Question 1

The timeline shown below best describes the cash flow of which of the following people?

Accepted Answer

A)  Joe, who puts down $3500 to buy a car, and then makes annual payments of $1000 
B)  Harry, who borrows $3500, and then receives an annual payment of $1000 
C)  Karen, who loans a friend $3500, which the friend then pays back in four annual installments of $1000 
D)  Leo, who borrows $3500, and then pays back the loan in four annual payments of $1000 
E)  Michelle, who contributes $3500 to an RRSP and makes four annual contributions of $1000 
A)  Joe, who puts down $3500 to buy a car, and then makes annual payments of $1000 
B)  Harry, who borrows $3500, and then receives an annual payment of $1000 
C)  Karen, who loans a friend $3500, which the friend then pays back in four annual installments of $1000 
D)  Leo, who borrows $3500, and then pays back the loan in four annual payments of $1000 
E)  Michelle, who contributes $3500 to an RRSP and makes four annual contributions of $1000

Question 2

A firm that provides tax services to the public intends to offer a premium tax-return service at a higher price than their current services.The managers of the company ask experts in marketing to determine how much an effective ad campaign for such a service would cost,and by how much sales would be increased.They consult experts in economics to calculate the increases in revenue from the success of the campaign,experts in operations to determine the cost of offering the service,and experts in strategy to anticipate possible counter-moves by competitors.This example illustrates which of the following points about the role of financial managers?

Accepted Answer

A)  Real-world decisions are complex and require information from many sources if the decisions are to be valid. 
B)  Determining the costs associated with making a decision is easier than determining the potential benefits of the decision. 
C)  All of the costs and benefits associated with a decision can never be fully identified. 
D)  Ultimately the decision whether to take a certain course of action rests with the financial managers of a company. 
E)  A financial manager's job is to make decisions on behalf of the firm's investors. 
A)  Real-world decisions are complex and require information from many sources if the decisions are to be valid. 
B)  Determining the costs associated with making a decision is easier than determining the potential benefits of the decision. 
C)  All of the costs and benefits associated with a decision can never be fully identified. 
D)  Ultimately the decision whether to take a certain course of action rests with the financial managers of a company. 
E)  A financial manager's job is to make decisions on behalf of the firm's investors.

Question 3

Which of the following best explains why market prices are useful to a financial manager when performing a cost-benefit analysis?

Accepted Answer

A)  They can be used to determine how much an asset can be sold for. 
B)  They can be used to convert different services and commodities into equivalent cash values which can be compared. 
C)  They allow all commodities and services to be assigned a fixed and unchanging value. 
D)  They can be evaluated to determine whether the market in which the manager exchanges goods and services offers true value. 
E)  They can be used to determine the correct value for assets to be purchased. 
A)  They can be used to determine how much an asset can be sold for. 
B)  They can be used to convert different services and commodities into equivalent cash values which can be compared. 
C)  They allow all commodities and services to be assigned a fixed and unchanging value. 
D)  They can be evaluated to determine whether the market in which the manager exchanges goods and services offers true value. 
E)  They can be used to determine the correct value for assets to be purchased.

Question 4

A company intends to install new management software for its warehouse.The software will cost $50,000 to buy and will cost an additional $150,000 to install and implement.It is anticipated that it will save the company $45,000 through reductions in staff and $65,000 in general inventory costs in the first year after installation.What is the benefit to the company in the first year if they choose to install the software?

Accepted Answer

A)  $45,000 
B)  $90,000 
C)  $110,000 
D)  $180,000 
E)  $65,000 
A)  $45,000 
B)  $90,000 
C)  $110,000 
D)  $180,000 
E)  $65,000

Question 5

When computing a present value,which of the following is TRUE?

Accepted Answer

A)  You should adjust the discount rate to match the time period of the cash flows. 
B)  You should adjust the future value to match the present value. 
C)  You should adjust the time period to match the present value. 
D)  You should adjust the cash flows to match the time period of the discount rate. 
E)  You should adjust the time period to match the future value. 
A)  You should adjust the discount rate to match the time period of the cash flows. 
B)  You should adjust the future value to match the present value. 
C)  You should adjust the time period to match the present value. 
D)  You should adjust the cash flows to match the time period of the discount rate. 
E)  You should adjust the time period to match the future value.

Question 6

-A metal fabrication company is pricing raw supplies of aluminium.The following are the costs to the company to receive one tonne of aluminium from various sources.Which source offers the best price for aluminium per tonne?

Accepted Answer

A)  3,012 Canadian dollars per tonne 
B)  3,206 Australian dollars per tonne, with $0.942 CAD = 1 AUD 
C)  4,998 Brazilian reals per tonne, with $0.6000 CAD = 1 BRL 
D)  121,756 Indian rupees per tonne, with $0.025 CAD = 1 INR 
E)  3,000 U.S. dollars per tonne, with $1.015 CAD = 1 US 
A)  3,012 Canadian dollars per tonne 
B)  3,206 Australian dollars per tonne, with $0.942 CAD = 1 AUD 
C)  4,998 Brazilian reals per tonne, with $0.6000 CAD = 1 BRL 
D)  121,756 Indian rupees per tonne, with $0.025 CAD = 1 INR 
E)  3,000 U.S. dollars per tonne, with $1.015 CAD = 1 US

Question 7

What is one of the prerequisite conditions for the Valuation Principle to work?

Accepted Answer

The availability of competitiv

Question 8

You decide to deposit your money in a bank account paying 6% interest.If the value of your savings grows to $3,180 in one year's time,how much money did you deposit?

Accepted Answer

A)  $3,180 
B)  $3,371 
C)  $3,000 
D)  $3,100 
E)  $3,080 
A)  $3,180 
B)  $3,371 
C)  $3,000 
D)  $3,100 
E)  $3,080

Question 9

If $476 invested today yields $500 in one year's time,what is the discount rate?

Accepted Answer

A)  0.05 
B)  0.95 
C)  1.05 
D)  1.50 
E)  0.24 
A)  0.05 
B)  0.95 
C)  1.05 
D)  1.50 
E)  0.24

Question 10

If the risk-free rate of interest (rf)is 6%,then you should be indifferent between receiving $250 today or

Accepted Answer

A)  $235.85 in one year. 
B)  $250.00 in one year. 
C)  $265.00 in one year. 
D)  $244.00 in one year. 
E)  $256.00 in one year. 
A)  $235.85 in one year. 
B)  $250.00 in one year. 
C)  $265.00 in one year. 
D)  $244.00 in one year. 
E)  $256.00 in one year.

Question 11

A firm has contracted to supply 500,000 gallons of propane fuel for $1.49 million to the local municipality.The municipality wants to break the contract.What does the minimum current market price of propane need to be in order for the firm to benefit from breaking the contract?

Accepted Answer

A)  greater than $2.97 per gallon 
B)  greater than $2.98 per gallon 
C)  greater than $2.99 per gallon 
D)  greater than $3.00 per gallon 
E)  greater than $3.01 per gallon 
A)  greater than $2.97 per gallon 
B)  greater than $2.98 per gallon 
C)  greater than $2.99 per gallon 
D)  greater than $3.00 per gallon 
E)  greater than $3.01 per gallon

Question 12

Helen is saving to start a business.If she invests $10,000 in a savings account now,which of the following is the minimum interest rate required to ensure that she has $25,000 in her account in ten years time?

Accepted Answer

A)  2.5% 
B)  6.4% 
C)  9.6% 
D)  10.2% 
E)  8.7% 
A)  2.5% 
B)  6.4% 
C)  9.6% 
D)  10.2% 
E)  8.7%

Question 13

Explain the role played by some of the other management disciplines in financial decision making.

Accepted Answer

The role played by some of the other man

Question 14

What is the present value (PV)of $66,000 received 7 years from now,assuming the interest rate is 9% per year?

Accepted Answer

A)  $60,550 
B)  $60,000 
C)  $66,000 
D)  $36,104 
E)  $8,650 
A)  $60,550 
B)  $60,000 
C)  $66,000 
D)  $36,104 
E)  $8,650

Question 15

A backhoe can dig 150 feet of trench per hour and costs $500 per hour to hire and operate.A ditch digger can dig six feet of trench per hour.Based on this information,what is the most a ditch digger can charge per hour when digging ditches?

Accepted Answer

A)  $20 per hour 
B)  $25 per hour 
C)  $3.33 per hour 
D)  $83.33 per hour 
E)  $500 per hour 
A)  $20 per hour 
B)  $25 per hour 
C)  $3.33 per hour 
D)  $83.33 per hour 
E)  $500 per hour

Question 16

Is there a need to distinguish between cash inflows and outflows on a timeline?

Accepted Answer

Cash inflows and outflows should have op

Question 17

Which of the following statements regarding the Law of One Price is most accurate?

Accepted Answer

A)  At any point in time, the price of two equivalent goods trading in different competitive markets is expected to be different. 
B)  One consequence of the Law of One Price is that when evaluating costs and benefits to compute a net present value (NPV), we must check the price in all possible markets. 
C)  If equivalent goods or securities trade simultaneously in different competitive markets, then they will trade for the same price in both markets. 
D)  An important property of the Law of One Price is that it holds even in markets where arbitrage is not possible. 
E)  Different goods trading simultaneously in the same competitive market will trade for different prices. 
A)  At any point in time, the price of two equivalent goods trading in different competitive markets is expected to be different. 
B)  One consequence of the Law of One Price is that when evaluating costs and benefits to compute a net present value (NPV), we must check the price in all possible markets. 
C)  If equivalent goods or securities trade simultaneously in different competitive markets, then they will trade for the same price in both markets. 
D)  An important property of the Law of One Price is that it holds even in markets where arbitrage is not possible. 
E)  Different goods trading simultaneously in the same competitive market will trade for different prices.

Question 18

The one-year discount factor is the discount at which we can purchase money in the future.

Accepted Answer

A) True 
 B)False

Question 19

Whenever a good trades in a competitive market,the ________ determines the value of the good.

Accepted Answer

A)  supply 
B)  price 
C)  demand 
D)  cost 
E)  quantity 
A)  supply 
B)  price 
C)  demand 
D)  cost 
E)  quantity

Question 20

What are the the three rules of valuing cash flows at different points in time?

Accepted Answer

1.It is only possible to compare or comb

Exam 3: The Valuation Principle: the Foundation of Financial Decision Making

The timeline shown below best describes the cash flow of which of the following people?

Which of the following best explains why market prices are useful to a financial manager when performing a cost-benefit analysis?

When computing a present value,which of the following is TRUE?

-A metal fabrication company is pricing raw supplies of aluminium.The following are the costs to the company to receive one tonne of aluminium from various sources.Which source offers the best price for aluminium per tonne?

What is one of the prerequisite conditions for the Valuation Principle to work?

You decide to deposit your money in a bank account paying 6% interest.If the value of your savings grows to $3,180 in one year's time,how much money did you deposit?

If $476 invested today yields $500 in one year's time,what is the discount rate?

If the risk-free rate of interest (rf)is 6%,then you should be indifferent between receiving $250 today or

A firm has contracted to supply 500,000 gallons of propane fuel for $1.49 million to the local municipality.The municipality wants to break the contract.What does the minimum current market price of propane need to be in order for the firm to benefit from breaking the contract?

Helen is saving to start a business.If she invests $10,000 in a savings account now,which of the following is the minimum interest rate required to ensure that she has $25,000 in her account in ten years time?

Explain the role played by some of the other management disciplines in financial decision making.

What is the present value (PV)of $66,000 received 7 years from now,assuming the interest rate is 9% per year?

A backhoe can dig 150 feet of trench per hour and costs $500 per hour to hire and operate.A ditch digger can dig six feet of trench per hour.Based on this information,what is the most a ditch digger can charge per hour when digging ditches?

Is there a need to distinguish between cash inflows and outflows on a timeline?

Which of the following statements regarding the Law of One Price is most accurate?

The one-year discount factor is the discount at which we can purchase money in the future.

Whenever a good trades in a competitive market,the ________ determines the value of the good.

What are the the three rules of valuing cash flows at different points in time?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

The Time Value of Money

Interest Rates

Bonds

Valuing Stocks

Investment Decision Rules

Fundamentals of Capital Budgeting

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

Determining the Cost of Capital

Risk and the Pricing of Options

Raising Equity Capital

Debt Financing

Capital Structure

Payout Policy

Financial Modelling and Pro Forma Analysis

Working Capital Management

Short Term Financial Planning

Risk Management

International Corporate Finance

Leasing

Mergers and Acquisitions

Corporate Governance

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