Midterm2_answer - Midterm 2 Business Finance Spring 2007...

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Midterm 2 Business Finance, Spring 2007 Instructor: Nina Baranchuk a 1. The difference between the present value of an investment and its cost is the: a. net present value. b. internal rate of return. c. payback period. d. profitability index. e. discounted payback period. d 2. The discounted payback rule states that you should accept projects: a. which have a discounted payback period that is greater than some pre-specified period of time. b. if the discounted payback is positive and rejected if it is negative. c. only if the discounted payback period equals some pre-specified period of time. d. if the discounted payback period is less than some pre-specified period of time. e. only if the discounted payback period is equal to zero. d 3. The most valuable investment given up if an alternative investment is chosen is a(n): a. salvage value expense. b. net working capital expense. c. sunk cost. d. opportunity cost. e. erosion cost. b 4. The stock valuation model that determines the current stock price by dividing the next annual dividend amount by the excess of the discount rate less the dividend growth rate is called the _____ model. a. zero growth b. dividend growth c. capital pricing d. earnings capitalization e. discounted dividend d 5. The price a dealer is willing to accept for selling a security to an investor is called the: a. equilibrium price. b. auction price. c. bid price. d. ask price. e. bid-ask spread.
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a 6. Wine and Roses, Inc. offers a 7 percent coupon bond with semiannual payments and a yield to maturity of 7.73 percent. The bonds mature in 9 years. What is the market price of a $1,000 face value bond? a.
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This note was uploaded on 06/15/2008 for the course ACC 501 504 taught by Professor Na during the Spring '08 term at University of Texas.

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Midterm2_answer - Midterm 2 Business Finance Spring 2007...

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