MBA MATH FINANCE- Questions With All Correct
Answers
-$1,369,393.94 correct answer -A firm that purchases electricity from the
local utility for $400,000 per year is considering installing a steam generator
at a cost of $290,000. The cost of operating this generator would be $280,000
per year, and the generator will last for five years. If the firm buys the
generator, it does not need to purchase any electricity from the local utility.
The cost of capital is 15%. What is the net present value of the more attractive
choice?
-1,100,489 correct answer -A firm that purchases electricity from the local
utility is considering installing a steam generator. A large generator costs
$280,000 whereas a small generator costs $200,000. The cost of operating the
generator would be $200,000 per year for the large and $220,000 for the
small. Either generator will last for five years. The cost of capital is 11%.What
is the net present value of the more attractive generator?
703,674 correct answer -A prospective MBA student earns $45,000 per
year in her current job and expects that amount to increase by 6% per year.
She is considering leaving her job to attend business school for two years at a
cost of $30,000 per year. She has been told that her starting salary after
business school is likely to be $90,000 and that amount will increase by 16%
per year. Consider a time horizon of 10 years, use a discount rate of 9%, and
ignore all considerations not explicitly mentioned here. What is the net
present value of the more attractive generator?
676.84 correct answer -What is the current value of a zero-coupon bond
that pays a face value of $1,000 at maturity in 8 years if the appropriate
discount rate is 5%.
0.184 correct answer -What interest rate is implicit in a $1,000 par value
zero-coupon bond that matures in 5 years if the current price is $430.
1,157.26 correct answer -What is the current value of a $1,000 bond with
a 7% annual coupon rate (paid annually) that matures in 6 years if the
appropriate discount rate is 4%.
Answers
-$1,369,393.94 correct answer -A firm that purchases electricity from the
local utility for $400,000 per year is considering installing a steam generator
at a cost of $290,000. The cost of operating this generator would be $280,000
per year, and the generator will last for five years. If the firm buys the
generator, it does not need to purchase any electricity from the local utility.
The cost of capital is 15%. What is the net present value of the more attractive
choice?
-1,100,489 correct answer -A firm that purchases electricity from the local
utility is considering installing a steam generator. A large generator costs
$280,000 whereas a small generator costs $200,000. The cost of operating the
generator would be $200,000 per year for the large and $220,000 for the
small. Either generator will last for five years. The cost of capital is 11%.What
is the net present value of the more attractive generator?
703,674 correct answer -A prospective MBA student earns $45,000 per
year in her current job and expects that amount to increase by 6% per year.
She is considering leaving her job to attend business school for two years at a
cost of $30,000 per year. She has been told that her starting salary after
business school is likely to be $90,000 and that amount will increase by 16%
per year. Consider a time horizon of 10 years, use a discount rate of 9%, and
ignore all considerations not explicitly mentioned here. What is the net
present value of the more attractive generator?
676.84 correct answer -What is the current value of a zero-coupon bond
that pays a face value of $1,000 at maturity in 8 years if the appropriate
discount rate is 5%.
0.184 correct answer -What interest rate is implicit in a $1,000 par value
zero-coupon bond that matures in 5 years if the current price is $430.
1,157.26 correct answer -What is the current value of a $1,000 bond with
a 7% annual coupon rate (paid annually) that matures in 6 years if the
appropriate discount rate is 4%.
