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Financial planning

Objective: Describe the relationship between strategic planning and financial planning.

5. Which of the following statements is true?
a. The future value of an annuity would be greater if funds are invested at the beginning of each period instead of at the end of each period.
b. An annuity is a series of equal payments that are made, or received, forever.
c. The effective annual rate (APR) of a loan is higher the less frequently payments are made.
d. The future value of an annuity would be greater if funds are invested at the end of each period rather than at the beginning of each period.

Objective: Prepare a cash budget.

6. A company collects 60% of its sales during the month of the sale, 30% one month after the sale, and 10% two months after the sale. The company expects sales of $10,000 in August, $20,000 in September, $30,000 in October, and $40,000 in November. How much money is expected to be collected in October?
a. $25,000
b. $15,000
c. $35,000
d. None of the above

Objective: Perform a break-even analysis.

7. Potential applications of the break-even model include:
a. replacement for time-adjusted capital budgeting techniques.
b. pricing policy.
c. optimizing the cash-marketable securities position of a firm.
d. none of these

Objective: Calculate present value and future value of cash flows.

8. If you invest $750 every six months at 8% compounded semi-annually, how much would you accumulate at the end of 10 years?
a. $10,065
b $10,193
c. $22,334
d. $21,731

Week Three: Working Capital Management and Capital Budgeting

Objective: Evaluate effective working capital management techniques.

9. According to the hedging principle, permanent assets should be financed with _______ liabilities.
a. permanent
b. spontaneous
c. current
d. fixed

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Solution Summary

The solution explains various questions relating to financial planning