Exam 5: Discounted Cash Flow Valuation

A) 3.64 percent
B) 3.87 percent
C) 4.10 percent
D) 4.21 percent
E) 4.39 percent

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A) Trust income of $1,200 a year forever
B) Retirement pay of $2,200 a month for 20 years
C) Lottery winnings of $1,000 a month for life
D) Car payment of $260 a month for 60 months
E) Apartment rent payment of $800 a month for one year

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A) $75 paid at the beginning of each monthly period for 50 years
B) $15 paid at the end of each monthly period for an infinite period of time
C) $40 paid quarterly for 5 years, starting today
D) $50 paid every year for ten years, starting today
E) $25 paid weekly for 1 year, starting one week from today

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A) $1,108.91
B) $1,282.16
C) $1,333.33
D) $1,401.49
E) $1,487.06

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A) C × {{1 - [1/(1 + r) ^t]}/r}
B) C × {1 - [1/(1 + r) ^t]} - r
C) C × {1 - [r/(1 + r) ^t]}/r
D) C × {{1 - [1/(1 × r) ^t]} × r}
E) C × {1 - [r/(1 × r) ^t]} × r

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A) 10.33 percent
B) 10.44 percent
C) 10.60 percent
D) 11.03 percent
E) 11.33 percent

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D

A) $228,060.00
B) $237,540.21
C) $240,860.00
D) $241,159.39
E) $242,681.25

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E

A) $14,239.14
B) $14,361.08
C) $14,727.15
D) $15,003.14
E) $15,221.80

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Jesse should recognize that this is an a...

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A) Number of equal payments
B) Amount of each payment
C) Frequency of the payments
D) Annuity interest rate
E) Timing of the annuity payments

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A) 6 percent compounded annually
B) 6 percent compounded semiannually
C) 6 percent compounded quarterly
D) 6 percent compounded monthly
E) All the other answers have the same effective annual rate.

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D

A) $12,750.00
B) $20,610.90.00
C) $30,029.18
D) $36,461.10
E) $41,300.00

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A) 10.21 percent
B) 10.25 percent
C) 10.35 percent
D) 10.38 percent
E) 10.42 percent

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A) I and III only
B) I and IV only
C) II and III only
D) II and IV only
E) I plus either III or IV

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A) Project 1, because the annual cash flows are greater than those of Project 2
B) Project 1, because the present value of its cash inflows exceeds those of Project 2 by $14,211.62
C) Project 2, because the total cash inflows are $70,000 greater than those of Project 1
D) Project 2, because the present value of the cash inflows exceeds those of Project 1 by $18,598.33
E) It does not matter as both projects have almost identical present values.

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Amortization means that a port...

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A) All else equal, an ordinary annuity is more valuable than an annuity due.
B) All else equal, a decrease in the number of payments increases the future value of an annuity due.
C) An annuity with payments at the beginning of each period is called an ordinary annuity.
D) All else equal, an increase in the discount rate decreases the present value and increases the future value of an annuity.
E) All else equal, an increase in the number of annuity payments decreases the present value and increases the future value of an annuity.

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A) $2,567.15
B) $2,675.10
C) $2,761.32
D) $2,818.74
E) $2,890.62

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