Net Present Value and Other Investment Criteria
NET PRESENT VALUE
1. The difference between the present value of an investment and its cost is the:
a. net present value.
b. internal rate of return.
c. payback period.
ANSWERS FOR QUIZ 1
You own a bond that pays $100 in annual interest, with a $1000 par value. It
matures in 15 years. Your required rate of return is 12%. Calculate the value of the bond
Telink Corporation bonds pay $
Cost of Capital
COST OF CAPITAL
1. The opportunity cost associated with the firms capital investment in a project is
a. cost of capital.
b. beta coefficient.
c. capital gains yield.
d. sunk cost.
e. internal rate of
Discounted Cash Flow Valuation
1. An annuity stream of cash flow payments is a set of:
a. level cash flows occurring each time period for a fixed length of time.
b. level cash flows occurring each time period forever.
TRUE or FALSE
1. Book value and market value of an asset are generally the same. F
2. The basic valuation model indicates that a security's price is a function of its cash
flows, their timing, and the investor's required rate of return. T
3. There is an i
1. An asset characterized by cash flows that increase at a constant rate forever is called
a. growing perpetuity.
b. growing annuity.
c. common annuity.
d. perpetuity due.
e. preferred stock
Valuation and Characteristics of Bonds
Bonds cannot be worth less than their book value.
KEYWORDS: book value
So long as a bond sells for an amount above its par value, the coupon interest rate and
Financial Leverage and Capital Structure Policy
1. The use of personal borrowing to change the overall amount of financial leverage to
which an individual is exposed is called:
a. homemade leverage.
BWRR3033 Risk Management (Group C) A122
Exercise-11 (Individual & Group)
: 20 May 2013
: 22 May 2013
Please submit your work in class.
Your work must have the following details appeared on the top LHS corner:
UNIVERSITI UTARA MALAYSIA
BWFF1013 FOUNDATION OF FINANCE
BWFF2013 FINANCIAL MANAGEMENT I
BWFF2033 FINANCIAL MANAGEMENT
This course introduces the concept of risk and th
Quiz 2 : 10 Oct 2013
1. An increase in which of the following will increase the current value of a stock according to the dividend
I. dividend amount
II. number of future dividends, provided the current number is less than infinite
FINAL EXAM QUESTIONS
A122 (QUES 3)
A. Charter Glassware is considering two possible capital structures, Plan 1 and 2, shown
in the following table. The corporate tax rate is 26 percent.
Common shares outstandi
FINAL EXAM QUESTIONS
A122 (QUES 4)
Briefly describe the following concepts:
i. Clientele effect (2 marks)
ii. Residual dividend theory (2 marks)
Gagasan Berhads partial balance sheet is as follows:
Common Stock (RM2 par)
QUIZ 1 (3 OCTOBER)
Encik Zamani is considering TWO investment alternative. The following information is
CD Berhad Bonds
Market Price : RM945.80
: 9 percent (semiannually)
: 8 years
CHAPTER 5 & 6
FINAL EXAM QUESTIONS
A122 (QUES 2)
A. Briefly explain why we focus on cash flows rather than accounting profits in
making capital budgeting decision. (1.5 marks)
B. What is the most favorable method in capital budgeting decision? Briefly
Analysis and Impact of Leverage
Financial risk refers to the relative dispersion of a firms earnings before interest and taxes.
KEYWORDS: financial risk
Operating leverage means financing a portio
BWFF 2023 FINANCIAL MANAGEMENT II
Exercise Stock Valuation
True / False
The common stock of a non-growth firm is valued in the same manner
as its preferred stock.
If the current dividend is $1.20 and the company plan to reduce the
When the amount earned on a deposit has become part of the principal at the end of a specified
time period, the concept is called
The future value of $100 received today and deposited at 6 percent for four years is
The Cost Of Capital
ABC Bhd. is considering a few projects for its investment. Investment costs and expected rate of
return for these projects are as follows:
Investment cost (RM)
Expected rate of return (%)
When a call provision is exercised, preferred stock is usually repurchased at a discount.
KEYWORDS: call provision
The use of a sinking fund for preferred stock in effect establ
Making Capital Investment Decisions
INCREMENTAL CASH FLOWS
1. The changes in a firms future cash flows that are a direct consequence of accepting a
project are called _ cash flows.
Dividends and Dividend Policy
1. Payments made out of a firms earnings to its owners in the form of cash or stock are
c. share repurchases.
e. stock splits.
Interest Rates and Bond Valuation
1. The stated interest payment, in dollars, made on a bond each period is called the
b. face value.
d. yield to maturity.
e. coupon rate.
BWFF2023 FINANCIAL MANAGEMENT II
TOPIC 6: CASH FLOWS IN CAPITAL BUDGETING PROBLEM
INTEGRATIVE PROBLEM (ANSWER)
a. Initial Outlay in Year 0
Net Working Capital (NWC)
Cutting Machine A = (Inventory + Account Receivable) Account Payable
= (10,000 + 15,000
Introduction to Valuation: The Time Value of Money
1. The amount an investment will worth after one or more periods of time is the _