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10 Business Finance Questions

1. Which of the following project evaluation techniques does not take into consideration the time value of money:
a. NPV
b. IRR
c. PI
d. Payback

2. In order to accept a project using the NPV evaluation technique, the NPV must be:
a. Greater than the discount rate
b. Positive
c. Greater than the WACC
d. Negative

3. A series of equal payments or receipts that occur at the end of each of a number of time periods is
referred to as:
a. An ordinary annuity
b. A deferred annuity
c. An annuity due
d. An extraordinary annuity

4. Assuming annual compounding, what is the future value of $15,000 if it is invested at 7.5%
for a period of 13 years?

5. Assuming quarterly compounding, what is the future value of $20,000 if it is invested at 6.5%
for a period of 9 years?

6. Assuming annual compounding, what is the present value of $100,000 received in 15 years if the current
opportunity rate of return is 9%?

7. Using the information below, calculate the payback period and the NPV.
Cost of Capital = 13%
Initial Investment 100,000
Cash inflow 1 15,000
Cash inflow 2 20,000
Cash inflow 3 30,000
Cash inflow 4 35,000
Cash inflow 5 40,000

8. Using the information in question #7, the IRR is closest to:
a. 3.5%
b. 5.5%
c. 10.5%
d. 20.5%

9. How much should a $1,000-face-value bonds sell for, assuming the following conditions:
The bond pays a coupon of 11%
The coupon payments are paid annually.
The required rate of return on similar-risk investments is 9%.
The bond matures in 15 years

10. How much should a $1,000-face-value bonds sell for, assuming the following conditions:
The bond pays a coupon of 7%
The coupon payments are paid semi-annually.
The required rate of return on similar-risk investments is 7%.
The bond matures in 10 years

Solution Preview

1. Which of the following project evaluation techniques does not take into consideration the time value of money:

d. ...

Solution Summary

Excel file shows the calculations to answer these 10 questions on everything from IRR to project evaluation to face-value bonds.

$2.19