Corporate Finance Practice Question Paper
ANSWERS TO THE END-OF-UNIT TESTS
UNIT 2
1.B 2.D 3.A 4.C 5.B 6.D 7.D 8.E 9.E 10.E
Notes:
5.
I applied the formula (4.16) for PV of annuity but adapted for a frequency different than once a year, quarterly instead: r = 0,055 C = 500 m = 4 T = 25
The result is approx. 27090 pounds which doesn’t appear as a possible answer. I chose the value nearest to that, therefore answer B.
6.
I calculated the future values of the cash flows as not annuity and as annuity. I really don’t think these cash flows should be understood as annuities therefore the right way to calculate the future values is using table A.3. By means of that table the result is 18957,11 which doesn’t appear as a possible result so I chose the nearest one, that’s D.
Future value End of year | Cash flow | Future value factor | Future value of cash flow | 1 | 5180 | 1,06 | 5490,8 | 2 | 9600 | 1,1236 | 10786,56 | 3 | 2250 | 1,1910 | 2679,75 | | | TOTAL | 18957,11 |
Just in case the calculation should be done as annuity:
Future value of an annuity End of year | Cash flow | Future value factor | Future value of cash flow | 1 | 5180 | 1 | 5180 | 2 | 9600 | 2,06 | 19776 | 3 | 2250 | 3,2149 | 7233,525 | | | TOTAL | 32189,525 |
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Just in case the assignment question was wrong, I calculated present values:
Present value End of year | Cash flow | Present value factor | Present value of cash flow | 1 | 5180 | 0,9434 | 4886,812 | 2 | 9600 | 0,89 | 8544 | 3 | 2250 | 0,8396 | 1889,1 | | | TOTAL | 15319,912 |
Present value of an annuity End of year | Cash flow | Present value factor | Present value of cash flow | 1 | 5180 | 0,9434 | 4886,812 | 2 | 9600 | 1,8334 | 17600,64 | 3 | 2250 | 2,6730 | 6014,25 | | | TOTAL | 28501,702 |
UNIT 3
1.B 2.D 3.-- 4.A 5.E 6.D 7.E 8.B 9.C 10.B
UNIT 4
1.C 2.A 3.D 4.B 5. 6.B 7.B 8.-- 9.B 10.A
UNIT 5
1.A 2.B 3.B 4.B 5.D 6.A 7.E 8.A 9.C 10.B 11.E 12.C 13.E 14.A 15.E
Notes:
2.
The concepts Auction-Rate
UNIT 2
1.B 2.D 3.A 4.C 5.B 6.D 7.D 8.E 9.E 10.E
Notes:
5.
I applied the formula (4.16) for PV of annuity but adapted for a frequency different than once a year, quarterly instead: r = 0,055 C = 500 m = 4 T = 25
The result is approx. 27090 pounds which doesn’t appear as a possible answer. I chose the value nearest to that, therefore answer B.
6.
I calculated the future values of the cash flows as not annuity and as annuity. I really don’t think these cash flows should be understood as annuities therefore the right way to calculate the future values is using table A.3. By means of that table the result is 18957,11 which doesn’t appear as a possible result so I chose the nearest one, that’s D.
Future value End of year | Cash flow | Future value factor | Future value of cash flow | 1 | 5180 | 1,06 | 5490,8 | 2 | 9600 | 1,1236 | 10786,56 | 3 | 2250 | 1,1910 | 2679,75 | | | TOTAL | 18957,11 |
Just in case the calculation should be done as annuity:
Future value of an annuity End of year | Cash flow | Future value factor | Future value of cash flow | 1 | 5180 | 1 | 5180 | 2 | 9600 | 2,06 | 19776 | 3 | 2250 | 3,2149 | 7233,525 | | | TOTAL | 32189,525 |
----
Just in case the assignment question was wrong, I calculated present values:
Present value End of year | Cash flow | Present value factor | Present value of cash flow | 1 | 5180 | 0,9434 | 4886,812 | 2 | 9600 | 0,89 | 8544 | 3 | 2250 | 0,8396 | 1889,1 | | | TOTAL | 15319,912 |
Present value of an annuity End of year | Cash flow | Present value factor | Present value of cash flow | 1 | 5180 | 0,9434 | 4886,812 | 2 | 9600 | 1,8334 | 17600,64 | 3 | 2250 | 2,6730 | 6014,25 | | | TOTAL | 28501,702 |
UNIT 3
1.B 2.D 3.-- 4.A 5.E 6.D 7.E 8.B 9.C 10.B
UNIT 4
1.C 2.A 3.D 4.B 5. 6.B 7.B 8.-- 9.B 10.A
UNIT 5
1.A 2.B 3.B 4.B 5.D 6.A 7.E 8.A 9.C 10.B 11.E 12.C 13.E 14.A 15.E
Notes:
2.
The concepts Auction-Rate