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Compute the NPV of this opportunity

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Reference no: EM132854267

Question -

Q1) The third party who checks annual financial statements to ensure that they are prepared according to GAAP and verifies that the information reported is reliable is the?

a. NYSE Enforcement Board.

b. Accounting Standards Board.

c. Securities and Exchange Commission (SEC).

d. Auditor.

Q2) Nielson Motors is considering an opportunity that requires an investment of $1,000,000 today and will provide $250,000 one year from now, $450,000 two years from now, and $650,000 three years from now. If the appropriate interest rate is 10%, then the NPV of this opportunity is closest to?

A. ($88,000)

B. $88,000

C. $1,300,000

D. $300,000

Q3) Which of the following statements is false?

a. The process of moving a value or cash flow forward in time is known as compounding.

b. The effect of earning interest on interest is known as compound interest.

c. It is only possible to compare or combine values at the same point in time.

d. A dollar in the future is worth more than a dollar today.

Q4) Consider the following timeline detailing a stream of cash flows:

If the current market rate of interest is 8%, then the present value of this stream of cash flows is closest to:

A. $24,074

B. $21,211

C. $26,000

D. $22,871

Q5) You are thinking about investing in a mine that will produce $10,000 worth of ore in the first year. As the ore closest to the surface is removed it will become more difficult to extract the ore. Therefore, the value of the ore that you mine will decline at a rate of 8% per year forever. If the appropriate interest rate is 6%, then the value of this mining operation is closest to?

a. $71,429

b. $500,000

c. $166,667

d. $8,772

e. $125,000

Q6) Suppose that a security with a risk-free cash flow of $1,000 in one year trades for $930 today. If there are no arbitrage opportunities then the current risk-free rate is closest to?

a. 6%

b. 6.5%

c. 7%

d. 7.5%

Q7) Use the following information for ECE incorporated:

Assets $200 million

Shareholder Equity $100 million

Sales $300 million

Net Income $15 million

Interest Expense $2 million

If ECE reported $15 million in net income, then ECE's Return on Equity (ROE) is:

A. 15.0%

B. 5.0%

C. 7.5%

D. 10.0%

Reference no: EM132854267

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