Question 1

Dollar amounts received at different points in time cannot be compared in absolute terms.

Accepted Answer

A) True 
 B)False

Question 2

What is one of the prerequisite conditions for the Valuation Principle to work?

Accepted Answer

The availability of competitiv

Question 3

Diwali Airlines has a contract that gives them the opportunity to purchase up to 10,000,000 gallons of jet fuel at $2.00 per gallon.The current market price of jet fuel is $2.26 per gallon.Divali believes they will only need 6,000,000 gallons of jet fuel.What is the value of this opportunity?

Accepted Answer

A) $1,560,000 
B) $2,600,000 
C) $1,040,000 
D) $9,040,000 
A) $1,560,000 
B) $2,600,000 
C) $1,040,000 
D) $9,040,000

Question 4

How can we convert the value of money from one point in time to another?

Accepted Answer

A) using the current exchange rate 
B) using a cost benefit analysis 
C) using the Valuation Principle 
D) using the current interest rate 
A) using the current exchange rate 
B) using a cost benefit analysis 
C) using the Valuation Principle 
D) using the current interest rate

Question 5

A company intends to install new management software for its warehouse.The software will cost $50,000 to buy and will cost an additional $150,000 to install and implement.It is anticipated that it will save the company $45,000 through reductions in staff and $65,000 in general inventory costs in the first year after installation.What is the benefit to the company in the first year if they choose to install the software?

Accepted Answer

A) $45,000 
B) $90,000 
C) $110,000 
D) $180,000 
A) $45,000 
B) $90,000 
C) $110,000 
D) $180,000

Question 6

Costs and benefits must be put in common terms if they are to be compared.

Accepted Answer

A) True 
 B)False

Question 7

In general,if an action increases a firm's value by providing benefits with a value greater than any costs involved,then that action is good for the firm's investors.

Accepted Answer

A) True 
 B)False

Question 8

Explain why a dollar today is worth more than a dollar tomorrow.

Accepted Answer

A dollar today can be invested

Question 9

If $476 invested today yields $500 in one year's time,what is the discount factor?

Accepted Answer

A) 0.05 
B) 0.95 
C) 1.05 
D) 1.50 
A) 0.05 
B) 0.95 
C) 1.05 
D) 1.50

Question 10

A firm that provides tax services to the public intends to offer a premium tax-return service at a higher price than their current services.The managers of the company ask experts in marketing to determine how much an effective ad campaign for such a service would cost,and by how much sales would be increased.They consult experts in economics to calculate the increases in revenue from the success of the campaign,experts in operations to determine the cost of offering the service,and experts in strategy to anticipate possible counter-moves by competitors.This example illustrates which of the following points about the role of financial managers?

Accepted Answer

A) Real-world decisions are complex and require information from many sources if the decisions are to be valid. 
B) Determining the costs associated with making a decision is easier than determining the potential benefits of the decision. 
C) All of the costs and benefits associated with a decision can never be fully identified. 
D) Ultimately the decision whether to take a certain course of action rests with the financial managers of a company. 
A) Real-world decisions are complex and require information from many sources if the decisions are to be valid. 
B) Determining the costs associated with making a decision is easier than determining the potential benefits of the decision. 
C) All of the costs and benefits associated with a decision can never be fully identified. 
D) Ultimately the decision whether to take a certain course of action rests with the financial managers of a company.

Question 11

A 2008 Toyota Camry can be bought in Buffalo,NY,for $18,720.The same model Camry can be purchased across the Canadian border in Hamilton,ON.If cars could be freely traded across the border,what would be the expected price of a 2008 Toyota Camry in Hamilton in Canadian dollars,given that $1 U.S.is equal to $0.98 Canadian?

Accepted Answer

A) $18,345 
B) $18,720 
C) $19,102 
D) $20,212 
A) $18,345 
B) $18,720 
C) $19,102 
D) $20,212

Question 12

Use the information for the question(s)below.
   Coloma Cooper Incorporated is able to produce $640 worth of copper from one ton of low-grade copper ore.Because of its higher copper content,Coloma can produce $940 worth of copper from one ton of high-grade copper ore.
-A mining company is offering to trade you 7250 tons of low-grade copper ore for 5000 tons of high-grade copper ore.Assuming you currently have 5000 tons of high-grade ore,what should you do?

Accepted Answer

Don't trade.Coloma should keep the high

Dollar amounts received at different points in time cannot be compared in absolute terms.

What is one of the prerequisite conditions for the Valuation Principle to work?

Diwali Airlines has a contract that gives them the opportunity to purchase up to 10,000,000 gallons of jet fuel at $2.00 per gallon.The current market price of jet fuel is $2.26 per gallon.Divali believes they will only need 6,000,000 gallons of jet fuel.What is the value of this opportunity?

How can we convert the value of money from one point in time to another?

Costs and benefits must be put in common terms if they are to be compared.

In general,if an action increases a firm's value by providing benefits with a value greater than any costs involved,then that action is good for the firm's investors.

Explain why a dollar today is worth more than a dollar tomorrow.

If $476 invested today yields $500 in one year's time,what is the discount factor?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bonds

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: A Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Leasing

Insurance and Risk Management

Corporate Governance

Filters

Exam 3: Time Value of Money: An Introduction

Dollar amounts received at different points in time cannot be compared in absolute terms.

What is one of the prerequisite conditions for the Valuation Principle to work?

Diwali Airlines has a contract that gives them the opportunity to purchase up to 10,000,000 gallons of jet fuel at $2.00 per gallon.The current market price of jet fuel is $2.26 per gallon.Divali believes they will only need 6,000,000 gallons of jet fuel.What is the value of this opportunity?

How can we convert the value of money from one point in time to another?

Costs and benefits must be put in common terms if they are to be compared.

In general,if an action increases a firm's value by providing benefits with a value greater than any costs involved,then that action is good for the firm's investors.

Explain why a dollar today is worth more than a dollar tomorrow.

If $476 invested today yields $500 in one year's time,what is the discount factor?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bonds

Stock Valuation

Investment Decision Rules

Fundamentals of Capital Budgeting

Stock Valuation: A Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modeling and Pro Forma Analysis

Working Capital Management

Short-Term Financial Planning

Option Applications and Corporate Finance

Mergers and Acquisitions

International Corporate Finance

Leasing

Insurance and Risk Management

Corporate Governance

Filters