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Past Exam for FIN 300 - CORPORATION FINANCE with Officer at Kentucky (UK)

Exam Information

Material Type:Exam 2
Professor:Officer
Class:FIN 300 - CORPORATION FINANCE
Subject:Finance
University:University of Kentucky
Term:Fall 2009
Keywords:
  • Profitability Index
  • Profitability
  • Required Rate
  • Rate of Return
  • Coupon Rate
  • Consequences
  • Future Cash Flows
  • Payback Period
  • Cash Outflow
  • Straight-Line Depreciation
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Sample Document Text

Exam 2 1) Suppose a project has a cost of $500 and produces cash flows of $121.95 per year for 5 years. What is the IRR of the project? a. 6% b. 7% c. 8% d. 9% 2) Which of the following is NOT a true statement? a. The payback rule ignores the time value of money b. The Profitability Index (P/I) is closely related to the payback period c. The IRR assumes the cash flows are reinvested at the IRR d. The payback rule is difficult to understand 3) If a project with normal cash flows has a Profitability Index (P/I) of less than 1, then: a. The IRR is greater than the required rate of return b. The NPV is positive c. The NPV is negative d. None of the above 4) The IRR assumes cash flows of an investment are reinvested at: a. The risk-free rate of return b. The rate of return of the project c. The firm’s long-term bond rate d. None of the above 5) For a bond selling at par, the yield to maturity must be: a. Greater than the coupon rate b. Equal to the coupon rate c. Less than the coupon rate d. Equal to the number ...

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