Deck 8: Non Financial Investments

Question 1

Which of the following is the principal purpose of purchasing durable goods?

A)To reap the benefits from the items directly.
B)To benefit from their appreciation in value.
C)To benefit from the tax deduction the government provides.
D)All of the above.
E)None of the above.

Answer 1

A

Question 2

Which of the following is not an economic reason for leasing?

A)The lessor may absorb the risk of technological or fashion obsolescence or large unforeseen expenditures on the asset.
B)The lessor is sometimes able to develop efficiencies in specializing in that asset.
C)The business owner may receive tax benefits that the lessor will not.
D)All of the above are economic reasons for leasing.
E)None of the above is an economic reason for leasing.

Answer 2

D

Question 3

Is leasing presented as a liability on the household's balance sheet?

A)Yes.
B)No.
C)No,unless the household is attempting to qualify for a new loan.
D)Yes,unless the household is attempting to qualify for a new loan.
E)None of the above.

Answer 3

B

Question 4

Which of the following is never used as an alternative name for real assets?

A)Tangible assets.
B)Physical assets.
C)Hard assets.
D)All of the above are alternative names.
E)Only a and c are alternative names.

Question 5

Which of the following is not a major factor when deciding to change automobiles?

A)State of current car.
B)Existing finances.
C)Current car promotion.
D)Attractiveness of new car.
E)All of the above are major factors.

Question 6

When calculating the NPV,what discount rate should we use?

A)A discount rate equal to the investment return that could be earned on nonmarketable securities with similar risk characteristics.
B)A discount rate equal to the investment return that could be earned on marketable securities with similar risk characteristics.
C)A discount rate equal to the investment return that could be earned on low-risk marketable securities.
D)A discount rate equal to the investment return that could be earned on high-risk nonmarketable securities.
E)None of the above.

Question 7

Which of the following is true of NPV vs IRR

A)IRR is more accurate
B)NPV has easier to understand answers
C)NPV is more accurate
D)IRR can be done without use of a calculator or computer
E)NPV can done without use of a calculator or computer

Question 8

Which of the following is not a reason to purchase a durable good?

A)To take advantage of a technological improvement with the potential to make household maintenance more time-efficient.
B)Physical wear and tear that results in an existing durable having reached the end of its useful life.
C)A change in circumstances.
D)To attempt to minimize risk.
E)All of the above are reasons to purchase a durable good.

Question 9

Which of the following best describes financial assets?

A)Assets in which ownership is represented and traded solely through pieces of paper.
B)Assets that can be sold currently in a public forum for fair value at low transaction costs.
C)Assets that you can see or touch that have market value.
D)All of the above.
E)None of the above.

Question 10

What type of human-related assets is personal finance principally interested?

A)Assets that derive their value from particular people.
B)Assets that generate income.
C)Assets in which ownership is represented and traded solely through pieces of paper.
D)All of the above.
E)None of the above.

Question 11

Project A has NPV of $45 million while project B has NPV of $54.5 million.If the cost of project A is $33 million and the cost of project B is $22 million,which project should be chosen if only one can be chosen?

A)Project A.
B)Project B.
C)Neither.
D)Both.
E)Answer varies,depending on inflation.

Question 12

Which of the following is inapplicable to human assets?

A)It is a resource that reflects the current value of all our future earnings.
B)It is a nonmarketable asset.
C)It is often rented to an employer for a period of time.
D)All of the above are applicable to human assets.
E)A and c are applicable to human assets.