BUSN 379 Finance Final Exam Answers
(TCO 3 and 4) The net present value is: (Points: 4)
(TCO 3 and 4) What is the net present value of a project with the following cash flows, if the discount rate is 10 percent?
(TCO 4) Leward Manufacturing is spending $115,000 to update its equipment. This is necessary if the firm wishes to be competitive in the marketplace and provide a wide array of product models. The company estimates that these updates will improve its cash inflows by $27,500 a year, for eight years. What is the payback period? (Points: 4)
(TCO 4) Ignoring the option to expand: (Points: 4)
overestimates the internal rate of return on a project.
(TCO 4) ___________, occurs when a firm cannot raise financing for a project under any circumstances. (Points: 4)
(TCO 4) ABC Cameras is considering an investment that will have a cost of $10,000 and the following cash flows: $6,000 in year 1, $4,000 in year 2 and $3,000 in year 3. Assume the cost of capital is 10%. Which of the following is true regarding this investment? (Points: 4)
(TCO 4) Assume Company X plans to invest $60,000 in industrial equipment. Using Tables 9.6 and 9.7 of your textbook (Page 277), which is the first year depreciation amount under MACRS? (Points: 4)
(TCO 1 and 4) Assume a project has earnings before depreciation and taxes of $120,000, depreciation of $40,000, and that the firm has a 30 percent tax bracket. What are the after-tax cash flows for the project? (Points: 4)
(TCO 8) Which of the following factors will affect the expected rate of return on a security? (Points: 4)
(TCO 8) Which statement is not true regarding risk? (Points: 4)
the expected return is usually not the same as the actual return
(TCO 8) The stock of Chocolate Galore is expected to produce the following returns, given the various states of the economy. What is the expected return on this stock?
(TCO 8) You own a portfolio that consists of $8,000 in stock A, $4,600 in stock B, $13,000 in stock C, and $5,500 in stock D. What is the portfolio weight of stock B? (Points: 4)
(TCO 8) You currently own a portfolio valued at $24,000 that has a beta of 1.1. You have another $8,000 to invest, and would like to invest it in a manner such that the risk of the new portfolio matches that of the overall market. What does the beta of the new security have to be? (Points: 4)