1. (TCO 4) Which of the following is true regarding the evaluation of projects? (Points : 4)
2. (TCO 4) There are several disadvantages to the payback method, among them: (Points : 4)
3. (TCO 3 and 4) You can ensure that an investment is expected to create value for (Points : 4)
4. (TCO 3 and 4) Portman’s is considering adding a new product to its lineup. This product is expected to generate sales for three years, after which time the product will be discontinued. What is the project’s net present value, if the firm wants to earn a 12 percent rate of return?
5. (TCO 4) The Inventive Co. is considering a new project. This project requires an initial cash investment of $70,000. The project will generate cash inflows of $10,500 in the first year. Then, the project will do nothing for two years, after which time cash inflows of $25,000 will be generated for four years. How long will it take the Inventive Co. to recover its $70,000 investment? (Points : 4)
6. (TCO 4) The postponement of a project until conditions are more favorable: (Points : 4)
7. (TCO 4) ____________, refers to the situation a firm faces when it has positive net present value projects, but cannot obtain financing for those projects. (Points : 4)
8. (TCO 4) ABC Cameras is considering an investment that will have a cost of $10,000 and the following cash flows: $6,000 in year 1, $4,000 in year 2 and $3,000 in year 3. Assume the cost of capital is 10%. Which of the following is true regarding this investment? (Points : 4)
9. (TCO 4) Assume Company X plans to invest $60,000 in industrial equipment. Using Tables 9.6 and 9.7 of your textbook (Page 277), which is the first year depreciation amount under MACRS? (Points : 4)
10. (TCO 1 and 4) Assume a corporation has earnings before depreciation, and taxes of $100,000, depreciation of $40,000, and that it has a 30 percent tax bracket. What are the after-tax cash flows for the company? (Points : 4)
11. (TCO 8) Which of the following statements is true regarding systematic risk? (Points : 4)
12. (TCO 8) Which statement is not true regarding risk? (Points
13. (TCO 8) The stock of Uptown Men’s Wear is expected to produce the following returns, given the various states of the economy. What is the expected return on this stock?
14. (TCO 8) You own a portfolio that consists of $8,000 in stock A, $4,600 in stock B, $13,000 in stock C, and $5,500 in stock D. What is the portfolio weight of stock A?