Quiz 8 for Stokes

Opportunity cost are revenues gained by forgoing other opportunities. True or False? True False

F

NPV is calculated using ten steps. True or False? True False

F

Present value of an annuity refers to: A. What a series of equal payment in the future is worth today taking into account time value of money B. A factor that when multiplied by a stream of equal payments equals present value C. What an equal series of payments will be like at some future date using compound interest D. None of the above

A

Capital appreciation is: A. The portion of the profits the company keeps B. When an investment is worth more when it is sold than when it was purchased C. An increase in liabilities D. None of the above

B

Present value (PV) refers to: A. Worth in future of an amount invested today B. Worth today of future payment C. Worth in the future of a series of payments over time D. None of the above

B

Sunk costs are: A. Recoverable B. Not recoverable C. Indicators of future gains D. Management's poor decisions

B

Compound interest method refers to: A. Interest is calculated only on the original principle B. Interest is calculated on a dollar received today C. Interest is calculated on both the original principle and and on all interest accumulated since the beginning of interest period D. All of the above

C

Future value is determined using: A. Worth of a dollar today B. Calculations only on the original principle C. A compound interest method D. Using a simple interest method

C

The payback method measures how long it will take to recover____________ investment. A. Total B. Past C. Initial D. Non-financial

C

The time value of money refers to: A. Factors that show future value B. Factors that show past value C. Concept that a dollar received today is worth more than a dollar received in the future D. Concept that a dollar received today is worth less than a dollar received in the future

C

Straight-line depreciation is a method that depreciates an asset a(n)__________________ amount each______________________ until it reaches its salvage value. A. Varied, quarter B. Equal, day C. Varied, year D. Equal, year

D

The component(s) of a capital investment decision are: A. Determining if the investment is worth while B. Costs of investing C. Determining how to finance the investment D. Both a & c

D

The strength(s) of the NPV analysis are: A. Answers in dollars, not years B. Accounts for all cash flows in the project C. Discounts at the cost of capital D. All of the above

D

An effective interest rate is the stated annual interest rate of a loan. True or False? True False

F

Dividends are payments to creditors. True or False? True False

F

An annuity is a series of equal payments. True or False? True False

T

In a simple interest method the principle is the amount invested. True or False? True False

T

Interest determines how much an amount of money invested today will be worth in the future. True or False? True False

T

Salvage value is the amount of cash to be received when an asset is sold, usually at the end of its useful life. True or False? True False

T

The payback method is in years, not dollars. True or False? True False

T