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quiz 5

# quiz 5 - 1 You plan to analyze the value of a potential...

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1. You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would lower the calculated value of the investment? Answer The total amount of cash flows remains the same, but more of the cash flows are received in the earlier years and less are received in the later years. The discount rate decrease s. The riskiness of the investment's cash flows decreases . The cash flows are in the form of a deferred annuity, and they total to \$100,000. You learn that the annuity lasts for only 5 rather than 10 years, hence that each payment is for \$20,000 rather than for \$10,000. The discount rate increases . 10 points Question 2 1. Last year Rocco Corporation's sales were \$725 million. If sales grow at 6% per year, how large (in millions) will they be 5 years later? Answer \$921.70 \$756.77 \$970.21 \$1,212.77 \$1,096.34 10 points Question 3 1. Pace Co. borrowed \$12,000 at a rate of 7.25%, simple interest , with interest paid at the end of each month. The bank uses a 360-day year. How much interest would Pace have to pay in a 30- day month?

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