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sample-final-819

# sample-final-819 - Final Fin-819 Last name First name...

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Final : Fin-819 Last name______________ First name__________________ Instruction. For the multiple choice questions (2 point each), you write your answers on scantrons. For the last three questions, write your answers on the exam. Please write your name on both scantrons and exams legibly and clearly. 1. Businesses can be organized as A) sole proprietorships B) partnerships C) corporations D) any of the above E) none of the above Answer D) 2. Limited liability is an important feature of: 3.Current price of Company X's stock is \$100. The table below gives the data on end of the year prices and probabilities dependent on the state of the economy. Calculate the standard deviation for the rate of return for the stock (no dividends). E c o n o m y P r o b a b i l i t y E n d o f t h e y e a r p r i c e G r o w t h . 5 \$ 1 3 0 R e c e s s i o n . 5 \$ 9 0 4. Mr. John has \$100 income this year and zero income next year. The market interest rate is 10% per year. Mr. John also has an investment opportunity in which he can invest \$50 this year and receive \$70 next year. Suppose Mr. John consumes \$30 this year and invests in the project. What is the NPV of the investment opportunity?

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5.Which of the following statements regarding the net present value rule and the internal rate of return rule is always true? A) Accept a project if the internal rate of return is positive B) Accept a project if the internal rate of return on a risky project exceeds the cost of capital for the project C) Accept a project if the net present value is positive D) B and C E) none of the above Answer: C 6.Which of the following is true about discounting future risk-free cash flows in the NPV rule: 7. Which of the following statements is true?
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