_______________________________ BSAD 180: Managerial Finance Midterm Exam I. Multiple Choices (40%) ( b) 1. The primary goal of financial management is to: a. maximize current dividends per share of the existing stock. b. maximize the current value per share of the existing stock. c. avoid financial distress. d. minimize operational costs and maximize firm efficiency. e. maintain steady growth in both sales and net earnings. ( c ) 2. The interest rate expressed as
Premium Time value of money Bond Rate of return
A. increasing payments paid for a definitive period of time B. increasing payments paid forever C. equal payments paid at regular intervals over a stated time period D. equal payments paid at regular intervals of time on an ongoing basis E. unequal payments that occur at set intervals for a limited period of time 2. Which one of the following accurately defines a perpetuity? A. a limited number of equal payments paid in even time increments B. payments of equal amounts that are paid irregularly
Premium Interest Compound interest Time value of money
advertising campaign that promises to yield $120 one year from now for $100 spent now. Explain why the firm should not undertake the advertising campaign. Because of the Time Value of Money; the $120 might have a Present Value that is lower than the $100 spent now‚ therefore the campaign would have a negative Net Present Value and should not be undertaken. 5.) Determine which of two investment projects a manager should choose if the discount rate of the firm is 10 percent. The first project promises
Premium Net present value Time value of money Rate of return
understand Time value of money. False Total 5.00 / 5.00 Question Explanation We have assumed time value of money is positive. Question 2 (5 points) At an interest rate of 10% it is better to have $100 today than $120 in 2 years. Your Answer Score Explanation True ✔ 5.00 Correct; it is compounding! False Total 5.00 / 5.00 Question Explanation All about compounding! Question 3 (5 points) Megan wants to buy a designer handbag and plans to earn the money babysitting
Premium Time value of money Investment Future value
the best answer. Do not erase on your scantron (these are marked wrong from trace pencil lead). Ask for a new scantron if you wish to change your answer. Mismarked scantrons are NOT fixed. Name: __________________________________ Lecture Time: Instructor:________________________ 1. In 2008‚ Miles‚ Ana and Cindy‚ who are partners in the MAC Company‚ had average capital balances of $114‚000‚ $98‚000 and $128‚000‚ respectively. The partners share profits and losses by allowing a
Premium Time value of money Stock Future value
CHAPTER 1: The time value of money We are going to link the present and the future by using the notion of interest rate that could be called discount rate‚ required rate of return or cost of capital. Finance is all about cash flows but more precisely about the exact date of the realization of the cash flow. I) PRESENT VALUE Example 1: What is the value today of $110 to be received in one year? - suppose the interest rate ‚ r =10% - if you had the money today you could
Premium Net present value Time value of money Internal rate of return
______________________________________ SIGNATURE: ______________________________________ PAPER ID: 00615 THE UNIVERSITY OF NEW SOUTH WALES AUSTRALIAN SCHOOL OF BUSINESS SCHOOL OF BANKING AND FINANCE FINS1613: BUSINESS FINANCE SEMESTER 1 2012 FINAL EXAM 1. TIME ALLOWED – 3 hours 2. THIS EXAMINATION PAPER HAS 19 PAGES 3. TOTAL NUMBER OF QUESTIONS – 45 Multiple Choice 4. TOTAL MARKS AVAILABLE – 45 5. MULTIPLE CHOICE QUESTIONS ARE 1 (ONE) MARK PER QUESTION. 6. THE EXAMINATION PAPER HAS 1 PART. a. You must
Premium Net present value Cash flow Discounted cash flow
Meese Paper Distributors‚ Inc. has before-tax earnings of $1‚900‚000. Calculate the amount of the total tax liability. 646000 113 900 + (0.34 x [1‚900‚000-335000]) 113 900 + (0.34 x 1‚565‚000) 113900 + 532100 = 646000 3) Calculate the future value of $4‚600 received today if it is deposited at 9 percent for three years. Rate | 9% | Nper | 3 | Pmt | 0 | Pv | 4600 | Fv | ($5‚957.13) | Rate | 14% | Nper | 15 | Pmt | 0 | Pv | ($12‚468.59) | Fv | $89‚000.00 | 5)
Premium Time value of money Cash flow Rate of return
choice would usually be the comparison of the Net Present Values of two investment opportunities as only the Net Present Values take into account the time value of money‚ the cash flow and cost of capital. Furthermore‚ the Net Present Value shows potential investors when they will be able to recuperate their investment. It also shows how much value is created or destroyed as a result of undertaking a project. Finally‚ the Net Present Value measures the attractiveness of a project in today’s pounds
Premium Net present value Time value of money Rate of return
prices reflect expectations for value-creating earnings and cash flows many years in the future. The mismatch between a short forecast horizon and asset prices that reflect long-term cash flows leads to the second problem: investors have to compensate for the undersized horizon by adding value elsewhere in the model. The prime candidate for the value dump is the continuing‚ or terminal‚ value. The result is often a completely non-economic continuing value. This value misallocation leaves both parts
Premium Discounted cash flow Stock market Cash flow