q3+version2 (1)

q3+version2 (1) - MGT 3062 FINANCIAL MANGEMENT SUMMER 2009...

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MGT 3062 FINANCIAL MANGEMENT SUMMER 2009 QUIZ 3 Student: ___________________________________________________________________________ Choose the BEST answer to each question. Bubble in your answer on the form provided. If you feel that the answer is not provided, show your work, explain your assumptions, and write your answer on the exam. Questions are worth 3.5 points each. Remove all hats and dark glasses. If you have to go to the restroom, go now. No electronic devices allowed. You may not use your cell phone as a calculator. As a courtesy to your classmates, no questions are allowed after initial instructions are given. Ethics Challenge: I swear by everything I hold sacred and my family honor that: the work on this exam is my own without any outside assistance; that I did not provide assistance to another classmate; that I used no electronic devices for information storage, retrieval, or communications; that I have abided by the Georgia Tech honor code in the preparation and execution of this exam. Signature:________________________________________________________________ 1. What is the net present value of a project that has an initial cash outflow of $18,900 and the following cash inflows? The required return is 13.25 percent. The project has zero cash flow in year 3. A. $3,109.16 B. -$3,840.60 C. -$4,847.47 D. $4,052.53 E. -$2,636.21 2. A cost that has already been incurred and cannot be recouped is a(n): A. sunk cost. B. salvage value expense. C. net working capital expense. D. erosion cost. E. opportunity cost.
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3. You would like to invest in the following project. Krista, your boss, insists that only projects returning least $1.08 in today's dollars for every $1 invested can be accepted. She also insists on applying a 12 percent discount rate to all cash flows. Based on these criteria, you should: A. reject the project because the PI is less than 1.08. B. accept the project because it has a positive IRR. C. reject the project because the IRR is less than the required return. D. accept the project because the project has a PI greater than 1. E. accept the project because the NPV is $986.86. 4. You are comparing two mutually exclusive projects. The crossover point is 11.46 percent. You determine that you should accept project B if the required return is 9.8 percent. This implies you should: A. accept project B anytime the required return is greater than the crossover rate. B. always accept project B. C. accept project B at a required return of 9.8 percent and accept project A at all other required rates. D. accept project B anytime the required return is less than the crossover rate. E. only accept project A if the required return equals the crossover rate. 5. Superior Manufacturers is considering a 3-year project with an initial cost of $846,000. The project will not directly produce any sales but will
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This note was uploaded on 02/09/2012 for the course MGT 3078 taught by Professor Marchman during the Spring '12 term at Georgia Tech.

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q3+version2 (1) - MGT 3062 FINANCIAL MANGEMENT SUMMER 2009...

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