Question 1

Calculate WACC given the following information:

Accepted Answer

A)  8.2% 
B)  8.15% 
C)  0.82% 
D)  8%
Use the following information to answer the questions below. 
A)  8.2% 
B)  8.15% 
C)  0.82% 
D)  8%
Use the following information to answer the questions below.

Question 2

You take out a twenty-year amortized loan of $100,000 with a 5% annual interest rate. What are the annual payments?

Accepted Answer

A)  $ 8,024 
B)  $ 8,718 
C)  $ 4,762 
D)  $37,689 
A)  $ 8,024 
B)  $ 8,718 
C)  $ 4,762 
D)  $37,689

Question 3

If the new common stock costs are greater than the cost of internal common equity, what will happen as the equity break point is passed?

Accepted Answer

A)  The MCC will rise then fall. 
B)  The MCC will remain unchanged. 
C)  The MCC will fall. 
D)  The MCC will rise. 
A)  The MCC will rise then fall. 
B)  The MCC will remain unchanged. 
C)  The MCC will fall. 
D)  The MCC will rise.

Question 4

Compound interest can best be described as:

Accepted Answer

A)  interest on interest only. 
B)  the discount rate. 
C)  interest on interest and interest on original principal. 
D)  interest earned on the original principal. 
A)  interest on interest only. 
B)  the discount rate. 
C)  interest on interest and interest on original principal. 
D)  interest earned on the original principal.

Question 5

Calculate the present value of an annual payment of $3,000 per year for ten years at 8%:
a. Ordinary Annuity
b. Annuity Due

Accepted Answer

PV = $20,130.24 ordi

Question 6

You would like to retire with $1,000,000. You plan on a 7% annual investment rate (3.5% semi-annually) and will put away $7,500 twice a year at the end of each semi-annual period. How long before you can retire? Round to the nearest figure.

Accepted Answer

A)  25 years 
B)  35 years 
C)  51 years 
D)  66 years 
A)  25 years 
B)  35 years 
C)  51 years 
D)  66 years

Question 7

Use the following information to answer the question below.
  
-What are the standard deviations for BIF Corporation and Norwood, Inc.?

Accepted Answer

A)  23.24%, 11.62% 
B)  17.90%, 11.62% 
C)  11.62%, 17.90% 
D)  23.24%, 17.90% 
A)  23.24%, 11.62% 
B)  17.90%, 11.62% 
C)  11.62%, 17.90% 
D)  23.24%, 17.90%

Question 8

Compare diversifiable and nondiversifiable risk. What are some examples of each type of risk?

Accepted Answer

Diversifiable risk is that risk that is

Question 9

In recent years, Canadian regulators have turned down fee increase requests from regulated utilities that argued they needed to charge higher fees to provide adequate returns to their shareholders. The regulating bodies told them to leave their fees where they were and to increase their debt levels. Why?

Accepted Answer

Because of the tax advantages, debt is a

Question 10

Calculate the present value of each of the alternatives below, if the discount rate is 12%.
a. $45,000 today in one lump sum.
b. $70,000 paid to you in seven equal payments of $10,000 at the end of each of the next seven years.
c. $80,000 paid in one lump sum 7 years from now.

Accepted Answer

a. PV = $45,000
b. P

Question 11

What are the two main factors of "external risk"?

Accepted Answer

A)  competitors and government 
B)  unexpected occurrences like 9/11 and NAFTA 
C)  unions and the banking system 
D)  foreign exchange and inflation 
A)  competitors and government 
B)  unexpected occurrences like 9/11 and NAFTA 
C)  unions and the banking system 
D)  foreign exchange and inflation

Question 12

The expected mean of the normal probability distribution of possible returns for XYZ Corporation is 15%. The standard deviation is 2%. Calculate the range of possible values allowing you a 67% confidence interval around the expected retur

Accepted Answer

A)  13% - 17% 
B)  10% - 20% 
C)  11% - 19% 
D)  14% - 16% 
A)  13% - 17% 
B)  10% - 20% 
C)  11% - 19% 
D)  14% - 16%

Question 13

The variability of a company's operating income can be measured by calculating:

Accepted Answer

A)  the standard deviation of operating income. 
B)  the coefficient of variation of net income. 
C)  the correlation coefficient between operating income and sales. 
D)  the beta of the company. 
A)  the standard deviation of operating income. 
B)  the coefficient of variation of net income. 
C)  the correlation coefficient between operating income and sales. 
D)  the beta of the company.

Calculate WACC given the following information:

You take out a twenty-year amortized loan of $100,000 with a 5% annual interest rate. What are the annual payments?

If the new common stock costs are greater than the cost of internal common equity, what will happen as the equity break point is passed?

Compound interest can best be described as:

Calculate the present value of an annual payment of $3,000 per year for ten years at 8%: a. Ordinary Annuity b. Annuity Due

You would like to retire with $1,000,000. You plan on a 7% annual investment rate (3.5% semi-annually) and will put away $7,500 twice a year at the end of each semi-annual period. How long before you can retire? Round to the nearest figure.

Use the following information to answer the question below. -What are the standard deviations for BIF Corporation and Norwood, Inc.?

Compare diversifiable and nondiversifiable risk. What are some examples of each type of risk?

Calculate the present value of each of the alternatives below, if the discount rate is 12%. a. $45,000 today in one lump sum. b. $70,000 paid to you in seven equal payments of $10,000 at the end of each of the next seven years. c. $80,000 paid in one lump sum 7 years from now.

What are the two main factors of "external risk"?

The expected mean of the normal probability distribution of possible returns for XYZ Corporation is 15%. The standard deviation is 2%. Calculate the range of possible values allowing you a 67% confidence interval around the expected retur

The variability of a company's operating income can be measured by calculating:

The World of Finance

Essential Concepts in Finance: Part A

Capital Budgeting and Business Valuation

Long-Term Financing Decisions

Short-Term Financing Decisions

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Exam 3: Essential Concepts in Finance: Part B

Calculate WACC given the following information:

You take out a twenty-year amortized loan of $100,000 with a 5% annual interest rate. What are the annual payments?

If the new common stock costs are greater than the cost of internal common equity, what will happen as the equity break point is passed?

Compound interest can best be described as:

Calculate the present value of an annual payment of $3,000 per year for ten years at 8%: a. Ordinary Annuity b. Annuity Due

You would like to retire with $1,000,000. You plan on a 7% annual investment rate (3.5% semi-annually) and will put away $7,500 twice a year at the end of each semi-annual period. How long before you can retire? Round to the nearest figure.

Use the following information to answer the question below. -What are the standard deviations for BIF Corporation and Norwood, Inc.?

Compare diversifiable and nondiversifiable risk. What are some examples of each type of risk?

Calculate the present value of each of the alternatives below, if the discount rate is 12%. a. $45,000 today in one lump sum. b. $70,000 paid to you in seven equal payments of $10,000 at the end of each of the next seven years. c. $80,000 paid in one lump sum 7 years from now.

What are the two main factors of "external risk"?

The expected mean of the normal probability distribution of possible returns for XYZ Corporation is 15%. The standard deviation is 2%. Calculate the range of possible values allowing you a 67% confidence interval around the expected retur

The variability of a company's operating income can be measured by calculating:

The World of Finance

Essential Concepts in Finance: Part A

Capital Budgeting and Business Valuation

Long-Term Financing Decisions

Short-Term Financing Decisions

Filters