sample-final-350

sample-final-350 - FIN 350 Sample Final Exam Instruction....

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FIN 350 Sample Final Exam Instruction. In this sample exam, there are 37 multiple choice questions. The actual final will have about 45 questions. 1. Given the following cash flows for project A: C 0 = -2000, C 1 = +1500 , C 2 = +500 and C 3 = +5000, calculate the payback period. A) One year B) 2 years C) 3 years D) Any of the above E) None of the above Since 2000=1500+500 Answer: B) 2. One common reason for partnerships to convert to a corporate form of organization is that the partnership: A) wishes to avoid double taxation of profits. B) has rapidly growing financing requirements. C) has issued all of its allotted shares. D) agreement expires after ten years of use E) none of the above B 3. Financial managers are expected to make corporate decisions to maximize A) the wealth of both shareholders and bondholders B) the wealth of shareholders C) the wealth of bondholders. D) the wealth of corporate employees E) the value of the firm with bond and stock holders B 4. Firms that do not issue stocks : A) will not be able to increase sales. B) cannot take positive NPV projects. C) do not face double taxation of their profits D) have no internal cash flows to fund positive NPV projects E) None of the above C 5. You have two plans to pay your friend: plan A: you pay $1000 to your friend three yeas from now , with a discount rate of 5%; plan B: you pay $5000 to your friend 10 years from now, with a discount rate of 7%, which plan do you prefer
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from your point of view? (assume that you are rational) A) A B) B C) Either A or B D) none of the above PV(A)= 1000/1.05 3 = $863.84; PV(B)= 5000/1.07 10 =$2,541.75. Since PV(A) is less than PV(B), plan A is better for you. A 6. You have a car loan of $10,000 (which is called the principle) with the interest rate of 7%. You decide to pay off this loan in next three years with equal payment each year, How much of your first payment is for the interest? A) $3810.5 B) $3110.5 C) $954.4 D) $6889.5 E) none of the above The interest payment in the first payment is the balance times the interest rate, That is 10000*0.07=$700 E 7. Which of the following presents the correct relationship? As the coupon rate of a bond decreases, the bond’s: A) face value is decreases. B) current bond price increases. C) coupon payments increase D) interest payments decrease. E) none of the above D 8..The IRR is defined as: A) The discount rate that makes the NPV equal to zero B) The difference between the cost of capital and the present value of the cash flows C) The discount rate used in the NPV method D) The discount rate used in the discounted payback period method E) None of the above A 9. A stock paying $5 in annual dividends next year sells now for $50 and has an expected return of 14%. What the expected growth rate of dividends? A) 5%
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sample-final-350 - FIN 350 Sample Final Exam Instruction....

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