Reference no: EM133055810
1) Thomas Green is using net present value (NPV) when evaluating investment opportunities. His required rate of return is 11.07 percent. The investment will produce the same after-tax cash inflows of $510,939 per year at the end of the year for 8 years. What is the NPV of a investment opportunity if the initial cost is $1,595,790?
2) Assume an individual makes a lump sum investment at the beginning of year one of $24,575, the present value of which is $24,575. The investor's discount rate, for an alternative safe investment, is 12.29 percent after tax. The expected return on this investment (received at each year-end) is as follows.
Year 1: 1,708
Year 2: 18,566
Year 3: 19,673
Year 4: 8,416
Year 5: 4,225
What is the net present value of the investment under consideration?
3) Assume an individual makes a lump sum investment at the beginning of year one of $540,900. The expected return on this investment (received at each year-end) is as follows.
Year 1: 250,400
Year 2: 154,000
Year 3: 126,700
Year 4: 130,200
What is the IRR of the investment under consideration?
4) An investment that Kevin is considering offers the following cash flows.
Year 1 Initial investment of $120,000
Year 2 Inflow of $25,300
Year 3 Inflow of $17,500
Year 4 Additional investment of $15,000
Year 5 Inflow of $18,900
Year 6 Inflow of $32,600
Year 7 Additional investment $11,900
Year 8 Inflow of $61,050
Year 9 Inflow of $41,750
Year 10 Sale proceeds of $33,000
What is the internal rate of return (IRR) that this investment offers if all cash flows occur at the end of each period?
5) Find the modified internal rate of return (MIRR) for your client for the following series of future cash flows if your client is able to reinvest cash flows received from the investment at an annual rate of 9.41 percent. The initial investment at the beginning of the first year is $476,500.
Year 1: $153,400
Year 2: $145,200
Year 3: $138,500
Year 4: $153,400
Year 5: $131,200
6) The Index of Leading Economic Indicators (LEI) consists of the following indicators,
EXCEPT:
a. Average weekly claims for unemployment insurance
b. Inventories to sales ratio
c. S&P 500 index
d. Money Supply (M2)
7) Every $1 that a bank takes in as a deposit leads to many dollars of deposits throughout the banking system. This is called the multiplier effect.
true
false
8) The Troy National Bank operates 25 branches in Detroit, Michigan. The name of the bank indicates that the bank operates on a nationwide basis.
true
false
9) Economists suggest that the marginal utility of a product to an individual consumer declines as the number of units consumed increases.
true
false
10) A rise in the index of Leading Economic Indicators can be a predictor of all EXCEPT:
a. Rising stock market
b. Rising interest rates
c. Expanding economy
d. More favorable mortgage rates in the immediate future
11) A negotiable instrument is valid only if it is in writing.
true
false
12) The passage of ERISA increased the responsibilities of many fiduciaries.
true
false
13) The theory of the firm is about the economics of business operations and profit maximization.
true
false
14) Which of the following leads to higher bank reserves, increased money supply, and expansion of the economy?
a. The Fed buys U.S. Govt. Securities
b. The Fed sells U.S. Govt. Securities
c. The FOMC of the Fed meets to discuss discount rates
d. The Fed raises the reserve requirements
15) The independence of the Federal Reserve is assured through the following EXCEPT:
a. Longer tenure for the Board of Governors than senators or the President
b. Fed Chairman chosen by regional Fed directors
c. Staggered terms for the Fed Board of Governors
d. No dependence on Congress for its budget