# Net Present Value and Learning Objective Number

Pages: 37 (5215 words) Published: February 12, 2013
Exam3 FIN370 Winter 2012 KeyVersion A

1. You are considering the following two mutually exclusive projects. The crossover point is _____ percent.

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A. 11.89
B. 13.75
C. 9.25
D. 12.08
E. 7.76

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 4
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 008 #89
SECTION: 8.4
TOPIC: NPV PROFILE
TYPE: PROBLEMS

2. M&A, Inc. maintains a constant debt-equity ratio of .4. The firm had net income for the year of \$140,000 and paid \$98,000 in dividends. The firm has total assets of \$700,000. What is the maximum sustainable growth rate of the firm given this information?  A. 6.38 percent

B. 9.17 percent
C. 16.28 percent
D. 24.38 percent
E. 18.62 percent

BLOOMS TAXONOMY QUESTION TYPE: ANALYSIS
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: INTERMEDIATE
Ross - Chapter 003 #103
SECTION: 3.4
TOPIC: SUSTAINABLE GROWTH RATE
TYPE: PROBLEMS

3. The future value of a series of cash flows over time can be computed by:  A. discounting each of the individual cash flows and summing the results. B. summing the amount of each of the individual cash flows and multiplying the summation by (1 + r)t, where t equals the total number of cash flows. C. computing the future value of the middle cash flow and multiplying that amount by the number of cash flows. D. summing the future values of each of the individual cash flows. E. multiplying each individual cash flow by (1 + rt) and summing the results.

BLOOMS TAXONOMY QUESTION TYPE: COMPREHENSION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 005 #8
SECTION: 5.1
TOPIC: FUTURE VALUE
TYPE: CONCEPTS

4. Over the period of 1926-2006:
A. large-company stocks outperformed all other investment categories. B. long-term government bonds underperformed long-term corporate bonds. C. inflation exceeded the rate of return on U.S. Treasury bills. D. small-company stocks underperformed large-company stocks. E. U.S. Treasury bills outperformed long-term government bonds.

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 2
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 010 #15
SECTION: 10.3
TOPIC: HISTORICAL RETURNS
TYPE: CONCEPTS

5. Preferred stock:
I. generally has a fixed dividend.
II. generally has a dividend that increases annually.
III. receives preference in bankruptcy over bonds.
IV. receives preference in bankruptcy over common stock.
A. I and III only
B. I and IV only
C. II and III only
D. II and IV only
E. I only

BLOOMS TAXONOMY QUESTION TYPE: KNOWLEDGE
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 007 #9
SECTION: 7.2
TOPIC: PREFERRED STOCK
TYPE: DEFINITIONS

6. You have a portfolio comprised of the following. What is your portfolio beta?

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A. 1.07
B. 1.23
C. 1.12
D. 1.18
E. 1.26

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 3
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 011 #75
SECTION: 11.6
TOPIC: PORTFOLIO BETA
TYPE: PROBLEMS

7. Boone Brothers purchased a parcel of land 8 years ago for \$392,500. At that time, the firm invested \$127,000 modifying the site so that it could be leased to an adjacent car dealer for displaying used car inventory. The lease payment was \$39,000 a year. Boone Brothers is now considering building a hotel on the site as the auto dealer is relocating to make room for a nearby shopping mall to expand. The current value of the land is \$1.14 million. Boone Brothers has no loans or mortgages secured by the property. What value should be included in the initial cost of the hotel project for the use of this land?  A. \$0

B. \$828,000
C. \$1,140,000
D. \$519,500
E. \$1,267,000

BLOOMS TAXONOMY QUESTION TYPE: APPLICATION
LEARNING OBJECTIVE NUMBER: 1
LEVEL OF DIFFICULTY: BASIC
Ross - Chapter 009 #49
SECTION: 9.2
TOPIC: OPPORTUNITY COST
TYPE: PROBLEMS

8. Fidel's...

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