FIN3150 Exam 3
Tony plans on working for the next 39 years til 65. Based on life expectancy surveys he has estimated he will live to be 90. He needs to accumulate $1.75 million to finance his retirement years. Tony has no savings. Monthly contribution at 8.5% is?
(473.08)
Peter's Scenic Flights is a travel agency with a beta of 2.4. Current risk-free rate is 3.568% and market risk premium is 6%. What is the cost of equity for the company?
17.968
Manta Lasers Co. has been working on new production of the new laser will cost them $900,000. The future cash flows are : $200,000 , $250,000, $275,000, $300,000, $350,000 and $400,000. If their cost of capital is 13%, what is the NPV?
229,455.62
McNamara Hotels issued face value bonds of $1,000 each. Bonds will mature in 10 years and make semi-annual coupon payments. Coupon rate is 8% per year. Current price is $950 per bond. What is the annual yield of these bonds?
N= 10 years I/Y=? *2 = 8.761% PV= 950 PMT= ((1000 * 0.08)/2)=$40 FV= 1000
Dragon Flights is planning a capital investment of $5 million, and will produce $1.5 million first year and increase 5.5% each year up to year 6. If Cost of Capital is 13%, what is the NPV?
NPV= $6,754,327.07
Which one of the following methods of analysis has the greatest nias towards short term projects?
Payback
Which one of the following indicates that a project is expected to create value for its owners?
Positive net present value
The net present value of an investment represents the difference between the investment's:
cash inflows and outflows
The internal rate of return is
discount rate that results in a zero net present value for the project.
Scenario Analysis
helps determine the reasonable range of expectations for a projects anticipated outcome.
sensitivity analysis:
illustrates how an increase in operating cash flow caused by changing both the revenue and the cost simultaneously will change the net present value for a project
Any changes to a firm's projected future cash flows that are caused by adding a new project are referred to as:
incremental cash flows
All else held constant, the future value of a lump sum investment will decrease if the:
interest is changed to simple interest from compound interest
Paying interest reduces the taxes owed by a firm. Which one of the following terms applies to this relationship
interest tax shield
Which one of the following is most closely related to the net present value profile?
profitability index
Given an interest rate of zero percent, the future value of a lump sum invested today will always:
remain constant , regardless of the investment time period
The analysis of a new project should exclude:
sunk costs
The internal rate of return is unreliable as an indicator of whether or not an investment should be accepted given which one of the following?
the investment is mutually exclusive with another investment of a different size.
If an investment is producing a return that is equal to the required return, the investment's net present value will be:
zero
Which of these activities is a source of cash?
Decreasing accounts receivable
