Scribd
Upload
273 views

Quiz Finance 1

This document contains a 10 question multiple choice quiz on finance and capital budgeting concepts. The questions cover topics like net present value, internal rate of return, break-even analysis, returns, standard deviation, and dividends. An answer key is provided at the end with the correct response for each question labeled A-E.

Uploaded by

student
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
273 views

Quiz Finance 1

This document contains a 10 question multiple choice quiz on finance and capital budgeting concepts. The questions cover topics like net present value, internal rate of return, break-even analysis, returns, standard deviation, and dividends. An answer key is provided at the end with the correct response for each question labeled A-E.

Uploaded by

student
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 3

FEC 339 Winter 2019 Quiz #1

Name___________________________________ ID_____________________

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.

1) A project costs $12,500 to initiate. Cash flows are estimated as $2,500 a year for the first two years
and $3,100 a year for the next three years. The discount rate is 11.25%. The net present value for
this project is ________ and the internal rate of return is ________ the discount rate.
A) $1,800.00; less than
B) $2,138.52; less than
C) -$2,138.52; more than
D) -$2,138.52; less than
E) $1,800.00; more than

2) A project is expected to produce cash inflows of $6,500 for three years. What is the maximum
amount that can be spent on costs to initiate this project and still consider the project as acceptable,
given an 11% discount rate?
A) $15,967.39
B) $15,900.00
C) $15,884.15
D) $19,500.00
E) $15,897.97

3) A project produces the following cash flows over the next five years: $600, $200, $350, $400 and
$500, respectively. The initial cost of the project is $1,400. What is the internal rate of return on
this project?
A) 12.87%
B) 14.39%
C) - 4.56%
D) 3.67%
E) The rate cannot be computed with certainty.

4) Fora project with conventional cash flows, if NPV is greater than zero, then:
A) The payback period is faster than the firm's required cutoff point.
B) The IRR is equal to the firm's required rate of return.
C) The profitability index is greater than 1.
D) The AAR exceeds the IRR.
E) The project does not pay back on a discounted payback basis.

B-1
5) Which of the following best describes the term "operating leverage"?
A) The change in costs that occurs when there is a small change in output.
B) The determination of what happens to NPV estimates when we ask what-if questions.
C) The degree to which a firm or project relies on fixed costs.
D) Investigation of what happens to NPV when only one variable is changed.
E) Taking into account the managerial options that are implicit in a project.

6) A project has the following estimated data: price = $150 per unit; variable costs = $88 per unit;
fixed costs = $250,000; required return = 11%; initial investment = $200,000; $50,000 salvage
value; life = ten years. What is the degree of operating leverage at the financial break-even level of
output?
A) 5.07 B) 6.07 C) 7.07 D) 8.07 E) 9.07

7) The Lakeside Inn is considering expanding their operations. Fixed costs are estimated at $92,000 a
year. The variable cost per unit is estimated at $22.50. The estimated sales price is $37.50 per unit.
What is the cash break-even point of this project? (Round to whole units.)
A) 7,180 B) 6,133 C) 7,000 D) 6,667 E) 6,420

8) You purchased a stock one year ago for $91.20. Today you sold the stock and realized a total return
of -63.7% on your investment. During the year you received a total of $2.28 in dividends. At what
price did you sell the stock?
A) $55.81 B) $28.55 C) $58.09 D) $30.83 E) $33.11

9) Bankers, Inc. stock is currently selling for $80 a share. The stock has a dividend yield of 4.2%.
How much dividend income will you receive per year if you purchase 150 shares of this stock?
A) $120 B) $504 C) $1,905 D) $336 E) $630

10) Ajax Corporation has experienced returns of 12%, 15%, 8% and 2% returns over the past four
years. Given this information, calculate the company's standard deviation.
A) 5.04% B) 4.88% C) 6.56% D) 5.62% E) 6.04%

B-2
Answer Key
Testname: FEC339_QUIZ1_W19

1) D
2) C
3) B
4) C
5) C
6) E
7) B
8) D
9) B
10) D

B-3

You might also like