CorporateGFinance,G12eG(Ross)
ChapterG4G DiscountedGCashGFlowGValuation
1) TheGnetGpresentGvalueGofGaGprojectGisGequalGtoGthe:
A) presentGvalueGofGtheGfutureGcashGflows.
B) presentGvalueGofGtheGfutureGcashGflowsGminusGtheGinitialGcost.
C) futureGvalueGofGtheGfutureGcashGflowsGminusGtheGinitialGcost.
D) futureGvalueGofGtheGfutureGcashGflowsGminusGtheGpresentGvalueGofGtheGinitialGcost.
E) sumGofGtheGproject'sGanticipatedGcashGinflows.
Answer:GBGDiffic
ulty:G1GEasy
Section:G4.1GValuation:GTheGOne-
PeriodGCaseGTopic:G NetGpresentGvalue
Bloom's:G UnderstandGAACS
B:G ReflectiveGThinking
Accessibility:G KeyboardGNavigation
2) WhichGoneGofGtheseGstatementsGisGcorrectGconcerningGtheGtimeGvalueGofGmoney?
A) IncreasingGtheGinitialGcostGofGaGprojectGincreasesGtheGproject'sGNPV.
B) IncreasingGtheGdiscountGrate,GincreasesGtheGPVGofGaGproject.
C) IncreasingGtheGFVGdecreasesGtheGPV.
D) DecreasingGtheGPVGdecreasesGtheGFV.
E) DecreasingGtheGdiscountGrateGincreasesGtheGFV.
Answer:GDGDiffic
ulty:G1GEasy
Section:G4.1GValuation:GTheGOne-
PeriodGCaseGTopic:G NetGpresentGvalue
Bloom's:G UnderstandGAACS
B:G ReflectiveGThinking
Accessibility:G KeyboardGNavigation
,3) AtGaGdiscountGrateGofG5Gpercent,GwhichGoneGofGtheGfollowingGisGtheGcorrectGformulaGf
orGcomputingGtheGPVGofG$1GtoGbeGreceivedGoneGyearGfromGtoday?
A)G$1/1.05
B)G$1
C)G$1G×G1.05
D)G$1G×G1.052
E)G$1/1.052
Answer:GAGDiffic
ulty:G1GEasy
Section:G4.1GValuation:GTheGOne-
PeriodGCaseGTopic:GPresentGvalueG-
GsingleGcashGflowGBloom's:G Understand
AACSB:GReflectiveGThinkingGAcce
ssibility:G KeyboardGNavigation
4) WhatGeffectGwillGanGincreaseGinGtheGdiscountGrateGhaveGonGtheGpresentGvalueGofGaGprojectGthatG
hasGanGinitialGcashGoutflowGfollowedGbyGfiveGyearsGofGcashGinflows?
A) ThereGwillGbeGnoGeffectGonGtheGPV.
B) TheGPVGwillGchangeGbutGtheGdirectionGofGtheGchangeGisGunknown.
C) TheGPVGwillGremainGtheGsameGasGtheGtimingGofGtheGcashGflowsGmustGchangeGalso.
D) TheGPVGwillGincrease.
E) TheGPVGwillGdecrease.
Answer:GEGDiffic
ulty:G1GEasy
Section:G 4.2GTheGMultiperiodGCase
Topic:G PresentGvalueG-
GmultipleGcashGflowsGBloom's:G Understand
AACSB:GReflectiveGThinkingGAcce
ssibility:G KeyboardGNavigation
,5) YouGareGconsideringGtwoGprojects.GProjectGAGhasGprojectedGcashGflowsGofG$6,500,G$4,500,Gand
$2,500GforGtheGnextGthreeGyears,Grespectively.GProjectGBGhasGprojectedGcashGflowsGofG$2,500,
$4,500,GandG$6,500GforGtheGnextGthreeGyears,Grespectively.GAssumingGbothGprojectsGhaveGtheGsa
meGinitialGcost,GyouGknowGthat:
A) thereGareGnoGconditionsGunderGwhichGtheGprojectsGcanGhaveGequalGvalues.
B) ProjectGBGhasGaGhigherGnetGpresentGvalueGthanGProjectGA.
C) ProjectGAGisGmoreGvaluableGthanGProjectGBGgivenGaGpositiveGdiscountGrate.
D) bothGprojectsGofferGtheGsameGrateGofGreturn.
E) bothGprojectsGhaveGequalGnetGpresentGvaluesGatGanyGdiscountGrate.
Answer:GCGDiffic
ulty:G1GEasy
Section:G 4.2GTheGMultiperiodGCase
Topic:G PresentGvalueG-
GmultipleGcashGflowsGBloom's:G Understand
AACSB:GReflectiveGThinkingGAcce
ssibility:G KeyboardGNavigation
6) AnGinterestGrateGthatGisGcompoundedGmonthly,GbutGisGexpressedGasGifGtheGrateGwereGcompound
edGannually,GisGcalledGthe rate.
A) statedGinterest
B) compoundGinterest
C) effectiveGannual
D) periodicGinterest
E) dailyGinterest
Answer:GCGDiffic
ulty:G1GEasy
Section:G 4.3GCompoundingGPeriods
Topic:G Annual,GholdingGperiod,GandGeffectiveGrate
sGBloom's:G Remember
AACSB:GReflectiveGThinkingGAcce
ssibility:G KeyboardGNavigation
, 7) TheGinterestGrateGchargedGperGperiodGmultipliedGbyGtheGnumberGofGperiodsGperGyearGisGcalledGthe
G rate.
A) effectiveGannual
B) annualGpercentage
C) periodicGinterest
D) compoundGinterest
E) dailyGinterest
Answer:GBGDiffic
ulty:G1GEasy
Section:G 4.3GCompoundingGPeriods
Topic:G Annual,GholdingGperiod,GandGeffectiveGrate
sGBloom's:G Remember
AACSB:GReflectiveGThinkingGAcce
ssibility:G KeyboardGNavigation
8) TheGannualGpercentageGrate:
A) considersGinterestGonGinterest.
B) isGtheGactualGcostGofGaGloanGwithGmonthlyGpayments.
C) isGhigherGthanGtheGeffectiveGannualGrateGwhenGinterestGisGcompoundedGquarterly.
D) isGtheGinterestGrateGchargedGperGperiodGdividedGbyG(1G+Gn),GwhenGnGisGtheGnumberGofGperiodsG
perGyear.
E) equalsGtheGeffectiveGannualGrateGwhenGtheGinterestGonGanGaccountGisGdesignatedGasGsimp
leGinterest.
Answer:GEGDiffic
ulty:G1GEasy
Section:G 4.3GCompoundingGPeriods
Topic:G Annual,GholdingGperiod,GandGeffectiveGrate
sGBloom's:G Understand
AACSB:GReflectiveGThinkingGAcce
ssibility:G KeyboardGNavigation
ChapterG4G DiscountedGCashGFlowGValuation
1) TheGnetGpresentGvalueGofGaGprojectGisGequalGtoGthe:
A) presentGvalueGofGtheGfutureGcashGflows.
B) presentGvalueGofGtheGfutureGcashGflowsGminusGtheGinitialGcost.
C) futureGvalueGofGtheGfutureGcashGflowsGminusGtheGinitialGcost.
D) futureGvalueGofGtheGfutureGcashGflowsGminusGtheGpresentGvalueGofGtheGinitialGcost.
E) sumGofGtheGproject'sGanticipatedGcashGinflows.
Answer:GBGDiffic
ulty:G1GEasy
Section:G4.1GValuation:GTheGOne-
PeriodGCaseGTopic:G NetGpresentGvalue
Bloom's:G UnderstandGAACS
B:G ReflectiveGThinking
Accessibility:G KeyboardGNavigation
2) WhichGoneGofGtheseGstatementsGisGcorrectGconcerningGtheGtimeGvalueGofGmoney?
A) IncreasingGtheGinitialGcostGofGaGprojectGincreasesGtheGproject'sGNPV.
B) IncreasingGtheGdiscountGrate,GincreasesGtheGPVGofGaGproject.
C) IncreasingGtheGFVGdecreasesGtheGPV.
D) DecreasingGtheGPVGdecreasesGtheGFV.
E) DecreasingGtheGdiscountGrateGincreasesGtheGFV.
Answer:GDGDiffic
ulty:G1GEasy
Section:G4.1GValuation:GTheGOne-
PeriodGCaseGTopic:G NetGpresentGvalue
Bloom's:G UnderstandGAACS
B:G ReflectiveGThinking
Accessibility:G KeyboardGNavigation
,3) AtGaGdiscountGrateGofG5Gpercent,GwhichGoneGofGtheGfollowingGisGtheGcorrectGformulaGf
orGcomputingGtheGPVGofG$1GtoGbeGreceivedGoneGyearGfromGtoday?
A)G$1/1.05
B)G$1
C)G$1G×G1.05
D)G$1G×G1.052
E)G$1/1.052
Answer:GAGDiffic
ulty:G1GEasy
Section:G4.1GValuation:GTheGOne-
PeriodGCaseGTopic:GPresentGvalueG-
GsingleGcashGflowGBloom's:G Understand
AACSB:GReflectiveGThinkingGAcce
ssibility:G KeyboardGNavigation
4) WhatGeffectGwillGanGincreaseGinGtheGdiscountGrateGhaveGonGtheGpresentGvalueGofGaGprojectGthatG
hasGanGinitialGcashGoutflowGfollowedGbyGfiveGyearsGofGcashGinflows?
A) ThereGwillGbeGnoGeffectGonGtheGPV.
B) TheGPVGwillGchangeGbutGtheGdirectionGofGtheGchangeGisGunknown.
C) TheGPVGwillGremainGtheGsameGasGtheGtimingGofGtheGcashGflowsGmustGchangeGalso.
D) TheGPVGwillGincrease.
E) TheGPVGwillGdecrease.
Answer:GEGDiffic
ulty:G1GEasy
Section:G 4.2GTheGMultiperiodGCase
Topic:G PresentGvalueG-
GmultipleGcashGflowsGBloom's:G Understand
AACSB:GReflectiveGThinkingGAcce
ssibility:G KeyboardGNavigation
,5) YouGareGconsideringGtwoGprojects.GProjectGAGhasGprojectedGcashGflowsGofG$6,500,G$4,500,Gand
$2,500GforGtheGnextGthreeGyears,Grespectively.GProjectGBGhasGprojectedGcashGflowsGofG$2,500,
$4,500,GandG$6,500GforGtheGnextGthreeGyears,Grespectively.GAssumingGbothGprojectsGhaveGtheGsa
meGinitialGcost,GyouGknowGthat:
A) thereGareGnoGconditionsGunderGwhichGtheGprojectsGcanGhaveGequalGvalues.
B) ProjectGBGhasGaGhigherGnetGpresentGvalueGthanGProjectGA.
C) ProjectGAGisGmoreGvaluableGthanGProjectGBGgivenGaGpositiveGdiscountGrate.
D) bothGprojectsGofferGtheGsameGrateGofGreturn.
E) bothGprojectsGhaveGequalGnetGpresentGvaluesGatGanyGdiscountGrate.
Answer:GCGDiffic
ulty:G1GEasy
Section:G 4.2GTheGMultiperiodGCase
Topic:G PresentGvalueG-
GmultipleGcashGflowsGBloom's:G Understand
AACSB:GReflectiveGThinkingGAcce
ssibility:G KeyboardGNavigation
6) AnGinterestGrateGthatGisGcompoundedGmonthly,GbutGisGexpressedGasGifGtheGrateGwereGcompound
edGannually,GisGcalledGthe rate.
A) statedGinterest
B) compoundGinterest
C) effectiveGannual
D) periodicGinterest
E) dailyGinterest
Answer:GCGDiffic
ulty:G1GEasy
Section:G 4.3GCompoundingGPeriods
Topic:G Annual,GholdingGperiod,GandGeffectiveGrate
sGBloom's:G Remember
AACSB:GReflectiveGThinkingGAcce
ssibility:G KeyboardGNavigation
, 7) TheGinterestGrateGchargedGperGperiodGmultipliedGbyGtheGnumberGofGperiodsGperGyearGisGcalledGthe
G rate.
A) effectiveGannual
B) annualGpercentage
C) periodicGinterest
D) compoundGinterest
E) dailyGinterest
Answer:GBGDiffic
ulty:G1GEasy
Section:G 4.3GCompoundingGPeriods
Topic:G Annual,GholdingGperiod,GandGeffectiveGrate
sGBloom's:G Remember
AACSB:GReflectiveGThinkingGAcce
ssibility:G KeyboardGNavigation
8) TheGannualGpercentageGrate:
A) considersGinterestGonGinterest.
B) isGtheGactualGcostGofGaGloanGwithGmonthlyGpayments.
C) isGhigherGthanGtheGeffectiveGannualGrateGwhenGinterestGisGcompoundedGquarterly.
D) isGtheGinterestGrateGchargedGperGperiodGdividedGbyG(1G+Gn),GwhenGnGisGtheGnumberGofGperiodsG
perGyear.
E) equalsGtheGeffectiveGannualGrateGwhenGtheGinterestGonGanGaccountGisGdesignatedGasGsimp
leGinterest.
Answer:GEGDiffic
ulty:G1GEasy
Section:G 4.3GCompoundingGPeriods
Topic:G Annual,GholdingGperiod,GandGeffectiveGrate
sGBloom's:G Understand
AACSB:GReflectiveGThinkingGAcce
ssibility:G KeyboardGNavigation
