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    10 Business Finance Questions

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    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

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    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

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