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    Finance problems: NPV, compounding, IRR etc

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    2. A firm that wants to know if it has enough cash to meet its bills would be most likely to use which kind of ratio?

    a. Liquidity

    b. Leverage

    c. Efficiency

    d. Profitability

    3. Kingsbury Associates has current assets as follows:

    Cash $3,000

    Accounts receivable $4,500

    Inventories $8,000

    If Kingsbury has a current ratio of 3.2, what is its quick ratio?

    a. 2.07

    b. 1.55

    c. 0.48

    d. 0.96

    4. An example of liquidity ratio is the:

    a. quick ratio.

    b. debt ratio.

    c. times-interest-earned.

    d. return on assets.

    5. The money market is usually thought of as dealing with long-term debt instruments issued by firms with excellent credit ratings.

    a. True

    b. False

    6. If you put $600 in a savings account that yields an 8% rate of interest compounded weekly, what will the investment be worth in 37 weeks (round to the nearest dollar)?

    a. $648

    b. $635

    c. $674

    d. $645

    7. Dawn Swift discovered that 20 years ago, the average tuition for one year at an Ivy League school was $4,500. Today, the average cost is $29,000. What is the growth rate in tuition cost over this 20-year period? Round off to the nearest 0.1%.

    a. 15.5%

    b. 4.2%

    c. 9.8%

    d. 10.6%

    8. If you want to have $90 in four years, how much money must you put in a savings account today? Assume that the savings account pays 8.5% and it is compounded monthly (round to the nearest $1).

    a. $60

    b. $65

    c. $66

    d. $71

    9. If the NPV of a project is positive, then the project's IRR ____________ the required rate of return.

    a. must be less than

    b. must be greater than

    c. could be greater or less than

    d. cannot be determined without actual cash flows

    10. Assume that a Toyota sold for 1,476,000 yen in 1985. If the price for this automobile was $8,200 in 1985, and the car still sells for the same amount of yen today, but the current exchange rate is 136 yen per dollar, what is the car selling for today in U.S. dollars?

    a. $ 9,367

    b. $10,853

    c. $11,192

    d. $12,062

    e. $13,525

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    Solution Summary

    The problem set deals with issues in finance: compounding, Net present value, IRR etc