BUSINESS 501 corporate communication_Assessments 8-15.

CorporategFinance,g12eg(Ross)
Chapterg4g g DiscountedgCashgFlowgValuation

1) Thegnetgpresentgvaluegofgagprojectgisgequalgtogthe:
A) presentgvaluegofgthegfuturegcashgflows.
B) presentgvaluegofgthegfuturegcashgflowsgminusgtheginitialgcost.
C) futuregvaluegofgthegfuturegcashgflowsgminusgtheginitialgcost.
D) futuregvaluegofgthegfuturegcashgflowsgminusgthegpresentgvaluegofgtheginitialgcost.
E) sumgofgthegproject'sganticipatedgcashginflows.

Answer:g BgDifficult
y:g1gEasy
Section:g 4.1gValuation: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:g DgDifficult
y:g1gEasy
Section:g 4.1gValuation:gThegOne-
PeriodgCasegTopic:g Netgpresentgvalue
Bloom's:g UnderstandgAACS
B:g ReflectivegThinking
Accessibility:g KeyboardgNavigation

,3) Atgagdiscountgrategofg5gpercent,gwhichgonegofgthegfollowinggisgthegcorrectgformulagf
orgcomputinggthegPVgofg$1gtogbegreceivedgonegyeargfromgtoday?
A) $1/1.05
B) $1
C) $1g×g1.05
D) $1g×g1.052
E) $1/1.052

Answer:g AgDifficult
y:g1gEasy
Section:g 4.1gValuation:gThegOne-
PeriodgCasegTopic:g Presentgvalueg-
gsinglegcashgflowgBloom's:g Understand
AACSB:g ReflectivegThinkinggAcces
sibility:g KeyboardgNavigation

4) Whatgeffectgwillgangincreasegingthegdiscountgrateghavegongthegpresentgvaluegofgagprojectgthatgh
asganginitialgcashgoutflowgfollowedgbygfivegyearsgofgcashginflows?
A) TheregwillgbegnogeffectgongthegPV.
B) ThegPVgwillgchangegbutgthegdirectiongofgthegchangegisgunknown.
C) ThegPVgwillgremaingthegsamegasgthegtiminggofgthegcashgflowsgmustgchangegalso.
D) ThegPVgwillgincrease.
E) ThegPVgwillgdecrease.

Answer:g EgDifficult
y:g1gEasy
Section:g 4.2gThegMultiperiodgCase
Topic:g Presentgvalueg-
gmultiplegcashgflowsgBloom's:g Understand
AACSB:g ReflectivegThinkinggAcces
sibility:g KeyboardgNavigation

,5) Yougaregconsideringgtwogprojects.gProjectgAghasgprojectedgcashgflowsgofg$6,500,g$4,500,gand
$2,500gforgthegnextgthreegyears,grespectively.gProjectgBghasgprojectedgcashgflowsgofg$2,500,
$4,500,gandg$6,500gforgthegnextgthreegyears,grespectively.gAssuminggbothgprojectsghavegthegsame
ginitialgcost,gyougknowgthat:
A) theregaregnogconditionsgundergwhichgthegprojectsgcanghavegequalgvalues.
B) ProjectgBghasgaghighergnetgpresentgvaluegthangProjectgA.
C) ProjectgAgisgmoregvaluablegthangProjectgBggivengagpositivegdiscountgrate.
D) bothgprojectsgoffergthegsamegrategofgreturn.
E) bothgprojectsghavegequalgnetgpresentgvaluesgatganygdiscountgrate.

Answer:g CgDifficult
y:g1gEasy
Section:g 4.2gThegMultiperiodgCase
Topic:g Presentgvalueg-
gmultiplegcashgflowsgBloom's:g Understand
AACSB:g ReflectivegThinkinggAcces
sibility:g KeyboardgNavigation

6) Anginterestgrategthatgisgcompoundedgmonthly,gbutgisgexpressedgasgifgthegrategweregcompounde
dgannually,gisgcalledgtheg rate.
A) statedginterest
B) compoundginterest
C) effectivegannual
D) periodicginterest
E) dailyginterest

Answer:g CgDifficult
y:g1gEasy
Section:g 4.3gCompoundinggPeriods
Topic:g Annual,gholdinggperiod,gandgeffectivegratesgBl
oom's:g Remember
AACSB:g ReflectivegThinkinggAcces
sibility:g KeyboardgNavigation

, 7) Theginterestgrategchargedgpergperiodgmultipliedgbygthegnumbergofgperiodsgpergyeargisgcalledgth
e
rate.
A) effectivegannual
B) annualgpercentage
C) periodicginterest
D) compoundginterest
E) dailyginterest

Answer:g BgDifficult
y:g1gEasy
Section:g 4.3gCompoundinggPeriods
Topic:g Annual,gholdinggperiod,gandgeffectivegratesgBl
oom's:g Remember
AACSB:g ReflectivegThinkinggAcces
sibility:g KeyboardgNavigation

8) Thegannualgpercentagegrate:
A) considersginterestgonginterest.
B) isgthegactualgcostgofgagloangwithgmonthlygpayments.
C) isghighergthangthegeffectivegannualgrategwhenginterestgisgcompoundedgquarterly.
D) isgtheginterestgrategchargedgpergperiodgdividedgbyg(1g+gn),gwhengngisgthegnumbergofgperiodsgp
ergyear.
E) equalsgthegeffectivegannualgrategwhengtheginterestgongangaccountgisgdesignatedgasgsimpl
eginterest.

Answer:g EgDifficult
y:g1gEasy
Section:g 4.3gCompoundinggPeriods
Topic:g Annual,gholdinggperiod,gandgeffectivegratesgBl
oom's:g Understand
AACSB:g ReflectivegThinkinggAcces
sibility:g KeyboardgNavigation