WorksheetsBASIC FINANCE MANAGEMENT QUIZ
Total questions: 25
Worksheet time: 1hrs 1mins
What is the present value of a ten year $1000 ordinary annuity discounted at 6% ?
$4886
$6145
$7360
$10000
The "time value of money" means that
money paid out today less value than if the money is paid out in the future
money received today is worth more than the same amount of money received in the future
the more time a person has to save, the lower the return on the money
the longer money is held, the less likely it will be spent
What is the present value of RM10,000 to be received in year 10 at an interest rate of 10%?
RM4,855.43
RM5, 855.43
RM3,855.43
RM6, 855.43
It is a series of equal payments at regular intervals.
Interest
Annuity
Logic
Proposition
Ordinary annuity is paid or received at the _______ of the time periods.
beginning
end
middle
quarter
Suppose you need $200 to buy textbooks next year. You can earn 5 percent on your money. How much do you have to put up today?
Answer needs to have two decimal points.
190.35
190.64
190.51
190.48
James wants to be able to make a $30,000 down payment on a new home in three years. If he can invest his savings in an account that earns 6% interest per year, compounded monthly, about how much will James need to deposit today to achieve his goal?
$25,002
$25,069
$25,189
$35,730
If employees of a company go on strike, this is an example of which types of investment risk?
company risk
industry risk
political risk
inflation risk
A risk taker is a person who is not willing to take larger risk.
Standard deviation is a relative measure of risk.
Which of the following is always true with regard to the net present value (NPV) approach?
The NPV and the IRR approaches will always rank projects in the same order
The NPV and Payback approaches will always rank projects in the same approaches
If a project is found to be acceptable under the NPV approach, it would also be acceptable under the internal rate of return (IRR) approach
If a project is found to be acceptable under the NPV approach, it would also be acceptable under the payback approach
This is a form of analysis defined by calculating how long it will take for the asset to "earn back" the money you invested in purchasing it.
internal rate of return
net present value
payback method analysis
tax accounting
The present value of an asset's future cash flows minus its purchase price initial investment is
Internal Rate of Return
Payback
Net Present Value
Modified Internal Rate of Return
Which of the following statements regarding NPV is true?
If NPV is positive, the project is expected to earn more than the firm's cost of capital.
Accepting negative NPV projects will reduce shareholders' wealth.
If the NPV is positive, the project's cost is less than the project's expected benefit.
All of the above.
A significant advantage of the net present value is that it _______.
fully considers time value of money
takes into consideration the yield to maturity
usus profit in the analysis
none of the above
You are analyzing two mutually exclusive projects of similar size and have determined the following data. Both projects have 5-year lives.
Based on the above details, which of the two projects would you accept?
Project A because it has the shortest payback period.
Both as they both have positive NPV.
Project B and reject Project A based on their NPV.
We compute the profitability index of a capital budgeting proposal by
multiplying the internal rate of return by the cost of capital.
dividing the present value of the annual after-tax cash flows by the cost of capital.
dividing the present value of the annual after-tax cash flows by the cash investment in the project.
multiplying the cash inflow by the internal rate of return.
An independent project should be accepted if it
produces a net present value that is greater than or equal to zero.
produces a net present value that is greater than the equivalent IRR.
has only one sign reversal.
produces a profitability index greater than or equal to zero.
The initial investment is the immediate cash outflow necessary to purchase the asset and put it into operating order.
True
False
Determine the payback period for a RM20,000 project that is expected to return RM6,000 for the first two years and RM3,000 for years 3 through 5.
3.5 years
4.5 years
4.67 years
5 years
The payback period of an investment is the amount of time it takes a project to recover its _____ amount.
Total Investment
Initial Investment
Final Installment
Loss
