in merger valuations as it is in capital budgeting.

A. True

B. False

12. Present value calcualtions allows mergers to:

A. Choose assets which creaste the most value even if their cash flows are times differently

B. Express present values in terms of future cash flows

C. Create value for the firm

D. A & C

E. A,B, & C

13. FRITCTO analysis does not print our poor investments.

A. True

B. False

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Reid Wolff
Reid WolffLv2
30 Sep 2019

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1. A discount factor:

A. Is the same as compounding future cash flow B. performs the reverse function of a compounding interest rate C. allows investors to quantify a figure which will assist them in comparing alternative investments D. b and c E. a, b and c

2. As the interest rate used to discount future cash flows is decreased present value of the future cash in-flows: A. increases B. decreases C. stays the same

3. Most bonds pay interest: A. monthly B. quarterly C. semi-annually D. annually E. none of the above

4. How much money will Jane have in 3 years if the money compounds at the annual rate of 10% and she sets aside $1000: A. $1300 B. $1331 C. $1406 D. $1420 E. None of the above

5. When performing sensitivity analysis:

A statistical methods should not be employed B. electronic spreadsheets make the job more manageable C. assumptions should be changed one at a time D. all of the above E. B and C

6. A differential analysis: A. can be used to compare an alternative to the status quo B. can be used to compare any set of alternative C. is easier to comprehend if a consistent frame of reference is employed D. B and C E. A, B, C

7. When projected assets are less than projected liabilities and equity the firm will have:

A a need for debt B. need for equity C. excess cash D. none of the above

8. If the bonds coupon rate is less than the general interest rate in the market the bond will sell at:

A premium B. discount C. neither A or B

9. Present value calculations: A. can help the creation of value B. can provide managers with a means of identifying the investment choices C. do not help the creation of value D. A and B E. B and C

10. When projected assets are more than projected liabilities and equity the plug will be:

A notes payable B. notes receivable C. cash D. none of the above

11. Earl is saving for a pair of jet skis, how much money must Earl put aside now to receive $14,000 six years from now if the money is compounding at an 8% annual compound rate:

A $8847 B. $8800 C. $8822 D. $8810 E. none of the above

12. Which of the following methods helps to size the investments: a. payback b. present value payback c. present value index d. irr e. none of the above

13. Jones company acquires the Mathis company. Jones is in a totally unrelated business to mathis. This is an example of: a. vertical integration b. horizontal integration c. diversification d. none of the above

14. The bond’s yield to maturity calculation is similar to a __________ calculation

a. NPV b. IRR c. payback d. discounted payback e. none of the above

15. If the bonds coupon rate is equal to the general interest rates in the market, the bond will sell at a: a. premium b. discount c. neither A nor B

16. synergy may result from: a. enhanced cash flow b. diversification c.excess cash d. all of the above

17. profit margin and asset turnover are combined to yield: a. EPS b.Payout c. ROA d.ROE e. none of the above

18. the ______matches revenues with expense for the entire accounting period: a, balance sheet b. cash flow statement c. statement of retained earnings d. income statement e. none of the above

19. which of the following would be included amoung the investment numbers of a capital budget? A. purchase price of the asset b. trade-in value of and asset being replaced c. investment tax credit from acquisition d. installation costs of the machinery e. all of the above

20. economic value is the same as: a. book value/net asset value b. owners equity c. none of the above

Hello, I am having some trouble with my Finance homework. I was wondering if someone could check the answers for me. (explanations are very helpful, but not necesary)

1) How much money will Jane Mims have in three years if the money compounds at an annual rate of 10% and she sets aside $1000

A) $1300

B)$1331

C) $1406

D) $1420

E) None of the Above

2) As the interest rate used to discount future cash flows is decreased, present value of the future cash inflows....

A) Increases

B) Decreases

C) Stays the Same

3) The ratio which many observers use to quantify the stock market's opinion of a firm is the....

A) ROE

B) EPS

C) D/E

D) P/E

E) None of the above

4) Compound rates, not discount rates, are used in an attempt to....

A) Screen out weak investments

B) quantify the firm's opportunity costs

C) Quantify the Firm's risk

D) A & B

E) None of the above

5) If Carla Rice puts $200 in the bank for nine years, and the money compounds at 7% annually, how much will Carla have at the end of the nine year period?

A) $362

B) $368

C) $374

D) $381

E) None of the Above

6) Adrian Ardell is saving for a new guitar. How much must Adrian set aside now to receive $4000, seven years from nowusing a compound interest rate of 7% annually?

A) $2400

B) $2491

C) $2411

D) $2500

E) None of the Above

7) Which of the following would be included among the investment numbers of a capital budget?

A) Purchase price of the asset

B) Trade - In - Value of an asset being replaced

C) Investment tax credit from acquistion

D) Installation costs of the Machinery

E) All of the above

8) Synergy between two companies

A) Is the complementary situation where value is created in the joining of the firms

B) May result in the improvement of the acquire's bottom line

C)Could be defined by purely qualitative benefits

D) A & C

E) A, B, & C

9) Gadsen acquires Digital corporation which is upstream in the marketing chain. This is an example of....

A) Diversification

B) Vertical Integration

C) Horizontal Integration

D) None of the Above

10) The cost of capital can be defined as

A) the weighted average cost of attracting investors to the firm

B) The price of obtaining funding for the firm, weighted according to target ratios in the capital structure

C) Less than the weighted average return that investors in the firm require

D) A & B

E) A, B,& C

TWO:

Which of the following elements is a part of relevant cash flow?

a.Net income

b.Deprecation

c. Change in working capital

d.Capital Investment

e.All of the above

Residual cash flows are estimated when:

a.The useful lives of alternatives are different

b.One asset has a shorter economic life than its alternatives

c.One asset has a longer economic life than its alternative

d.A and B

e.A, B, and C

The cost of capital can be defined as:

A. the weighted average cost of attracting investors to the firm.

B. the price of obtaining funding for the firm, weighted according to target ratios in the capital structure.

C. less than the weighted average return that investors in the firm require.

D. A and B.

E. A, B, and C.

Gilbert Jones is saving for a new outboard motor. He needs to have $10,000, 4 years from now. How much must he set aside now to have $10,000, 4 years from now if money compounds at 12% annually?

a.$6310

B)6355

c.6332

d.6106

e.None of the above

When projecting financial statements, the balance sheet will

a.Always balance

b.Never balance

c.None of the above

Profit margin and asset turnover are combined to yield

a.EPS

b.Payout

c.ROA

d.ROE

e.None of the above

As the interest rate used to discount future cash flows is decreased, present value of the future cash inflows:

a.increase

b.decreases

c.stays the same

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