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# version1 (1) - MGT 3062 FINANCIAL MANAGEMENT EXAM 2 SPRING...

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MGT 3062 FINANCIAL MANAGEMENT - EXAM 2 SPRING 2008 Version #1 Student: ___________________________________________________________________________ Choose the best answer to each question and mark your answer on the answer sheet. Ethics Challenge: I did not violate the Georgia Tech Honor code while taking or preparing for this exam: Signature: _________________________________ 1. What is the expected return on a portfolio comprised of \$7,500 in stock M and \$2,500 in stock N if the economy enjoys a boom period? A. 8.25 percent B. 8.16 percent C. 12.25 percent D. 15.75 percent E. 6.93 percent 2. Which one of the following will increase the net present value of a project? 3. When the present value of the cash inflows exceeds the initial cost of a project, then the project should be: 1

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4. Justin's Manufacturing purchased a lot in Lake City ten years ago at a cost of \$790,000. Today, that lot has a market value of \$1.2 million. At the time of the purchase, the company spent \$100,000 to grade the lot and another \$20,000 to build a small garage on the lot to house additional equipment. The company now wants to build a new facility on the site. The building cost is estimated at \$1.7 million. What amount should be used as the initial cash flow for this project? 5. You are comparing stock A to stock B. Given the following information, which one of these two stocks should you prefer and why? A. Stock A; Stock A has a slightly lower expected return but appears to be significantly less risky than stock B. B. Stock B; Stock B has a much higher return which compensates for the additional risk. C. Stock A; Stock A has an expected return of 10.2 percent and appears to be less risky. D. Stock B; Stock B has a higher expected return and appears to be just slightly more risky than stock A. E. Stock A; Stock A has a higher expected return and appears to be less risky than stock B.
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version1 (1) - MGT 3062 FINANCIAL MANAGEMENT EXAM 2 SPRING...

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