Explore BrainMass
Share

# Financial Pre-Test Problems

This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

I am looking for the way to solve these by hand and in Excel, and also the proper answer:

1. Suppose that the following cash flows are received:

0 = -\$500, 1 = \$200, 2 = \$200, 3 = \$200

The Internal Rate of Return on the cash flows (rounded to the nearest percent) is
8%, 9%, 10%, 11%, or 12%

2. A 10-year bond paying 8% annual coupons pays \$1000 at maturity. If the required rate of return on the bond is 7%, then today the bond will sell (rounded to the nearest cent) for
\$1000.00
\$1210.45
\$987.48
\$1070.24

3. The annual revenue-growth rates for a new tech star tup during its first 4 years of operations were as follows:

1 = 50, 2 = 50, 3 = -50, 4 = -50

Rounded to the nearest tenth of one percent, the start up's 4-year Compound Annual Growth Rate was
-13.4% or -10.5%

4. Last year, a barber shop generated \$100,000 in profit. Assume that the shop's profits grow at 5% per year and that cash flows are discounted at 10% per year. If profits are received at the end of each year, what is the present value of all the shop's future profits?
\$2,100,000
\$3,000,000

#### Solution Preview

See the attached file for proper formatting. Thanks

I am looking for the way to solve these by hand and in Excel, and also the proper answer:

1.  Suppose that the following cash flows are received:
0 = -\$500, 1 = \$200, 2 = \$200, 3 = \$200
The Internal Rate of Return on the cash flows (rounded to the nearest percent) is
8%, 9%, 10%, 11%, or 12%
Solution
Year Cash Flow
0 (\$500)
1 \$200
2 \$200
3 \$200 ...

#### Solution Summary

Financial pre test problems for cash flows received are given.

\$2.19