Finance > QUESTIONS & ANSWERS > FNAN 522 Finance Exam II Final Already Graded. (All)

FNAN 522 Finance Exam II Final Already Graded.

Document Content and Description Below

FNAN 522 Finance Exam II Final Already Graded. Started on Tuesday, 10 December 2019, 9:41 PM State Finished Completed on Tuesday, 10 December 2019, 10:5 6 PM Time taken 1 hour 15 mins Marks 30.00/40.00 Grade 210.00 out of 280.00 (75%) A company is considering a project that has a discount rate of 5%. It will require an initial investment of $200,000. In the first year, it will have $100,000 in net cash inflows (one year after the initial investment). In year 2, it will have cash inflows of $100,000 (two years after the initial investment), and in year 3 the project will generate $200,000 (three years after the initial investment). What is the project's NPV? Assume all cash flows occur at the end of the year. Select one: a. $190,476 b. $193,204 c. $358,708 d. $158,709 The correct answer is: $158,709 FNAN522-020_860-202020 Question 2 Correct Mark 1.00 out of 1.00 Question 3 Correct Mark 1.00 out of 1.00 A project has an initial investment requirement of $100,000. In year 1, it should earn $25,000; in year two, $30,000; and in year 3, $50,000. What is the project's internal rate of return? Assume the cash flows in years one, two, and three happen at the end of the year. Select one: a. 5.0% b. 6.21% c. 7.56% d. 2.21% The correct answer is: 2.21% In which of the following situations would it be appropriate to use the IRR method to make an investment decision? Select one: a. To compare two projects that have an equal initial investment and lifespan. b. All of these answers. c. To assess a project which cash flows fluctuate between positive and negative. d. To compare two investments that have different durations. The correct answer is: To compare two projects that have an equal initial investment and lifespan. Question 4 Correct Mark 1.00 out of 1.00 Question 5 Incorrect Mark 0.00 out of 1.00 Under the internal rate of return rule in capital budgeting, which of the following statements CANNOT be true? Select one: a. The initial investment can be the cost from purchasing new equipment. b. The cash inflows can be estimates. c. The internal rate of return can vary throughout the life of a project. d. The internal rate of return can be equal to the cost of capital. The correct answer is: The internal rate of return can vary throughout the life of a project. You have just been offered a contract worth $5.6 million per year for 3 years. However, to take the contract, you will need to purchase some new equipment. Your discount rate for this project is 15.3%. You are still negotiating the purchase price of the equipment. What is the most you can pay for the equipment and still have a positive NPV? Select one: a. $5.6 million b. $16.8 million c. $23.4 million d. $12.6 million The correct answer is: $12.6 million Question 6 Correct Mark 1.00 out of 1.00 Question 7 Correct Mark 1.00 out of 1.00 Which of the following could be a sunk cost? Select one: a. A feasibility study that attempted to determine the economic viability of a project. b. All of these answers. c. Labor hours spent on planning project. d. Equipment purchased to pursue a project. The correct answer is: All of these answers. Which of the following is an example of an opportunity cost? Select one: a. If invest in one of two projects, the cost is the lost revenue from the other project. b. If you buy a candy bar instead of a soda, the cost is thirst. c. All of these answers. d. If you watch a game instead of going for a run, the cost is poorer personal health. The correct answer is: All of these answers.

[Show More]

Last updated: 3 years ago

Preview 1 out of 21 pages

Buy Now

Instant download