1. THE HIGHER A CAPITAL BUDGETING PROJECT'S NET PRESENT VALUE, THE HIGHER ITS IRR WILL BE. True False

1. CONSIDER THE FOLLOWING CASH FLOWS:

   TIME	CASH FLOW
   0	0
   1	120
   2	250
   3	430
   4	520
   5	?

   WHEN THE DISCOUNT RATE IS 10%, THE PRESENT VALUE OF ALL THE CASH FLOWS, INCLUDING THE MISSING CASH FLOW IS $1,350.96. THE VALUE OF THE MISSING CASH FLOW MUST BE _______.

   		$228
   		$425
   		$575
   		$670

1. WHICH OF THE FOLLOWING ARE SOURCES OF CASH? I. AN INCREASE IN ACCOUNTS RECEIVABLE II. AN INCREASE IN ACCOUNTS PAYABLE III. AN INCREASE IN FIXED ASSETS IV. AN INCREASE IN ACCRUALS V. A DECREASE IN INVENTORY VI. A DECREASE IN LONG-TERM DEBT

   		III AND V
   		II, IV AND V
   		I, III AND V
   		II AND VI

1. DREW BARRYMORE DECIDES TO SELL YOU HER HOME IN PALM BEACH, FLORIDA FOR $20,000,000. THE FIRST NATIONAL BANK OF PALM BEACH AGREES TO LEND YOU 80% OF THIS AMOUNT USING A 30-YEAR, FIXED-RATE LOAN HAVING AN INTEREST RATE OF 7%. THE TOTAL AMOUNT OF INTEREST YOU WILL HAVE TO PAY ON THIS LOAN OVER ITS 30-YEAR LIFE WILL BE _______.

   		$1,400,000
   		$22,321,423.72
   		$15,397,205.28
   		$1,120,000

1. IF YOU WORK FOR A CORPORATION, YOUR ULTIMATE JOB IS TO _______.

   		MAXIMIZE SHARE PRICE
   		MAXIMIZE SALES
   		MINIMIZE EXPENSES
   		MAXIMIZE PROFITS

1. CONSIDER THE INFORMATION FOR MUTUALLY EXCLUSIVE PROJECTS Y AND Z GIVEN IN THE FOLLOWING TABLE:

   TIME	CASH FLOWS PROJECT Y	CASH FLOWS PROJECT Z
   0	-$1,000,000	-$2,000,000
   1	$500,000	$100,000
   2	$350,000	$200,000
   3	$250,000	$750,000
   4	$200,000	$1,000,000

   ASSUME A DISCOUNT RATE OF 10%. BASED ON THE INFORMATION IN THE TABLE, THE NET PRESENT VALUE OF PROJECT Y IS _______ AND THE PROFITABILITY INDEX OF PROJECT Y IS _______ AND THE INTERNAL RATE OF RETURN OF PROJECT Y IS _______.

   		$68,233.04; 1.072; 12.28%
   		$68,233.04; 1.068; 13.71%
   		$80,937.28; 1.0809; 14.94%
   		$90,927.28; 1.0909; %15.73%

1. WHICH OF THE FOLLOWING WOULD CAUSE FREE CASH FLOW TO RISE? I. AN INCREASE IN ACCRUALS II. A DECREASE IN ACCRUALS III. AN INCREASE IN NOTES PAYABLE IV. A DECREASE IN NOTES PAYABLE V. AN INCREASE IN CURRENT ASSETS VI. A DECREASE IN CURRENT ASSETS VII. AN INCREASE IN FIXED ASSETS VIII. A DECREASE IN FIXED ASSETS

   		IV, V AND VII
   		II, III AND VII
   		III AND VII
   		I, VI AND VIII

1. IF YOU WORK FOR A CORPORATION, WHO IS/ARE YOUR ULTIMATE BOSS(ES)?

   		SHAREHOLDERS
   		THE CHIEF EXECUTIVE OFFICER
   		THE CHIEF OPERATING OFFICER
   		NONE OF THE ANSWERS PROVIDED IS CORRECT

1. SUPPOSE YOUR INVESTMENT OF $50,000 GROWS TO $350,000 IN 20 YEARS. WHAT AVERAGE ANNUAL RATE OF RETURN HAVE YOU REALIZED?

   		10.22%
   		38.92%
   		12.39%
   		8.52%

1. HOW MUCH WILL YOU HAVE AT THE END OF 10 YEARS IF YOU DEPOSIT $50,000 INTO THE FIRST NATIONAL BANK OF JSU AND EARN 4% COMPOUNDED MONTHLY?

   		$82,106.27
   		$74,541.63
   		$68,295.15
   		$91,207.18

1. THE ROE AND THE RETENTION RATIO OF THE JSU CORPORATION JUST FELL. ACCORDING TO THE CONSTANT GROWTH MODEL, THIS MUST MEAN JSU'S STOCK PRICE JUST________.

   		ROSE
   		NEITHER THE ROE NOR THE RETENTION RATIO AFFECT A STOCK'S PRICE ACCORDING THE CONSTANT GROWTH MODEL.
   		STAYED THE SAME
   		FELL

1. AS THE INTEREST OR DISCOUNT RATE RISES, ________ FALL AND _______ RISE. I. FUTURE VALUES; PRESENT VALUES II. PRESENT VALUES; FUTURE VALUES III. FUTURE VALUE OF AN ANNUITY; PRESENT VALUE OF AN ANNUITY IV. PRESENT VALUE OF AN ANNUITY; FUTURE VALUE OF AN ANNUITY

   		I AND III
   		I ONLY
   		II AND IV
   		III ONLY

1. THE MARKET RISK PREMIUM JUST ROSE. THIS MEANS ________. I. THE SECURITY MARKET LINE SHIFTED DOWN AND TO THE RIGHT II. THE SECURITY MARKET LINE'S SLOPE STEEPENED III. THE PRICE OF COMMON STOCKS JUST FELL IV. THE PRICE OF COMMON STOCKS JUST ROSE

   		IV ONLY
   		I AND IV
   		II AND III
   		I ONLY

1. THE FIN 301 CORPORATION HAS A DEBT RATIO OF .75 AND AN ROA OF 5%. THE FIRM'S ROE MUST BE _______

   		25%
   		15%
   		30%
   		20%

1. THE FIRST NATIONAL BANK OF FIN 301 OFFERS 3% COMPOUNDED DAILY ON A ONE-YEAR CERTIFICATE OF DEPOSIT. THE EFFECTIVE ANNUAL RATE ON THIS INVESTMENT IS _____

   		3.027%
   		3.038%
   		3.0682%
   		3.045%

1. CONSIDER THE INFORMATION IN THE FOLLOWING TABLE FOR MUTUALLY EXCLUSIVE PROJECTS A AND B:

   DISCOUNT RATE	NPV PROJECT A	NPV PROJECT B
   0%	$5 MILLION	$3 MILLION
   12%	$0	$1 MILLION
   14%	-$3 MILLION	$0 MILLION

   ACCORDING TO THIS INFORMATION, ________.

   I. THE NPV PROFILES OF PROJECTS A AND B CROSS II. THE NPV PROFILES OF PROJECTS A AND B DO NOT CROSS III. THE INTERNAL RATE OF RETURN METHOD CAN BE USED REGARDLESS OF THE DISCOUNT RATE IV. THE INTERNAL RATE OF RETURN METHOD SHOULD NOT BE USED IF THE DISCOUNT RATE IS LESS THAN THE CROSS-OVER RATE

   		II ONLY
   		I AND IV
   		II AND III
   		III ONLY

1. THE JSU CORPORATION JUST PAID A $1 DIVIDEND TO ITS COMMON SHAREHOLDERS. DIVIDENDS ARE EXPECTED TO GROW AT A CONSTANT RATE OF 5% FOREVER. IF THE RISK-FREE RATE OF INTEREST IS 4% AND THE STOCK'S SECURITY RISK PREMIUM IS 8%, THEN, ACCORDING TO THE CONSTANT GROWTH MODEL, THIS STOCK SHOULD SELL FOR _______.

   		$12
   		$14
   		$15
   		$13

1. A PERPETUAL ANNUITY HAS A PRESENT VALUE OF $307.69 WHEN THE DISCOUNT RATE IS 13%. WHAT MUST THE EQUAL ANNUAL PAYMENTS BE?

   		$40
   		$55
   		$35
   		$30