FIN 571 NERD Education Specialist /fin571nerd.com FIN 571 NERD Education Specialist /fin571nerd.com | Page 14

and round your answer to 2 decimal places, e.g., 32.16.) NPV $
Should the company make the purchase? No Yes 44.Down Under
Boomerang, Inc., is considering a new three-year expansion project
that requires an initial fixed asset investment of $2.64 million. The
fixed asset will be depreciated straight-line to zero over its three-year
tax life, after which it will be worthless. The project is estimated to
generate $2,060,000 in annual sales, with costs of $755,000. The tax
rate is 35 percent and the required return is 13 percent. What is the
project’s NPV? (Do not round intermediate calculations and round
your answer to 2 decimal places, e.g., 32.16.) NPV
$ 45.What is
the net present value of a project with an initial cost of $36,900 and
cash inflows of $13,400, $21,600, and $10,000 for Years 1 to 3,
respectively? The discount rate is 13 percent.
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FIN 571 Final Exam Guide (New, 2017)
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Question 1 The underlying assumption of the dividend growth model is
that a stock is worth: A.
An amount computed as the next annual
dividend divided by the required rate of return. B. An amount computed as
the next annual dividend divided by the market rate of return. C. The
same amount computed as any other stock that pays the same current
dividend and has the same required rate of return. D. The present value
of the future income that the stock is expected to generate. E. The same
amount to every investor regardless of their desired rate of return. •
Question 2 You plan to invest $6,500 for three years at 4 percent simple
interest. What will your investment be worth at the end of the three years?
A.
$6,941.11 B.
$7,280.00 C.
$7,311.62 D.
$6,760.00 E.
$7,250.00 • Question 3 A firm has
a debt-equity ratio of.64, a pre tax cost of debt of 8.5 percent, and a
required return on assets of 12.6 percent, What is the cost of equity if you
ignore taxes ? A.
16.38% B. 8.55% C. 15.22% D. 11.22% E. 8.06%
• Question 4 What is the present value of $6,811 to be received in one year
if the discount rate is 6.5 percent ? A. $6,395.31 B.
$7,253.72 C.
$6,023.58 D.
$6,643.29 E.
$6,671.13 • Question 5 Under