# 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

https://brainmass.com/business/annuity/102810

#### 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.