Week 1 :
1.
Question 1
Marie is
expected to receive $25,000 at the end of 7 years. If the interest rate is 10%
per year, how much is it worth at the end of 10 years?
$33,275
$48,718
$82,750
$64,844
2.
Question 2
Which of cash
flow streams has the higher present value?
Investment A
offers you $6,000 per year for ten years, whereas Investment B offers you
$8,500 per year for seven years. The discount rate is 6 percent.
Investment B
Investment A
OR
Compute the future value of $3,000 continuously compounded for 6 years at an annual interest rate of 15%.
$7,145 $7,337 $7,379
Question 3
Apollo Inc.
has an unfunded pension liability of $900 million that must be paid in 30
years. If the annual interest rate is 6% compounded semiannually, what is the
present value?
370,788,084
156,699,118
152,759,781
27,282,904
4.
Question 4
If you invest
$1,000 today, you will receive $400 in one year from now and $750 in two years
from now. If your require a 12% return on investments of this risk, should you
take the investment?
Yes, you
should take the investment.
No, you should not take the investment.
5.
Question 5
What is the
net present value of a project that contributes $16,000 at the end of the first
year and $27,000 at the end of the second year. The initial cost is $39,000 and
the interest rate is 6%.
$117
$124
$712
$39,124
6.
Question 6
Claire
invests in a stock that will pay dividends of $3.00 at the end of the first
year, $3.10 at the end of the second year, and $3.50 at the end of the third
year. She also believes that at the end of the third year she will be able to
sell the stock for $33. What is the present value of all future benefits if a
discount rate of 10% is applied?
7.
Question 7
Jane wants to
make an investment which will pay $500 every six months over next five years.
How much should Jane invest if she requires 10% rate of return compounded
semiannually?
$2,164.74
$3,072.28
$3,860.87
$4,256.78
Week 2 :
1.
Question 1
In a growing perpetuity,
the present value of cash flow is given by: CF/(rate-growth rate) where rate
> growth rate
True
False
2.
Question 2
You purchasing a British
consol is entitled to receive $75 annual payments indefinitely. The market
interest rate is 8%. What is the price of a consol if the next payment occurs
one year from today?
3.
Question 3
You have an opportunity to
take on a 20-year $150,000 mortgage at 9 percent interest. What will your
monthly payments be?
$1,350
$1,401
$13,500
$16,432
4.
Question 4
CVC Inc. has been offered a
$3,000,000 machine under a 15 year loan agreement. The loan requires to make
equal, semi-annual payments that include both principal and interest on the
outstanding balance. The interest rate on the loan is 9%. Calculate the amount of
these semi-annual payments.
$184,175
$309,087
$372,177
None of the above
5.
Question 5
Mr. Wow has $1,000
currently. At 9 percent interest, how long does it take to quadruple his money?
-16.09
5.18
16.09
None of the above
6.
Question 6
Sam is considering taking
early retirement, having saved $500,000. If he has a plan to set aside $37,000
per year and the interest rate is 10 percent, how many years does he need to
make $500,000?
8.97
27.32
7.
Question 7
Suppose that you are
offered an investment that will cost $898 and will pay you interest of $70 per
year for the next 20 years. Furthermore, at the end of the 20 years, the
investment will pay $1,000. If you purchase this investment, what is your
compound annual rate of return?
Week 3 :
1.
Question 1
Consider a
bond which pays 7% semiannually and has 8 years to maturity. The market
requires an interest rate of 8% on bonds of this risk. What is this bond's
price? Face value of bond is typically $1,000.
$601.69
$942.53
$941.74
None of the above
2.
Question 2
All else
constant, a bond will sell at _____ when the yield to maturity is _____ the
coupon rate.
a premium;
higher than
at par;
higher than
a premium;
equal to
a discount; higher than
3.
Question 3
AOS company
offers a 10-year zero coupon bond. The yield to maturity is 7.7%. What is the
current market price of a $1,000 face value bond?
$226.82
$476.26
$1,000
None of the above
4.
Question 4
Peter's
factory has sales of $730,000 and a profit margin of 5%. The annual
depreciation expense is $70,000. What is the amount of the free cash flow if
the company has no long-term debt?
$34,000
$86,400
$106,500
$120,400
5.
Question 5
The earnings
per share will:
increase as
net income increases.
increase as
the number of shares outstanding increase.
decrease as
the total revenue of the firm increases.
increase as the tax rate increases.
6.
Question 6
Depreciation:
is a noncash
expense that is recorded on the income statement.
increases the
net fixed assets as shown on the balance sheet.
reduces both
the net fixed assets and the costs of a firm.
is a non-cash expense which increases the net
operating income.
Final Quiz :
1.
Question 1
Edward charged $1,500 worth
of laptop one years ago on MasterCharge which has an interest rate of 8%
compounded monthly. He made 12 regular monthly payments of $80 at the end of
each month, and refrained from using the card for the past year. How much does
he still owe?
$628.51
$995.99
$1.518.17
$1,540.00
2.
Question 2
An Atlas provide a loan
with 20 yearly repayments of $900 with the first payment beginning immediately.
What is the present value of the loan if the interest rate is 10%?
$7,528
$7,662
$8,428
$8,562
3.
Question 3
John is considering opening
his own business. He estimates that the initial cost to set up his business is
$4,000. He plans to keep the business for the next three years and expects the
business to generate the net cash flows of $900, $1,500, and $2,900 for the
next three years. If he wants to get 10% return, should he open the new
business?
Yes, John should open the
business.
No, John should not open the business.
4.
Question 4
ABC Telecommunications
plans to establish a web-service device three years from today. The device is
expected to have an economics life of five years once it is established. The
device will generate $10 million in cash flows per year at the end of each
year. Then what is the value of these cash flows to the company today assuming
an interest rate of 10% compounded annually?
$28.5 million
$37.9 million
$94.3 million
$108.3 million
5.
Question 5
Julia is buying a $30,000
car. The dealer offers her two alternatives.
[Choice 1] Pay the full
$30,000 purchase price and finance it with a loan at 5% annually over 4 years.
[Choice 2] Receive $2,000
cash back and finance the rest at a bank annual interest rate of 9%.
Both loans have monthly
payments over four years. Which should Julia choose?
Choice 1
Choice 2
6.
Question 6
Mr. Lewis is expected to
retire in 20 years and he would like to accumulate $100,000 in the retirement
fund. If the interest rate is 12% per year, how much should he put into the
fund each month in order to achieve the goal?
$0.04
$101.09
$1,101.09
$13,387.88
7.
Question 7
Suppose that you want to
make regular monthly deposits of $300 at the end of each month into a saving
account for 3 years, and want to have 20,000 in the account at the end of the
three years term. What is the interest rate of the account must earn to achieve
this?
1.50%
3.01%
3.26%
12.37%
8.
Question 8
Cony must pay a creditor
$100 one year from now, $200 two years from now, $300 three years now, $400
four years from now. Cony would like to restructure the loan into four equal
payments due at the end of each year. If the agreed upon interest rate is 8% compounded
annually, what is the payment?
$176.70
$240.40
$796.22
9.
Question 9
You have determined the
present value of an expected cash flow stream. Which of the following would
cause the stream to have a higher present value?
The discount rate
increases.
The discount rate
decreases.
Number of period increases.
d. None of the above
10.
Question 10
Walas Co. has a 6%,
semiannual coupon bond with a current market price of $600.34. The bond has a
par value of $1,000 and a yield to maturity of 12.90%. How many years is it
until this bond matures?
About 3 years
About 6 years
About 11 years
About 22 years
11.
Question 11
Your budget is $1,100. Given the opportunity to invest
in one of the three bonds listed below, which would you purchase? Assume an
interest rate of 7%.
|
Bond |
Face Value |
Annual Coupon Rate |
Maturity |
Price |
|
A |
$1,000 |
5.5% |
10 |
$900 |
|
B |
$1,000 |
7.5% |
8 |
$1,000 |
|
C |
$1,000 |
8.5% |
2 |
$1,000 |
Purchase Bond A
Purchase Bond B
Purchase Bond C
12.
Question 12
A 5-year corporate bond
with a compound rate 7% has a face value of $1,000. What is the annual interest
payment?
$50
$70
$350
None of the above
13.
Question 13
A 3-year bond with 10%
annual coupon rate and $1,000 face value. If the yield to maturity on the bond
is 8%, calculate the price of bond assuming that the bond makes semi-annual
coupon payments.
$861.31
$1,051.54
$1,052.42
$1,092.46
14.
Question 14
A lottery claims their
grand price is $10 million, payable over 20 years at $500,000 per year. If the
first payment is made at the end of the year, what is this grand prize really
worth? Use an interest rate of 6%.
15.
Question 15
A 10-year, 7% coupon bond
with a face value of $1,000 is currently selling for $871.65. Calculate your
rate of return if you sell the bond next year for $880.10.
9
16.
Question 16
Consider a coupon bond that
has a $1,000 par value (face value) and a coupon rate of 10%. The bond is
currently selling for $1,300 and has eight years to maturity? What is the
bond’s yield to maturity?
5.70
Minicase Quiz :
1.
Question 1
Case Study Quiz : Ysom, Inc.
First, This quiz is related
to course 3.3, 4.1, 4.2. Since it has tough questions, please REVIEW
them before starting.
Second, please download
"Mini case Excel Template".
Third, read
"Background" tab in attached file.
Last, answer the following
questions using "Template" tab in attached file.
Are you ready for practice
quiz?
Yes
No
2.
Question 2
Estimate EBIT which is 30%
of sales each year.
Q. Calculate EBIT in 2017 (D5 in excel template).
Rounding numbers to one decimal place.
3.
Question 3
Estimate Income tax. Row 8
in template shows tax rate each year.
Q. Calculate Income tax in 2021 (H7 in excel
template). Rounding numbers to one decimal place.
4.
Question 4
Estimate Net Investment
each year.
Q. Calculate net investment in 2018 (E9 in excel
template). Rounding numbers to one decimal place.
5.
Question 5
Estimate Increase/Decrease
in Net Working Capital (NWC) each year. You will learn NWC later in detail.
Q. Calculate NWC in 2019 (F11 in excel template).
Rounding numbers to one decimal place.
6.
Question 6
Estimate Free Cash Flow
each year using the method discussed in Course 3.3 and 3.4
Q. Calculate Free cash flow in 2017 (D13 in excel
template). Rounding numbers to one decimal place.
7.
Question 7
Q. Calculate Terminal value as of 2020 (G14 in excel
template). Rounding numbers to one decimal place.
Hint : Use cost of capital
in 2021.
8.
Question 8
Q. Calculate Total Free Cash Flow in 2020 which is the
sum of free cash flow each year and terminal value in the last year of
estimation period. That is, G16 in excel template. Rounding numbers to one
decimal place.
9.
Question 9
Q. Calculate Present Value of Total Free Cash Flow
(C17 in excel template) using the discount rate of 50%. Rounding numbers to one
decimal place.
Hint : 2020's FCF already
includes the Terminal Value.
10.
Question 10
Q. What is Enterprise Value (C18 in excel template)?
Rounding numbers to one decimal place.
Hint : Recall that
Enterprise Value = PV( Future free cash flow of firm) in video 3.3
11.
Question 11
Q. What is the value per share of the company’s stock
(C19 in excel template)? Number of shares are 0.1 million.Rounding numbers to
one decimal place.
Hint : Please review course
4.1
12.
Question 12
Q. What is the value of Professor Shin’s Ownership for
millions unit (C20 in excel template)? Rounding numbers to one decimal place.
Hint : The company is
equally owned by Prof. Shin and Prof. Lee.
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