Question

Find the net present value of a project with initial cost of $5,876,000 and produces the following cash flows: $3,200,000 at the end of year 1; $2,973,000 at the end of year 2; and $2,525,000 at the end of year 3. The required rate of return for the project is 15 percent.

	A.	$814,852
	B.	$1,634,917
	C.	$723,100
	D.	$487,286

A project costs $4,769,500 initially and produces the following cash flows: $1,000,000 at the end of year 1; $1,500,000 at the end of year 2; $1,860,000 at the end of year 3; and $2,000,000 at the end of year 4. calculate the project's internal rate of return.

	A.	12.99 percent
	B.	11.23 percent
	C.	9.76 percent
	D.	10.11 percent

The project below has a net present value of $2,300,000. Find the missing cash flow, if the discount rate is 12 percent.

Year	Cash Flow
0	-$5,500,000
1	$2,000,000
2	$2,000,000
3	$2,000,000
4	??????

	A.	$2,523,394
	B.	$3,752,673
	C.	$2,000,000
	D.	$4,714,795

A $1,000 face value bond has a bid quote of $101.472 and a bid ask spread of 0.205. What price must you pay to purchase this bond? Ignore any accrued interest or trading costs.

	A.	$1,035.22
	B.	$1,016.77
	C.	$1,014.72
	D.	$1,072.25

A bond that pays interest annually yields a rate of return of 7.25 percent. The inflation rate for the same period is 2.74 percent. What is the real rate of return on this bond?

	A.	4.53 percent
	B.	4.21 percent
	C.	5.07 percent
	D.	4.39 percent

Western Sports bonds have a face value of $1,000, mature in 9 years, pay interest semiannually, and have a coupon rate of 7.25 percent. The next interest payment will be paid two months from today. What is the dirty price of this bond if the market rate of return is 8.3 percent?

	A.	$934.34
	B.	$958.51
	C.	$982.67
	D.	$946.42

You are purchasing a bond with a face value of $1,000 and a coupon rate of 6.95 percent. The bond pays interest semiannually and has a yield to maturity of 7.23 percent. The bond matures in 6.5 years and pays its next interest in two months. What amount of accrued interest must you pay to purchase this bond today?

	A.	$24.10
	B.	$11.58
	C.	$23.17
	D.	$46.33

River Tours has 7.20 percent coupon bonds that pay interest semiannually. The face value of each bond is $1,000 and the current market price is $1,078.60. If the yield to maturity is 6.38 percent, how many years is it until these bonds mature?

	A.	11.0 years
	B.	13.0 years
	C.	15.0 years
	D.	9.0 years

A bond's price is quoted to sell at 94 percent of par. The bond has a face value of $25,000 and yield to maturity of 7.85 percent. If the bond matures 15 years from today and has semiannual payments, what is its coupon rate?

	A.	5.23 percent
	B.	6.77 percent
	C.	3.58 percent
	D.	7.16 percent

Which of the following bonds is subject to the greatest interest rate risk?

	A.	5-year, zero coupon bond
	B.	10-year, zero coupon bond
	C.	5-year, 5 percent coupon bond
	D.	10-year, 5 percent coupon bond

Which of the following items are generally included in a bond indenture?

I.   Sinking fund provisions/requirements

II. Security description

III. Bid and asked prices

IV. Total amount of bonds issued

	A.	II and IV only
	B.	I, II, and IV only
	C.	I, II, III, and IV
	D.	I and II only

Sussie's has a 7 percent profit margin and a dividend payout ratio of 30 percent. The total asset turnover is 1.6 and the debt-equity ratio is 0.4. What is the sustainable rate of growth?

	A.	11.02 percent
	B.	7.67 percent
	C.	12.33 percent
	D.	9.84 percent

The most recent financial information for Myfirm Inc. is as follows:

Sales	$9,800
Costs	$8,740
Net Income	$1,060
Assets	$8,950
Debt	$4,760
Equity	$4,190

Assets and costs are proportional to sales. Debt and equity are not. A dividend of $424 was paid, and the company wishes to maintain a constant dividend payout ratio. Next year's sales are projected to be $10,682. What is the amount of the external financing need?

	A.	$112
	B.	-$382
	C.	-$28
	D.	$716

The Zhang/Tamara Inc. has a 12 percent return on assets and a 35 percent dividend payout ratio. What is its internal growth rate?

	A.	5.08 percent
	B.	12.34 percent
	C.	8.46 percent
	D.	7.24 percent

The most recent financial data for Tiger Eye Inc. is:

Sales	$4,650
Costs	$4,160
Net Income	$490
Assets	$5,820
Debt	$2,760
Equity	$3,060

Assets and costs are proportional to sales. Debt and equity are not. No dividends or taxes are paid. Next year's sales are projected to be $5,673. What is the amount of the external financing needed?

	A.	$683
	B.	$469
	C.	$1,048
	D.	-$28

Scenario analysis is defined as the:

	A.	determination of the initial cash outlay required to implement a project.
	B.	Separation of a project's sunk costs from its opportunity costs.
	C.	Analysis of the effects that a project's terminal cash flows have on the project's NPV.
	D.	Determination of changes in NPV estimates when what-if questions are posed.

Assume both the discount and tax rates are positive values. At the financial break-even point, the:

	A.	NPV is negative.
	B.	Operating Cash Flow, OCF, is zero.
	C.	Contribution margin per unit equals the fixed costs per unit.
	D.	IRR equals the required return.

Smith and Jim Inc. is analyzing a proposed project. The company expects to sell $3,500 units ± 4 percent. The expected variable cost per unit is $310 and the expected fixed costs are $628,000. Costs estimates are considered accurate within plus or minus 3 percent range. The depreciation expense is $128,000. The sales price is estimated at $823 per unit, plus or minus 6 percent. What is the sales revenue under the worst case scenario?

	A.	$2,765,280.00
	B.	$1,968,825.40
	C.	$1,511,092.80
	D.	$2,599,363.20

Assume a project has a sales quantity of 9,700 units, plus or minus 5 percent and a sales price of $71 a unit, plus or minus 1 percent. The expected variable cost per unit is $12 ± 3 percent and the expected fixed costs are $295,000 plus or minus 2 percent. The depreciation expense is $82,000. The tax rate is 21 percent. What is the operating cash flow under the best-case scenario?

	A.	$187,295.40
	B.	$272,163.23
	C.	$236,819.54
	D.	$164,208.11

Answer 1

1.

	15.00%
Cash flows	Year	Discounted CF
(5,876,000.00)	0	-5876000.00
3,200,000.00	1	2782608.70
2,973,000.00	2	2248015.12
2,525,000.00	3	1660228.49

NPV = 814,852

2.

Cash flows	Year	Discounted CF
(4,769,500.00)	0	-4769500.00
1,000,000.00	1	899038.03
1,500,000.00	2	1212404.07
1,860,000.00	3	1351596.73
2,000,000.00	4	1306598.78

IRR = 11.23%

3.

	12.00%
Cash flows	Year	Discounted CF
(5,500,000.00)	0	-5500000.00
2,000,000.00	1	1785714.29
2,000,000.00	2	1594387.76
2,000,000.00	3	1423560.50
4,714,795.00	4	2996337.46

Missing cash flow 4,714,795

4.

ask price = 101.472 + 0.205 = 101.677

price paid = 1016.77

max of 4 questions to be answered