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1. In order to compare different investment opportunities (each with the same risk) with interest rates reported in different manners you should
a) convert each interest rate to an annual nominal rate
b) convert each interest rate to a monthly nominal rate
c) convert each interest rate to an effective annual rate
d) compare them by using the published annual rates
e) convert each interest rate to an APR
2. A given rate is quoted as 8% annual percentage rate (APR), but has an effective annual rate (EAR) of 8.30%. What is the frequency of compounding during the year?
a) Weekly
b) Monthly
c) Quarterly
d) Semiannually
e) Annually
Jiminy's Cricket Farm issued a 30-year, 7 percent semi-annual bond 5 years ago. The bond currently sells for 81 percent of its face value. The book value of the debt issue is $23 million. The company's tax rate is 33 percent. What is the company's to..
The Internal Rate of Return for capital budgeting projects is best described as:
Two competing companies have submitted bids to develop a new video display technology. The yearly development cost of Alpha expressed in actual dollars will be $150,000 the first year and increase by 5% per year over the five year contract.
It takes Cookie Cutter Modular Homes, Inc., about six days to receive and deposit checks from customers. Cookie Cutter’s management is considering a lockbox system to reduce the firm’s collection times. What is the reduction in outstanding cash balan..
The Don'tMissSnow Company is purchasing some new research equipment today for $100,000. For depreciation purposes, it falls into the 3-year MACRS class. So depreciation rates are 33%, 45%, 15%, and 7%, respectively for years 1 through 4 of the asset'..
Royal Troon Inc is planning to lease a computer for $6,500 per annum, payable in advance, for a period of 4 years. The lease will cover maintenance expenses. Royal Troon’s chairman feels that if he buys the same computer he should be able to sell it ..
Conventional corporation is evaluating a capital budgeting project that will generate $600,000 per year for the next 10 years. The project costs $3.6 million and conventional's required rate of return is 11 percent. Should the project be purchased?
What is current price of ordinary common shares in Fortescue Metal Group(FMG)?Using an appropriate chart,describe how has this price evolved over the last 5-years,and compare to an appropriate index.
Financial leverage has to do with A. the usage of fixed cost financial securities to finance a portion of a firm's assets. B. using common stock to finance a portion of a firm's assets. C. the incurrence of fixed operating costs in the firm's income ..
Consider the following income statement for the Heir Jordan Corporation: HEIR JORDAN CORPORATION Income Statement Sales $ 46,800 Costs 36,200 Taxable income $ 10,600 Taxes (35%) 3,710 Net income $ 6,890 Dividends $ 3,400 Addition to retained earnings..
Goldman Sachs & Co. sold a 12.5% interest in its annual profits to Sumitomo Bank Ltd of Japan in return for a capital investment of $500 million. Sumitomo was one of the world’s largest commercial banks, with assets of 172 billion. Under the agreemen..
Quad Enterprises is considering a new three-year expansion project that requires an initial fixed asset investment of $2.58 million. The fixed asset falls into the three-year MACRS class. The project is estimated to generate $2,040,000 in annual sale..
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