Chapter 5.
8.
Here we have the FVA, the length of the annuity, and the interest rate. We want to calculate the
annuity payment. Using the FVA equation:
FVA = Ccfw_[(1 + r)t 1] / r
$25,000 = $C[(1.07458 1) / .0745]
We can now solve this equation for the an
Chapter 8
4.
Our definition of AAR is the average net income divided by the average book value. The average
net income for this project is:
Average net income = ($1,735,000 + 2,105,000 + 1,954,000 + 1,342,000) / 4 = $1,784,000
And the average book value i
53. Lets denote the PV of annuity as A. Here we are given A, number of periods, and the amount of
the annuity. We need to solve for the interest rate. We must be careful to use the cash flows of
the loan. Using the present value of an annuity equation, we
Chapter 4.
11. To find the PV of a lump sum, we use:
PV = FV / (1 + r)t = $2,000,000 / (1.09)80 = $2,027.26
13. To answer this question, we can use either the FV or the PV formula. Both will give the same
answer since they are the inverse of each other. W
Chap 1
a
c
1.
The process of managing a firms long-term investments is called:
a.
capital budgeting.
b.
working capital management.
c.
credit management.
d.
cost accounting.
e.
capital structure management.
2.
The amount of debt and equity used by a firm
Chapter 7
9. If the company uses straight voting, you will need to own one-half of the shares, plus one
share, in order to guarantee enough votes to win the election. So, the number of shares needed
to guarantee election under straight voting will be:
Sha
Chapter2.
16. We can fill in the balance sheet with the numbers we are given. The balance sheet will be:
Balance Sheet
Cash
Accounts receivable
Inventory
Current assets
$193,000
253,000
538,000
$984,000
Tangible net fixed assets
Intangible net fixed asset
CHAPTER 22
c
3.
a.
b.
c.
d.
e.
The fixed price in an option contract at which the owner can buy or sell the underlying
asset is called the options:
opening price.
intrinsic value.
strike price.
market price.
time value.
e
33. You own stock in a firm that
CHAPTER 20
e
1.
a.
b.
c.
d.
e.
The first public equity issue that is made by a company is referred to as:
a rights issue.
a general cash offer.
an initial public offering.
an unseasoned issue.
Both C and D.
b
2.
a.
b.
c.
d.
e.
The winner's curse is used t
CHAPTER 24
7. Which of the following would not describe the difference between warrants and call
options?
A. Warrants are issued by firms whereas call options are issued by individuals.
B. Call options have an exercise price whereas warrants do not.
C. Ex
CHAPTER 23
b
4.
a.
b.
c.
d.
e.
The NPV approach must be:
augmented by added analysis if there are a few embedded options.
augmented by added analysis if a decision has significant embedded options.
jettisoned if there are any embedded options.
computed ca
CHAPTER 29
a
19. Which of the following statements concerning acquisitions are correct?
I.
Being acquired by another firm is an effective method of replacing senior management.
II. The net present value of an acquisition should have no bearing on whether
CHAPTER 23
b
4.
a.
b.
c.
d.
e.
The NPV approach must be:
augmented by added analysis if there are a few embedded options.
augmented by added analysis if a decision has significant embedded options.
jettisoned if there are any embedded options.
computed ca
CHAPTER 17
e
8.
In a world with taxes and financial distress, when a firm is operating with the optimal
capital structure:
I.
the debt-equity ratio will also be optimal.
II. the weighted average cost of capital will be at its minimal point.
III. the requi
Stock splits: time to query decades of dogma
By John Authers
Published: April 7 2007 03:00 | Last updated: April 7 2007 03:00
This is a holy juncture. Christians are celebrating Easter while Jews are celebrating Passover. These
festivals strengthen and re