Question 1. If you had $5000, which of the following TVM methods would you use to calculate what its value would be in three years?
a. Discounting
b. Compounding
c. Compounding an annuity
d. Discounting an annuity
e. Amortizing
Question 2. Which of the following capital budget model does not use Time Value of Money calculations?
a. Internal Rate of Return (IRR)
b. Modified Internal Rate of Return (MIRR)
c. Payback
d. Net Present Value (NPV)
e. All use Time Value of Money calculations
Question 3. Which of the following factors should be considered in calculating capital budget projects?
a. The selection model to be used
b. Taxes
c. Depreciation
d. Risk
e. All of the above
Question 4. The discount rate used in making capital budget decisions is derived from:
a. Weighted Average Cost of Capital (WACC)
b. Bond Yield
c. Federal Reserve discount rate
d. 6 Month T Bill rate
e. Prime Rate
Question 5. The goal of an optimal capital structure is:
a. Use as little debt as possible
b. Use only retained earnings
c. Avoid diluting current shareholder ownership
d. Achieve minimum overall cost of capital
e. Use only common stock
Question 6. When determining the price to be paid for an acquisition, one of the factors considered is often:
a. Earnings
b. Cash Flow
c. Dividends
d. Growth potential
e. All of the above