FM_515_answers_to_online_self_quizzes

FM_515_answers_to_online_self_quizzes - F M 515 answers to...

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Unformatted text preview: F M 515 answers to on-line self quiz Week One 1. Question: You have a chance to buy an annuity that pays $1,000 at the end of each year for 3 years. You could earn 5.5% on your money in other investments with equal risk. What is the most you should pay for the annuity? Student Answer: $2,697.93 CORRECT ANSWER $2,775.77 $2,921.86 $3,075.64 $3,237.52 Instructor Explanation: The answer represents the present value of the cash flows discounted by 5.5% over 3 years. Points Received: (not graded) 2. Question: How much would $5,000 due in 50 years be worth today if the discount rate were 7.5% Student Answer: Instructor Explanation: Points Received: (not graded) 3. Question: Money Markets are markets for? Student Answer: Points Received: (not graded) 4. Question: Which of the following could explain why a business might choose to organize as a corporation rather than as a sole proprietorship or a partnership? Student Answer: Instructor Explanation: The advantages of incorporation are unlimited life, easy transfer-ability of ownership interest, limited liability, and ease of raising money in the capital markets. Regulations and double taxation are disadvantages of corporations. Points Received: (not graded) 5. Question: Which of the following statements is true? Student Answer: Instructor Explanation: Statement c is correct. Sole proprietorships pay personal income tax not corporate tax. The other statements are false. Corporations are subject to limited liability, but are subject to more regulations than the other forms of business organizations. Points Received: (not graded) Week Two 1. Question: Other things held constant, which of the following actions would increase the amount of cash on a company's balance sheet? Student Answer: The company repurchases common stock. The company pays a dividend. The company issues new common stock. CORRECT ANSWER The company gives customers more time to pay their bills. The company purchases a new piece of equipment. Points Received: (not graded) 2. Question: Kramer Corporation recently announced that its net income was lower than last year. However, analysts estimate that the company's net cash flow increased. What factors could explain this discrepancy? Student Answer: Points Received: (not graded) 3. Question: Which of the following statements is most correct? Student Answer: Instructor Explanation: EVA = EBIT(1-T) - (After-tax cost of capital) (Total Capital). Therefore, if less capital is used with the same operating incomd, EVA will be increased. Points Received: (not graded) 4....
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FM_515_answers_to_online_self_quizzes - F M 515 answers to...

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