BF 620 Multiple Choice Review Test 1 Pete Plowfield has just started a new business, Pete?s Portobello Mushroom Farm, Inc. He expects after tax cash flows at the end of the first year of operation to be $59,000, and expects that these cash flows will increase by 4% per year. If the required return for investors is 9.5%, how much is the business worth today? There is insufficient information to determine a value $621,052.63 $1,072,727.27 $1,475,000 Nellie and Norman Newlywed have just purchased their dream home for $420,000. They have made a 30% down payment, and have procured a 23 year, 5 month mortgage loan at APR of 8 25/39%, with monthly payments commencing one month from today. What is their monthly mortgage payment? $1046.26 $2442.27 $3144.96 $3922.88 Nellie and Norman decide to pay off their mortgage the day they make their 121st payment. What is their loan payoff on that date? $146,900.37 $201,438.91 $220,685.44 $231,558.06 You want to retire with $4,100,000 in exactly 47 years. You can put your money into a bank account that pays APR of 8.8% interest, compounded 4 times per year. Assuming that you do not have to pay any taxes on this money, how much must you deposit every three months, starting three months from today, to reach your goal? $1533.77 $2934.16 $3556.97 $3944.24 Aunt Bernadette?s Rice Co., Inc. had Net Fixed Assets of $3723 at the start of 2005 and had Net Fixed Assets of $4166 at the start of 2006. In 2005 Bernadette took depreciation expense of $612. How much cash did Bernadette use for Investments in 2005? $443 $612 $1055 $1667 5a. The Conodin Shoe Company Manufactures athletic shoes. It expects to have after-tax cash flows of $135,000 at the end of one year. Cash flows will grow at 3.2% per year and cash flows will come for 10 years, at which time there will be no more cash flows. At the end of 9 years, Conodin will be able to sell some equipment that will provide after-tax cash flows of $325,000. If investors require a 12.5% annual return, how much is the company worth today? $839,089.67 $951,682.48 $1,117,693.46 $1,333,925.16 In exactly 6 years and 2 months, you will receive the first of 48 payments that will pay you $337.44 every two months. The discount rate will be an APR of 10.38% compounded six times per year. How much is that cash flow worth today? $5901.50 $7342.55 $10,942.79 $13,443.63 Your bank account has a yearly EAR of 8.3%, and inflation is steady at 3.1%. If you deposit $73,242.96 today, and leave your money in the account for twenty years, by how much does the nominal value of your money in twenty years exceed the real value of the money, in terms of today?s dollars? $360,856.90 $195957.42 $164,899.48 $83,310.05 You will receive $1000 per year for 8 years, starting one year from today. The account you deposit the money in will pay APR of 6%, compounded every 4 months. What will the value of your account be in ten years? $26,278.22 $9940.49 $8000.00 $6180.21 Your bank account pays APR of 11 13/71%, compounded 17 times per year. If you receive $2,000 in one year, $5,000 in five years, and $11,000 in eight years, what is the present value of that stream of cash flows? $18,000.00 $14,354.99 $12,662.47 $9,162.21
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