# Multiple Choice

Need a hand with a few multiple choice questions.

Thanks!

Robert

1. If you had $5000, which of the following TVM methods would you use to calculate what its value would be in three years?

a. Discounting

b. Compounding

c. Compounding an annuity

d. Discounting an annuity

e. Amortizing

2. Which of the following capital budget model does not use Time Value of Money calculations?

a. Internal Rate of Return (IRR)

b. Modified Internal Rate of Return (MIRR)

c. Payback

d. Net Present Value (NPV)

e. All use Time Value of Money calculations

3. Which of the following factors should be considered in calculating capital budget projects?

a. The selection model to be used

b. Taxes

c. Depreciation

d. Risk

e. All of the above

4. The discount rate used in making capital budget decisions is derived from:

a. Weighted Average Cost of Capital (WACC)

b. Bond Yield

c. Federal Reserve discount rate

d. 6 Month T Bill rate

e. Prime Rate

5. The goal of an optimal capital structure is:

a. Use as little debt as possible

b. Use only retained earnings

c. Avoid diluting current shareholder ownership

d. Achieve minimum overall cost of capital

e. Use only common stock

6. When determining the price to be paid for an acquisition, one of the factors considered is often:

a. Earnings

b. Cash Flow

c. Dividends

d. Growth potential

e. All of the above

https://brainmass.com/business/capital-budgeting/multiple-choice-202436

#### Solution Preview

Please see the attached file. All answers/explanations in blue

1. If you had $5000, which of the following TVM methods would you use to calculate what its value would be in three years?

a. Discounting

b. Compounding

c. Compounding an annuity

d. Discounting an annuity

e. Amortizing

$500 is a lump sum and we need to find the future value. The method to use is compounding to find the FV of a lump sum

2. Which of the following capital budget model does not use Time Value of Money calculations?

a. Internal Rate of ...

#### Solution Summary

The solution explains some multiple choice questions relating to finance