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2504b_practice_final0 - Practice Final EXAMINATION DURATION...

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Practice Final EXAMINATION August 11, 2009 DURATION: 3 HOURS No. of Students: 27 Course: BUSI 2504 B Instructor: Mitch Murphy Student Name: Student Number: Grade: / 30 + / 70 = / 100 AUTHORIZED MEMORANDA BAII Plus calculator.
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Page 2/10 BUSI 2504B Practice Final FORMULAS FV = PV (1 + r ) t ; PV = FV (1 + r ) t ; EAR = 1 + APR m m – 1; PV = PMT 1 – 1 (1+ r ) t r ! + FV (1 + r ) t ; P 0 = D 1 1 + r + D 2 (1 + r ) 2 + . . . ; P 0 = D r ; P 0 = D 0 (1 + g ) r g = D 1 r g ; R = D 1 P 0 + g ; P 0 = D 1 1 + r + D 2 (1 + r ) 2 + · · · + D t (1 + r ) t + P t (1 + r ) t ; P t = D t +1 r g ; DR = D + ( P end P start ); PR = DR P start = D P start + P end P start P start ; ¯ r = r 1 + · · · + r n n ; ˜ r = [(1 + r 1 ) · · · (1 + r n )] 1 /n – 1; Var( r ) = 1 n – 1 n i = 1 ( r i – ¯ r ) 2 ; StdDev( r ) = p Var( r ); WACC = E V R E + P V R P + D V R D (1 – T C ); E + P + D = V ;
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BUSI 2504B Practice Final Page 3/10 PART A: MULTIPLE CHOICE (10 QUESTIONS - 30 MARKS) [ 3] Q1. When net capital spending is a negative value, the firm has: (a) depreciation expense which exceeds the cost of new assets acquired. (b) acquired more fixed assets than it has current assets. (c) sold more fixed assets than it acquired during a stated period of time. (d) reduced its total assets during the course of the year. [ 3] Q2. What is the present value of $12,450 to be received 3 years from today if the discount rate is 4.25 percent? (a) $10,878.68. (b) $10,988.57. (c) $10,929.13. (d) $8,788.24. [ 3] Q3. Bob bought some land costing $14,190. Today that same land is valued at $58,408. How long has Bob owned this land if the price of land has been increasing at 5 percent per year? (a) 28.51 years. (b) 28.67 years. (c) 28.72 years. (d) 29.00 years. [ 3] Q4. If you are borrowing money, which one of the following rates would you prefer? (a) 9% paid annually. (b) 9% compounded semi-annually. (c) 9% compounded quarterly. (d) 9% compounded monthly. [ 3] Q5. You are considering an annuity which costs $88,656 today. The annuity pays $6,100 a year. The rate of return is 5.5 percent. What is the length of the annuity time period?
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