CURTIN UNIVERSITY
FINANCE (PRINCIPLES) 215
MID SEMESTER TEST
2012 Semester 2
Format
The formats (numbers of questions and styles of questions) are the same at all locations.
The front page will say:
Time allowed:
Two hours and ten minutes (including readi
Chapter 5 Time Value of Money and Interest Rates I
Questions from the required textbook at the end of Chapter 5
1. For each of the following, compute the present value:
Future Value
$4 995
$4 782
$8 277
$14 305
Years
13
8
15
7
Interest Rate
4%
6%
7%
25%
P
Chapters 8 and 9 Capital Budgeting
Questions from the required textbook at the end of Chapter 8
4. The new computer system of Tim Foods Ltd cost $96,000. Tim will outgrow in 3
years. When Tim sells it, it will probably only get 20% of the purchase price.
Chapter 17 Shareholder value and the Cost of Capital
Questions from the required textbook at the end of Chapter 17
1. Equity in the Abby Group has a beta of 1.27. The market risk premium is 7%,
and the risk-free is 4%. Abbys last dividend was 50 per share
Introduction to Finance Principles
Question 1:
a) 3 marks
Ted Ltd is entitled to receive a cash flow of $8,000 in 2 years time and a further cash
inflow of $14,000 in 5 years time (in year 5). If the interest rate is 8.5% per annum,
how much is this strea
CHAPTER 11
CASH FLOW ESTIMATION AND RISK ANALYSIS
True/False
Easy:
(11.1) Relevant cash flows
1
.
Answer: b
Since the focus of capital budgeting is on cash flows rather than on net
income, changes in noncash balance sheet accounts such as inventory are
no
Finance (Principle) 515
Final Examination Practice Questions
Reference Book:
Peirson, G., Brown, R., Easton, S., Howard, P., and Pinder, S.
(2006), Business Finance, 9th edition, NSW: McGraw-Hill/Irwin
Chapter 5 Project Evaluation: Principles and Methods
CHAPTER 14
CAPITAL STRUCTURE DECISIONS: THE BASICS
True/False
Easy:
(14.1) Bankruptcy costs
1
.
Answer: a
Different borrowers have different risks of bankruptcy, and bankruptcy
is costly to lenders. Therefore, lenders charge higher rates to
borrowers judg
CHAPTER 6
RISK, RETURN, AND THE CAPITAL ASSET PRICING MODEL
True/False
Easy:
(6.2) Payoff matrix
1
.
Answer: a
A payoff matrix shows the set of possible rates of return on an
investment, along with their probabilities of occurrence, and the
investment's e
CHAPTER 7
STOCKS, STOCK VALUATION, AND STOCK MARKET EQUILIBRIUM
True/False
Easy:
(7.1) Proxy
1
Answer: a
EASY
.
A proxy is a document giving one party the authority to act for another
party, including the power to vote shares of common stock. A proxy can
CHAPTER 5
BONDS, BOND VALUATION, AND INTEREST RATES
True/False
Easy:
(5.2) Issuing bonds
1
.
Answer: a
If a firm raises capital by selling new bonds, it is called the "issuing
firm," and the coupon rate is generally set equal to the required rate
on bonds
CASH FLOW ESTIMATION AND
RISK ANALYSIS
(Difficulty: E = Easy, M = Medium, and T = Tough)
True-False
Easy:
Relevant cash flows
1.
Answer: b
Diff: E
Since the focus of capital budgeting is on cash flows rather than on
net income, changes in noncash balance
CHAPTER 9
THE COST OF CAPITAL
True/False
Easy:
(9.1) Capital
1
.
Answer: a
"Capital" is sometimes defined as the funds supplied by investors.
a.
b.
True
False
(9.1) Cost of capital
2
.
Answer: a
True
False
(9.1) Component costs of capital
.
Answer: b
True
CHAPTER 10
THE BASICS OF CAPITAL BUDGETING: EVALUATING CASH FLOWS
True/False
Easy:
(10.1) Capital budget
1
.
Answer: b
A firm should never undertake an investment if accepting the project
would lead to an increase in the firm's cost of capital.
a.
b.
True
Chapter 6 Valuing Shares and Bonds
Questions from the required textbook at the end of Chapter 6
2. Issued bonds have a price of $91.77 and a coupon rate of 10% paid annually.
The bonds will mature in 6 years. What is the yield to maturity?
3. You have jus
Please name the active cells before entering formulae that refer to those ce
=IF statements: parking cost
Parking cost
1st 3 days
Subsequent days
Enter formulae in cells C9 and C11 to
work out the cost of airport parking
based on a flat rate for the first
Discount Rate
Years
0
1
2
3
4
5
6
25%
Cash Flows
-$1,000
$100
$200
$300
$400
$500
$600
PV of the CF
NPV
IRR
Should you do the project?
Alternatively (using IRR),
$847 <- =NPV(B1,B4:B9)
-$153 <- =B3+E1
19.71% #VALUE!
NO
#VALUE!
NO
#VALUE!
Project Y
Discoun
Please name the active cells before entering formulae that refer to those ce
=IF statements: parking cost
Parking cost for
1st 3 days
Subsequent days
Enter formulae in cells C9 and C11 to
work out the cost of airport parking
based on a flat rate for the f
PV
N
Rate
FV
600
10
10%
$1,556.25 <- =FV(B3,B2,0,-B1)
PMT
N
Rate
Type
FV
10,000
10
8%
BGN
Can you see why this is an annuity due (or in advance)?
$156,454.87 <- =FV(B4,B3,-B2,0,IF(B6="BGN",1,0)
Year
0
1
2
3
4
5
6
7
8
9
Gif
FV in year 10
$10,000
$21,589.25