Question 1

Lindsey and Tobias have the opportunity to invest in a project that requires an investment of $3,000.There is a 35% chance of a $2,900 return; a 40% chance of a $3,400 return; and a 25% chance of a $4,500 return one year from now.Lindsey requires a 15% return on the project after the first year,but Tobias requires a return of only 12%.Using the expected rate of return:
A)Lindsey and Tobias should both invest in the project
B)Only Tobias should invest in the project
C)Only Lindsey should invest in the project
D)Lindsey and Tobias should both reject the project

Accepted Answer

To determine whether Lindsey and Tobias should invest in the project, we need to calculate the expected rate of return for the project.

Expected Rate of Return = (Probability of Return 1 * Rate of Return 1) + (Probability of Return 2 * Rate of Return 2) + (Probability of Return 3 * Rate of Return 3)

Expected Rate of Return = (0.35 * 2900/3000) + (0.40 * 3400/3000) + (0.25 * 4500/3000)

Expected Rate of Return = 0.3833 or 38.33%

Since the expected rate of return (38.33%) is higher than both Lindsey's and Tobias's required rates of return (15% and 12% respectively), both should invest in the project.

Question 2

Assume that you can sell a new product at $5.00 per unit.Your variable costs are $3.00 per unit and you fixed costs are $20,000.What is your breakeven point in sales units?
A)5,000
B)7,500
C)10,000
D)12,500
E)15,000

Accepted Answer

Breakeven point in units = Fixed Costs / (Sales Price per unit - Variable Costs per unit)
= $20,000 /($5.00-$3.00)
= 10,000 units. Therefore, the best choice would be C - 10,000 units.

Question 3

Which of the following is not considered to be a mega-trend in this textbook?
A)societal,demographic,and technological changes
B)crises and bubbles
C)fads
D)emerging economies and global changes

Accepted Answer

The textbook considers societal, demographic, and technological changes, crises and bubbles, and emerging economies and global changes as mega-trends. However, fads are not considered mega-trends as they are temporary trends that are not likely to have a significant impact on the long-term future.

Question 4

The time value of money concept is associated with which one of the following principles of entrepreneurial finance:
A)real,human,and financial capital must be rented from owners
B)risk and expected reward go hand in hand
C)while accounting is the language of business,cash is the currency
D)it is dangerous to assume that people act against their own self-interests

Accepted Answer

The time value of money concept is related to the principle that real, human, and financial capital must be rented from owners, as it involves the cost of using capital over time.

Question 5

Financial markets where customized contracts or securities are negotiated,created,and held with restrictions on how they can be transferred are called:
A)private financial markets
B)public financial markets
C)domestic financial markets
D)international financial markets
E)all of the above

Accepted Answer

These characteristics are most closely associated with private financial markets. Public financial markets offer securities that are freely transferable, while domestic and international financial markets are more general descriptions that do not necessarily imply customization or restrictions on transferability.

Question 6

You have the opportunity of making a $5,000 investment.The outcomes one year from now will be either $5,000 or $6,000 with an equal chance of either outcome occurring.What is the expected rate of return?
A)10%
B)15%
C)20%
D)25%
E)30%

Accepted Answer

The expected return is calculated by taking the weighted average of the possible outcomes. In this case, the expected return is: (0.5 x $5,000) + (0.5 x $6,000) = $5,500. Therefore, the expected rate of return is ($5,500 - $5,000) / $5,000 = 10%. Option A) is the best choice as it gives the highest expected rate of return.

Question 7

The goal of the entrepreneurial process is to:
A)develop opportunities
B)gather resources
C)manage and build operations
D)create value

Accepted Answer

While all of the choices may be important aspects of the entrepreneurial process, the ultimate goal is to create value. Whether it be through a new product or service, or by improving upon an existing one, the goal is to provide something of value to potential customers or clients. Developing opportunities, gathering resources, and managing/building operations are all important steps in achieving this goal, but they are means to an end - creating value.

Question 8

You have the opportunity of making a $5,000 investment.The outcomes one year from now will be either $4,500 or $6,000 with an equal chance of either outcome occurring.What is the expected outcome?
A)$4,500
B)$6,000
C)$5,250
D)$5,750
E)$5,000

Accepted Answer

The expected outcome is the weighted average of the possible outcomes, where the weights are the probabilities of each outcome occurring. In this case, the expected outcome is:
(0.5 x $4,500) + (0.5 x $6,000) = $5,250
Therefore, the best choice is to invest the $5,000 with an expected return of $5,250.

Question 9

You are considering investing in two independent projects "A" and "B".Project A requires an initial investment of $12,000.In one year,there is a 30% chance of a $10,500 return; a 50% chance of a $12,500 return; and a 20% chance of a $14,500 return.Project B requires an initial investment of $1,000.In one year,there is a 25% chance of a $950 return; a 25% chance of a $1,000 return; and a 50% chance of a $1,200 return.If you require a 7% return on your investment after one year,you should:
A)Accept A and reject B
B)Accept B and reject A
C)Accept both projects
D)Reject both projects

Accepted Answer

The answer of You are considering investing in two independent...

Question 10

A project requires an initial investment of $1,000,000.In one year,there is a 40% chance of a $950,000 return; a 50% chance of a $1,200,000 return; and a 10% chance of a $2,000,000 return.What is the project's expected return one year from now?
A)12.8%
B)15.5%
C)18.0%
D)38.3%

Accepted Answer

Expected return = (probability of return 1 * return 1) + (probability of return 2 * return 2) + (probability of return 3 * return 3)
Expected return = (0.4 * 950,000) + (0.5 * 1,200,000) + (0.1 * 2,000,000)
Expected return = 380,000 + 600,000 + 200,000
Expected return = 1,180,000
Therefore, the project's expected return one year from now is $1,180,000. 
The best choice is C.

Question 11

Assume that you can sell a new product at $5.00 per unit.Your variable costs are $3.00 per unit and you fixed costs are $20,000.What will be your profit before taxes if you sell 12,000 units next year?
A)$0
B)$1,000
C)$2,000
D)$4,000
E)$8,000

Accepted Answer

The answer of Assume that you can sell a new...

Quiz 1: Introduction to Finance for Entrepreneurs

Assume that you can sell a new product at $5.00 per unit.Your variable costs are $3.00 per unit and you fixed costs are $20,000.What is your breakeven point in sales units?

Which of the following is not considered to be a mega-trend in this textbook?

The time value of money concept is associated with which one of the following principles of entrepreneurial finance:

Financial markets where customized contracts or securities are negotiated,created,and held with restrictions on how they can be transferred are called:

You have the opportunity of making a $5,000 investment.The outcomes one year from now will be either $5,000 or $6,000 with an equal chance of either outcome occurring.What is the expected rate of return?

The goal of the entrepreneurial process is to:

You have the opportunity of making a $5,000 investment.The outcomes one year from now will be either $4,500 or $6,000 with an equal chance of either outcome occurring.What is the expected outcome?

A project requires an initial investment of $1,000,000.In one year,there is a 40% chance of a $950,000 return; a 50% chance of a $1,200,000 return; and a 10% chance of a $2,000,000 return.What is the project's expected return one year from now?

Assume that you can sell a new product at $5.00 per unit.Your variable costs are $3.00 per unit and you fixed costs are $20,000.What will be your profit before taxes if you sell 12,000 units next year?