An investment will pay $500 in three years, $700 in five years and $1000 in nine years. If your opportunity rate is 6%, what is the present value of this investment? What will be an ideal response? ANSWER $1,534.79
Date: September 19th, 2020
You have been depositing money at the end of each year into an account drawing 8% interest. What is the balance in the account at the end of year four if you deposited the following amounts? Year End of Year Deposit 1 $350 2 $500 3 $725 4 $400 A) $2,207 B) $2,384 C) $2,687 […]
Date: September 19th, 2020
What is the present value of the following perpetuities? a. $200 per year discounted at 6% annually b. $500 per year discounted at 9% annually c. $1,000 per year discounted at 5% annually d. $550 per year discounted at 8% annually What will be an ideal response? ANSWER a. $3,333.33 b. $5,555.56 c. […]
Date: September 19th, 2020
Active Athletics Inc. has an EBIT of $400,000, $150,000 in depreciation, $500,000 in outstanding debt, a forward-looking EV/EBITDA multiple of 6.0, and an estimated cost of capital of 14%. Use the EV/EBITDA approach to value the firm. A) $2,800,000 B) $2,400,000 C) $1,700,000 D) $1,500,000 ANSWER A Explanation: A) EV = Multiple * […]
Date: September 19th, 2020
Bueno Media preferred stock shares pay a $4 annual dividend and sell for $57.14 per share. What is the current required rate of return for their shares? A) 7.00% B) 6.93% C) 6.51% D) 5.29% ANSWER A Explanation: A) r = PMT/Price = $4/$57.14 = 7.00%.
Date: September 19th, 2020
For most occupations the law forbids an employer from forcing you into retirement A) before age 60. B) before age 65. C) before age 70. D) at any age. ANSWER D
Date: September 19th, 2020
These two products provide decreasing death protection over time. A) Decreasing term and group mortgage insurance B) Decreasing term and universal life insurance C) Group mortgage and universal life insurance D) Group mortgage and variable life insurance ANSWER A
Date: September 19th, 2020
The maturity of an issue of preferred stock is: A) the same as the longest maturity bond issued by the firm. B) variable between 15 and 30 years. C) indefinite, just as the maturity of common shares. D) renewable every five years. ANSWER C
Date: September 19th, 2020
Which of the following is NOT an advantage of the EV/EBITDA valuation approach over the price-earnings approach? A) Because the EV/EBITDA approach is more of a cash flow-oriented method, there is less room for accounting discretion. B) Because EBITDA is measured before interest and depreciation expenses are deducted, this method MAXIMIZES potential distortions from capital […]
Date: September 19th, 2020
Term insurance differs from whole life insurance in that term A) is more expensive per dollar of death protection. B) provides protection only during the term of the policy and not for your whole life. C) is designed for single individuals while whole life is for families. D) is offered only through employer-sponsored insurance programs. […]
Date: September 19th, 2020
