Multiple choice questions based on time value of money.

Choose the correct answer from the given option.

1. The future value of a dollar as the interest rate increases and the farther in the future an initial deposit is to be received.

a.         Decreases; decreases

b.        Decreases; increases

c.         Increases; increases

d.        Increases; decreases

2. Given some amount to be received several years in the future, if the interest rate increases, the present value of the future amount will be:

a.         Higher

b.        Lower

c.         Stay the same

d.        Cannot tell

e.         Variable

3. The IRR of a capital investment:

a.         Changes when the cost of capital changes

b.        Is equal to the annual net cash flows divided by one half of the project's cost when the cash flows are an annuity.

c.         Must exceed the cost of capital in order for the firm to accept the investment

d.        Is similar to the yield to maturity on a bond

4. A firm had $130,000 and $90,000 in current assets in 2002 and 2003 respectively. It also had $120,000 and $85,000 in current liability in 2002 and 2003 respectively. What is the net change in working capital from 2002 to 2003?