Finance 3227: Introduction to Finance
Final Examination, Fall 2020
Time Permitted: 3 Hours
Name: Student Number:
Section: 3227-007 Instructor’s Name: Tashfeen
Questions Marks Earned
MCQ (Question 1 – Question 23) /46
Question 24 /12
Question 25 /8
Question 26 /12
Question 27 /8
Total /86
Instructions:
- Please write your first name, last name, student ID, section number and Instructor’s name
correctly
- Answer all the questions
- The exam has a total of 23 MCQ and 4 Analytical Questions
- The exam consists of 12 pages in total
- Only BA II Plus Calculator is permitted in the exam
- Show your work clearly for questions 24 - 27
- You can use the text book, lecture notes and formula sheet
- You cannot communicate with anyone else during the exam. That will be considered a serious
violation of academic integrity.
Section A: Multiple Choice Questions (each MCQ is worth 2 points)
For each of the following, please pick the best answer
1. Suppose you have an opportunity to invest in a project, which is expected to generate after-tax
cash flows of $6,800 in year 1, $7,200 in year 2, and $7,500 in year 3. The appropriate discount
rate for the project is 10.5 percent. What is project’s initial investment when the project's NPV is
$2,609.25?
1
, a. $17,609.25
b. $15,000.00
c. 21,500.00
d. $20,218.50
Correct Answer: B
2. You are considering a project, where the initial investment is $400,000. The first expected cash
flow is going to be 20,000, after which the cash flows are expected to grow at a rate of 5%. The
required rate of return on the project is 10%. What is the NPV of the project?
a. – 200,000
b. 0
c. – 100,000
d. 100,000
Correct Answer: B
3. Which of the following is correct with respect to working capital and capital budgeting?
a. Investment in working capital is ignored in the capital budgeting process
b. Working capital usually has a different discount rate
c. Investment in working capital is assumed to be recovered at the end of the life of the project
d. All of the above are correct
Correct Answer: C
4. Tash & Fin Corp. is considering a new investment opportunity. Which of the following
available information about this opportunity should be included in the decision to accept or reject
this opportunity?
i. The technical feasibility consulting fees which cost $50,000 and were just delivered
today.
ii. The debt interest or coupons on the money that will be borrowed to finance the
investment.
iii. The alternative use of the resources for this opportunity, which have been analyzed
to yield a positive NPV of $250,000
iv. The regulatory fees of getting the required permits, which according to the
operations department will not generate any cash flows.
a. i, ii, and iv only
b. ii, iii, and iv only
c. i and iii only
d. iii and iv only
Correct Answer: B
2
Final Examination, Fall 2020
Time Permitted: 3 Hours
Name: Student Number:
Section: 3227-007 Instructor’s Name: Tashfeen
Questions Marks Earned
MCQ (Question 1 – Question 23) /46
Question 24 /12
Question 25 /8
Question 26 /12
Question 27 /8
Total /86
Instructions:
- Please write your first name, last name, student ID, section number and Instructor’s name
correctly
- Answer all the questions
- The exam has a total of 23 MCQ and 4 Analytical Questions
- The exam consists of 12 pages in total
- Only BA II Plus Calculator is permitted in the exam
- Show your work clearly for questions 24 - 27
- You can use the text book, lecture notes and formula sheet
- You cannot communicate with anyone else during the exam. That will be considered a serious
violation of academic integrity.
Section A: Multiple Choice Questions (each MCQ is worth 2 points)
For each of the following, please pick the best answer
1. Suppose you have an opportunity to invest in a project, which is expected to generate after-tax
cash flows of $6,800 in year 1, $7,200 in year 2, and $7,500 in year 3. The appropriate discount
rate for the project is 10.5 percent. What is project’s initial investment when the project's NPV is
$2,609.25?
1
, a. $17,609.25
b. $15,000.00
c. 21,500.00
d. $20,218.50
Correct Answer: B
2. You are considering a project, where the initial investment is $400,000. The first expected cash
flow is going to be 20,000, after which the cash flows are expected to grow at a rate of 5%. The
required rate of return on the project is 10%. What is the NPV of the project?
a. – 200,000
b. 0
c. – 100,000
d. 100,000
Correct Answer: B
3. Which of the following is correct with respect to working capital and capital budgeting?
a. Investment in working capital is ignored in the capital budgeting process
b. Working capital usually has a different discount rate
c. Investment in working capital is assumed to be recovered at the end of the life of the project
d. All of the above are correct
Correct Answer: C
4. Tash & Fin Corp. is considering a new investment opportunity. Which of the following
available information about this opportunity should be included in the decision to accept or reject
this opportunity?
i. The technical feasibility consulting fees which cost $50,000 and were just delivered
today.
ii. The debt interest or coupons on the money that will be borrowed to finance the
investment.
iii. The alternative use of the resources for this opportunity, which have been analyzed
to yield a positive NPV of $250,000
iv. The regulatory fees of getting the required permits, which according to the
operations department will not generate any cash flows.
a. i, ii, and iv only
b. ii, iii, and iv only
c. i and iii only
d. iii and iv only
Correct Answer: B
2
