week05_TutorialQuestions - SCHOOL OF BANKING AND FINANCE...

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FINS 1613 Tutorial Questions 1 SCHOOL OF BANKING AND FINANCE FINS1613 BUSINESS FINANCE Semester 2, 2010 TUTORIAL QUESTIONS WEEK 5 – Capital Budgeting: An Introduction Please note that some answers are exact when rounded to 2 or 3 decimal places because of the use of PV tables rather than calculators. Multiple-choice Questions 1. A major disadvantage of the payback period methodology is: a. It is useless as an indicator of risk b. It ignores any cash flows (in or out) that occur after the initial outlay has been repaid c. It does not take into account the time value of money d. Statements a, b and c are all correct e. Statements b and c are correct 2. A project has an initial cash outlay of $3,325 and subsequent cash inflows of $700 per year for the next 7 years. What is the project's payback period? a. 4.50 years b. 4.75 years c. 5.00 years d. 5.50 years e. 5.75 years 3. A company has been offered an investment opportunity that will yield cash flows of $30,000 per year in years 1 through 4, $35,000 per year in years 5 through 9 and $40,000 in year 10. This
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This note was uploaded on 01/09/2012 for the course FINS 1613 taught by Professor Drkhshim during the Three '10 term at University of New South Wales.

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week05_TutorialQuestions - SCHOOL OF BANKING AND FINANCE...

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