FIN 515 Midterm Exam Solution – All
Possible Questions
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TCO G) The firm’s asset turnover
measures
(TCO G) If Moon Corporation has an
increase in sales, which of the following would result in no change in its EBIT
margin?
(TCO B) You plan on retiring in 20
years. You currently have $275,000 and think you will need $1,000,000 to
retire. Assuming you don’t deposit any additional money into the account, what
annual return will you need to earn to meet this goal?
(TCO B) You take out a 4 year car
loan for $18,000. The loan has a 4% annual interest rate. The payments are made
monthly. What are the monthly payments? Show your work.
(TCO B) You currently have $10,000
in your retirement account. If you deposit $500 per month and the account pays
5% interest, how much will be in the account in 10 years? Show your work.
(TCO B) You have a two children, A
and B. Child A is not going to college but is working in a business to learn
the ropes. Child A plans on opening a business someday. Child B is attending
college. You put a certain amount of money into an account. From this account,
Child B will receive $2,000 per month for the next four years. Whatever is left
at that time will go to Child A to help start the business. You want Child A to
receive $96,000 at that time. The account pays 7% annually, compounded monthly.
How much money do you need to start the account? Show your work.
(TCO F) A project requires an
initial cash outlay of $40,000 and has expected cash inflows of $12,000
annually for 7 years. The cost of capital is 10%. What is the project’s NPV?
Show your work.
(TCO F) A project requires an
initial cash outlay of $60,000 and has expected cash inflows of $15,000
annually for 8 years. The cost of capital is 10%. What is the project’s payback
period? Show your work.
(TCO F) A project requires an
initial cash outlay of $95,000 and has expected cash inflows of $20,000
annually for 9 years. The cost of capital is 10%. What is the project’s IRR?
Show your work.
(TCO F) A project requires an
initial cash outlay of $40,000 and has expected cash inflows of $12,000
annually for 7 years. The cost of capital is 10%. What is the project’s
discounted payback period? Show your work.
TCO F) Company A has the opportunity
to do any, none, or all of the projects for which the net cash flows per year
are shown below. Projects A and C can be done together. Projects B and C can be
done together. But Projects A and B are mutually exclusive. The company has a
cost of capital of 18%. Which should the company do and why? You must use at
least two capital budgeting methods. Show your work.
|
A
|
B
|
C
|
|
|
0
|
-500
|
-500
|
-600
|
|
1
|
200
|
-200
|
100
|
|
2
|
200
|
600
|
100
|
|
3
|
200
|
400
|
100
|
|
4
|
200
|
200
|
100
|
|
5
|
200
|
-300
|
100
|
|
6
|
200
|
100
|
|
|
7
|
-300
|
100
|
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