Which of the following statements regarding the selection of how many years to use in estimating FCFF is FALSE? A) There is no set rule for how many years to use. B) Common practice suggest five to ten years is a reasonable amount of time to estimate individual year cash flows. C) One guiding principle […]
Date: September 19th, 2020
Company-sponsored pension plans are regulated by A) the Employee Retirement Benefit Act (ERBA). B) the Old-Age, Survivors, Disability, and Health Insurance Act (OASDHI). C) the Retirement Accounting Standards Board (RASB). D) the Employee Retirement Income Security Act (ERISA). ANSWER D
Date: September 19th, 2020
You are going to add one of the following three projects to your already well-diversified portfolio. PROJECT 1 PROJECT 2 Probability Return Standard Deviation Beta Probability Return Standard Deviation Beta 50% Chance 22% 12% 1.1 30% Chance 36% 19.5% 0.8 50% Chance -4% 40% Chance 10.5% 30% Chance -20% PROJECT 3 Probability Return Standard Deviation […]
Date: September 19th, 2020
You are currently earning 12% compounded semiannually. Your investment company is switching all accounts to daily compounding. What rate will give you the same effective annual rate of return as you are receiving now? A) 10.83% B) 11.66% C) 10.97% D) 11.89% ANSWER B
Date: September 19th, 2020
Seasonality is introduced into financial ratios by averaging monthly account balances, and thus it is recommended that ending account balances be used. Indicate whether the statement is true or false ANSWER FALSE
Date: September 19th, 2020
If the discount rate used to compare the present value of two annuities is 0%, then the timing of the cash flows is unimportant in the present value calculation. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Which of the following is NOT an example of an annuity cash flow? A) Your pay check which is the same every month. B) Your tuition payments which are the same every term. C) The identical payment you make every two years for your share of a lake cabin that you own with other family […]
Date: September 19th, 2020
Ellis Manufacturing Inc has estimated FCFF for each of the next five years and believes that subsequent cash flows will grow at a constant annual rate of 3% indefinitely. If FCFF are $4,500,000 in year five, and the cost of capital is 9%, what is the value in year five of these terminal value cash […]
Date: September 19th, 2020
One reason for using credit is as a shopping convenience. Indicate whether the statement is true or false ANSWER TRUE
Date: September 19th, 2020
Anchor Incorporated has a beta of 1.0. If the expected return on the market is 15%, what is the expected return on Anchor Incorporated’s stock? A) 18% B) 14% C) 15% D) cannot be determined without the risk-free rate ANSWER C
Date: September 19th, 2020
