Purchase Solution

NPV

Not what you're looking for?

Ask Custom Question

NOTE: Unless otherwise stated, the borrowers and lenders do sell at the same market interest rate.

1. Shareholders of corporations generally do not vote on every investment decision but depend on managers to maximize value by:
(A) Choosing the highest net income projects.
(B) Investing at the market rate of return.
(C) Buying shares back from investors.
(D) Following the NPV rule to choose investments.

2. A corporation has the following opportunity to invest in a project with a return of $77,000 in one period. The current investment is $69,000.
The financial rate market rate is 8%. What is the NPV and the investment decision?
(A) -$2,296; do not invest.
(B) $2,296; invest.
(C) $2,480; do not invest.
(D) $8,000; invest.
(E) $2,480; do not invest.

3. An individual with no investment opportunities has income of $3,000 in period 0 and income of $2,500 in period 1. If the interest rate is 3% and the individual is constrained to consume all income in period 1, then which of the following consumption patterns is not possible?
(A) $0 in period 0 and $5,590 in period 1.
(B) $2,000 in period 0 and $3,530 in period 1.
(C) $0 in period 0 and $5,427 in period 1.
(D) $3,000 in period 0 and $2,500 in period 1

4. Corporate managers maximize shareholder wealth by choosing positive NPV projects because:
(A) All investors have the same preferences.
(B) Dissatisfied shareholders can sell off shares.
(C) The separation theorem in financial markets states that all investors will be satisfied with the same investment decision regardless of personal preferences.
(D) Managers are wiser than shareholders regarding investments.

5. An individual has $60,000 income in period 0 and $30,000 income in period 1. If the individual desires to consume $19,000 in period 1 and the market interest rate is 8%, what is the maximum amount of consumption in period 0?
(A) $50,000
(B) $70,185
(C) $71,000
(D) $61,880

Purchase this Solution
Solution Summary

This solution is comprised of a detailed explanation to answer what shareholders of corporations generally do not vote on every investment decision but depend on managers to maximize value by.

Solution Preview

NOTE: Unless otherwise stated, the borrowers and lenders do sell at the same market interest rate.

1. Shareholders of corporations generally do not vote on every investment decision but depend on managers to maximize value by:
(A) Choosing the highest net income projects.
(B) Investing at the market rate of return.
(C) Buying shares back from investors.
(D) Following the NPV rule to choose investments.

Answer: D

2. A corporation has the following opportunity to invest in a project with a return of $77,000 in one period. The current investment is $69,000.
The financial rate market rate is 8%. What is the NPV ...

Purchase this Solution
Free BrainMass Quizzes
Cost Concepts: Analyzing Costs in Managerial Accounting

This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.

Organizational Leadership Quiz

This quiz prepares a person to do well when it comes to studying organizational leadership in their studies.

Transformational Leadership

This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.

Marketing Management Philosophies Quiz

A test on how well a student understands the basic assumptions of marketers on buyers that will form a basis of their marketing strategies.

Learning Lean

This quiz will help you understand the basic concepts of Lean.

View More Free Quizzes
Related BrainMass Solutions

  • NPV, IRR, and Sensitivity Analysis

    cash flow Year Cash flow ;+NPV ;-NPV ;+NPV ;-NPV ;+NPV ;-NPV 0 -$42,000 2% 3% 1.00 1.00 -$42,000 -$42,000 1..10 $4,700 2% 3% 8.98 8.53 $42,218 $40,092 NPV $218 -$1,908 IRR 2.10% 10% Decrease Discount

  • Expected NPV and standard deviation of NPV with real example

    What are the project's expected NPV and standard deviation of NPV? b. Should the base case analysis use the most likely NPV or expected NPV? Explain your answer. a.

  • NPV

    126133 NPV You have estimated 3 possible NPV outcomes for an investment under analysis, the expected NPV, the best case NPV and the worst case NPV. You have also gotten estimates from management on the probability of each of these three cases.

  • Coefficeint of variation of NPV

    (Expected NPV and standard deviation of NPV in thousands). The expected NPV, standard deviation of NPV, and coefficeint of variation of NPV is calculated when a probability distribution of NPV is given.

  • Calculating NPV at Various Discount Rates

    What is the NPV at a discount rate of 11 percent? What is the NPV at a discount rate of 21 percent? What is the NPV at a discount rate of 29 percent?

  • NPV, IRR and Profitability Index

    NPV=0.

  • NET PRESENT VALUE and internal rate of return FOR CAPITAL

    You can get the NPV for 0%. 4% NPV would be $46,822.37 8% NPV would be -$7,831.63 10% NPV would be -$32,419.23 NPV is calculated by finding the present value of each cash flow, including both cash inflows and outflows, discounted

  • NPV analysis of Jameson Cargile, Inc.

    NPV is just for analysis. B. The YellowJacket is a better choice because the negative NPV is greater than the negative NPV associated with the Bumblebee. C.

  • Internal rate of return

    the discount rate that makes NPV negative. the rate of return that makes the NPV positive. One disadvantage of the NPV method is that: Answer the NPV deals with cash flows.

  • Calculating Net Present Value

    PI= (I+NPV) / I where I=Investment if PI>0 then {(I+NPV) / I}>0 which means NPV> -I meaning NPV>0 where <0> is the limit of I NPV=0={C1 / (1+IRR)}-I={C1 / (1+k)}-I where C1 is the expected future net cash flow that means IRR=K As stated from

View More Related Solutions