In: Accounting
B) The asking price for the asset.
C) The asset’s replacement value.
D) The assets’ future cash flows compounded by the required rate of return.
E) None of the above
** Please show the all mathematical steps and the Financial Calculator step if possible, Thanks.
10- | The interest rate is defined as: | option is E | it is the rate which is charged on borrowed fund | |
9- | The value of a share is given by the present value of which cash flows | option is D | Future dividends only because future dividends are discounted at required rate of return and then sum up to get the value of share | |
8- | Future value | PV*(1+r)^n | 2000*(1.025)^60 | 8800 |
7- | The prospective P/E ratio: | option is E | A. A) and B) only | |
6- | Year | cash flow | present value of cash flow = cash flow/(1+r)6n r = 10% | |
3 | 1.5 | 1.126972201 | ||
4 | 1.5 | 1.024520183 | ||
5 | 1.5 | 0.931381985 | ||
present value of cash flow = sum of present value of cash flow | 3.08 | option is A | ||
5- | A. The asset’s minimum value. | Option is E | none of the above | |
4- | option is B | 100 as bond coupon rate and market interest rate is same so it would be selling out at par value | ||
3- | Which of the following describes the difference between the returns on debt and equity? | option is C | A. The return on debt is stipulated in the trust deed, whereas the return on equity is varied at the discretion of management | |
2- | Which of the following constitutes a difference between debt and equity | option is A | A. The right to claim against the assets of the corporation in the case of bankruptcy | |
1- | Which of the following statements about bonds and their prices is correct | option is D | All of the above |