10. You will receive a $100,000 inheritance in 20 years. You can invest that money today at 6% compounded annually. What is the present value of your inheritance?
a. $27,491.25
b. $29,767.15
c. $31,180.47
d. $35,492.34
e. $100,000
11. Your grandfather place $2,000 in a trust fund for you. In 10 years the fund will be worth $5,000. What is the rate of return on the trust fund?
a. 5.98%
b. 8.76%
c. 9.60%
d. 9.98%
e. 10.14%
12. Your parents agree to pay half of the purchase price of a new car when you graduate from college. You will graduate and buy the car two years from now. You have $6,000 to invest today and can earn 10% on invested funds. If your parents match the amount you have in two years, what is the maximum you can spend on the new car?
a. $7,260
b. $11,948
c. $12,000
d. $13,250
e. $14,520
14. You need to borrow $18,000 to buy a truck. The current loan rate is 9.9% compounded monthly and you wan to pay the loan off in equal monthly payments over 5 years. What is the size of your monthly payment?
a. $363.39
b. $374.04
c. $381.56
d. $394.69
e. $455.66
18. What is the market value of a bond that will pay a total of forty semiannual coupons of $50 each over the remainder of its life? Assume the bond has a $1,000 face value and an 8% YTM.
a. $634.86
b. $642.26
c. $1,135.90
d. $1,197.93
e. $1,215.62
24. Calculate the NPV of the following project using a discount rate of 12%: Yr 0 = -$500; Yr 1 = -$50; Yr 2 = $50; Yr 3 = $200; Yr 4 = $400; Yr 5 = $400.
a. $0.00
b. $61.22
c. $118.75
d. $208.04
e. $269.21
27. You purchase a machine for $12,000, depreciated straight-line to a salvage value of $2,000 over its four-year life. If the machine is sold at the end of the third year for $6,000, what the after-tax proceeds from the sale, assuming your tax rate is 34%?
a. $1,010
b. $3,510
c. $5,010
d. $5,490
e. $6,990
32. What is the expected market return if the expected return on asset A is 16% and the risk-free rate is 7%? Asset A has a beta of 1.2.
a. 9.5%
b. 14.5%
c. 16.5%
d. 17.5%
e. 20.5%
35. Given the following: the risk-free rate is 8% and the market risk premium is 8.5%. Which projects should be accepted if the firm's beta is 1.27.
Project I --- Beta .65 - Expected Return 12%
Project II -- Beta .90 - Expected Return 17%
Project III - Beta 1.40 - Expected Return 19%
a. I only
b. II only
c. III only
d. I and II only
e. None of the projects are acceptable
40. Your firm decides to increase the time allowed customers to pay their bills from 30 to 40 days. All else the same, this action will _______ and _______.
a. increase the firm's operating cycle; increase the firms cash cycle
b. increase the firm's cash cycle; increase the firm's inventory cycle
c. increase the firm's accounts payable period; increase the firm's operating cycle
d. increase the firm's inventory cycle; increase the firm's operating cycle
e. increase the firm's accounts receivable period, increase the firm's inventory cycle
Use the following financial statement information to answer questions #41.
Item Beginning Ending
Inventory $800 $950
Accounts receivable $1,100 $1,200
Accounts payable $750 $650
Credit sales $8,420
Cost of goods sold $6,250
41. What is the inventory turnover?
a. 6.6 times
b. 7.1 times
c. 7.8 times
d. 8.9 times
e. 10.5 times