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FIN 419 Final Exam Guide (New)
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1) Risk and probability Micro-pub, Inc., is considering the purchase of one of two
microfilm cameras, R and S. Both should provide benefits over a10-year period, and each
requires an initial investment of $4,000. Management has constructed the following table
of elements of rates of return and possibilities for pessimistic, most likely, and optimistic
results.
2) Capital asset princing model (CAPM) Use the capital asset princing model to find the
required reurn.
3)a. What single investmentmade today, annual interest, will be worth $3,500 at the end
of 10 years?
b. What is the present value is $3,500 to be received at the end of 10 years if the discount
rate is 6%?
c. What is the most you would pay today for a promise to repay you $3,500 at the end of
10 years if your opportunity cost is 6% ?
d. Compare, contrast, and discuss your findings in part a through c.
4) Loan Payment Determine the equal, annual, end-of-year payment required each year
over the life of the loan to repay it fully during the stated term of the loan.
5) Loan amortization schedule Personal Finace Problem Joan Messineo borrowed
$18,000 at a 14% annual rate of interest to be repaid over 3 years. The loan is amortized
into three equal, annual, end-of-year payments.
6) NPV Calculate the net present value (NPV) for a 30-year project with an initial
investment of $ 0 and a cash inflow of $2,000 per year. Assume that the firm has an
opportunity cost of 17%. Comment on the acceptability of the project.