Question

- From a finance perspective, what should the primary goal of the Chief Financial Officer (CFO) of the corporation be?

A) Maximize the pay and compensation of employees and managers of the firm.

B) Maximize the value of the stockholders wealth because they are the owners of the corporation.

C) Maximize the societal value to minimize governmental interference.

D) Make Professor Gillette happy.

14. Which of the
following amounts is closest to what should be paid for Overland
common stock? Overland has *just paid*a dividend
of $2.25. These dividends are expected to grow at a rate of 5% in
the foreseeable future. The risk of this company
suggests that future cash flows should be discounted at a rate of
11%.

A) $20.45

B) $21.48

C) $37.50

D) $39.38

E) $47.70

15.When calculating the net present value (NPV) of a project costing $8000, and that returns $2000 in year one, $5,000 in year 2, and $2,800 in year 3, which interest factor below would be more useful in your calculations?

A) Future Value Annuity factor

B) Present Value Annuity factor

C) Future Value Lump sum factor

D) Present Value Lump sum factor

16. A pure discount bond (e.g. a Zero-Coupon Bond)

A) does not have any face value.

B) pays interest annually.

C) pays interest semiannually.

D) has no coupon payment.

Answer #1

Find the following values:
a. The future value of a lump sum of $6,000 invested today at 9
percent, annual compounding for 7 years.
b. The future value of a lump sum of $6,000 invested today at 9
percent, quarterly compounding for 7 years.
c. The present value of $6,000 to be received in 7 years when
the opportunity cost (discount rate) is 9%, annual compounding.
d. The present value of $6,000 to be received in 7 years when
the...

1 . An employee retiring from a firm after 36 years of service
at age 68 has earned a pension of $63,000 per year paid in
quarterly payments of $15,750. His expected life expectancy is 12
years further at age 80. The pension payments would end when he
dies.
a. Given a 16% discount rate based on the investment risk of his
employer, what is the lump sum value of the pension when he
retires? Excerpts from the Present Value...

If Mike would like to know how much to deposit at the end of
each month for the next ten years so that he will have enough money
saved to purchase a home in ten years’ time. What time value of
money concept should he use for computations?
Select one:
a. Present value of an annuity ordinary annuity.
b. Future value of annuity due.
c. Future value of an ordinary annuity.
d. Present value of a single sum (lump sum)

What is the present value of a bond that pays $45 per year
periodic coupon payment for the next 10 years and at the end of the
10th year the bond also pays a lump sum $1,000 given the investors
opportunity cost is 6% APR and interest rate is compounded
semi-annually? Please show your formula in your answer and explain
step-by-step calculation to arrive to your final answer.

A coupon bond is a bond that
A. pays interest on a regular basis (typically every six
months).
B. None of the options are correct.
C. does not pay interest on a regular basis but pays a lump sum
at maturity.
D. can always be converted into a specific number of shares of
common stock in the issuing company.
E. always sells at par value.

A lump sum payment of $1,000 is due at
the end of 5 years. The nominal interest rate is 10%, semiannual
compounding. Which of the following statements is/are
INCORRECT? Why?
a. The present
value of the $1,000 would be greater if interest were compounded
monthly rather than semiannually.
b. The periodic rate is greater than 5%.
c. The periodic interest rate is 5%.
d. The present
value would greater if the lump sum were discounted back for more
periods.
e. ...

Amy’s goal is to save $50,000 in 10 years. To know how much she
should be saving now on a regular basis to reach this goal, Amy
would use:
internal finance concepts.
a budget.
time value of money calculations.
several complex math functions.
Which of the following statements is true about
compound growth?
The longer you let your money grow, the more it will
produce.
The full benefits of compound growth are generally realized
within 5 to 10 years.
Only...

On January 1 st 2012, Everhart Corporation, a calendar year
company
issues
$100,000, 5%, 5-year bonds dated January 1, 2012. The bond
pays
interest
semiannually on January 1 and July 1 . The bonds are issued
to yield 6%.
2.50%
3.00%
5.00%
6.00%
Present
value of a
single sum
for 5
periods
0.88385
0.86261
0.78353
0.74726
Present
value of a
single sum
for 10
periods
0.78120
0.74409
0.61391
0.55839
Present
value of an
annuity for
5 periods
4.64583
4.57971
4.32948...

You win the lottery and are given the option of receiving
$250,000 now or an annuity of $25,000 at the end of each year for
30 years. Which of the following is correct?
a. If you know the interest rate, you can calculate the present
value of each option, and pick the one with the lower present
value
b. You will always choose the annuity
c. You will choose the lump sum payment if the interest rate is
7%, compounded...

A. A contract features a lump-sum future flow of $46,000 three
years from today. If you can now purchase that flow for $42,201.84,
then what annual implied return would you earn on this
contract?
B. An annuity contract will make 8 annual payments and the first
payment occurs exactly a year from today. If the annuity has a 9.2%
rate and a current PV or price of $308.98, then what must be the
size of its annual payments?
C. An...

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