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Analysis for Financial Management
Quiz 7: Discounted Cash Flow Techniques
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Question 1
Multiple Choice
You plan to buy a new Mercedes four years from now.Today,a comparable car costs $82,500.You expect the price of the car to increase by an average of 4.8 percent per year over the next four years.How much will your dream car cost by the time you are ready to buy it?
Question 2
Multiple Choice
When making a capital budgeting decision,which of the following is/are NOT relevant? I.The size of a cash flow. II.The risk of a cash flow. III.The accounting earnings from a cash flow. IV.The timing of a cash flow.
Question 3
Multiple Choice
What is the benefit-cost ratio for an investment with the following cash flows at a 14.5 percent required return?
Question 4
Multiple Choice
Which of the following figures of merit does not directly take into consideration the time value of money? I.Payback period II.Internal rate of return III.Net present value (NPV) IV.Accounting rate of return
Question 5
Multiple Choice
Which of the following should be included in the analysis of a new product? I.Money already spent for research and development of the new product II.Reduction in sales for a current product once the new product is introduced III.Increase in working capital needed to finance sales of the new product IV.Interest expense on the loan used to finance the new product launch
Question 6
Multiple Choice
Which of the following is not an important step in the financial evaluation of an investment opportunity?
Question 7
Multiple Choice
EAC Nutrition offers a 9.5 percent coupon bond with annual payments,maturing 11 years from today.Your required return is 11.2 percent.What price are you willing to pay for this bond if the face (or par) value is $1,000?