FIN5063 Quizzes

 Skip to main content

Question 1

Complete

1.00 points out of 1.00

Flag question

Question text

Financial management involves decisions about which of the following?

Select one:

a.

How to minimize taxation

b.

All of these

c.

Which projects to fund

d.

What type of capital should be raised

Question 2

Complete

1.00 points out of 1.00

Flag question

Question text

For corporations, maximizing the value of owner's equity can also be stated as

Select one:

a.

maximizing retained earnings.

b.

maximizing net income.

c.

maximizing earnings per share.

d.

maximizing the stock price.

Question 3

Complete

1.00 points out of 1.00

Flag question

Question text

The practice generally known as double taxation is due to

Select one:

a.

interest on shareholders' dividends being taxed as income.

b.

corporate income being taxed at both the federal and state levels.

c.

shareholders' dividends being taxed at both the federal and state levels.

d.

corporate incomes being taxed at the corporate level, then again at the shareholder level when corporate profits are paid out as dividends.

Question 4

Complete

1.00 points out of 1.00

Flag question

Question text

Which of the following is an example of aligning managers' personal interests with those of the owners? 

Select one:

a.

Offer the managers shares of common stock of the firm.

b.

Pay the managers high salaries.

c.

Trust the managers' actions as they will always act in the owners' best interest.

d.

Allow the managers to have as many perks as they request.

Question 5

Complete

1.00 points out of 1.00

Flag question

Question text

This subarea of finance helps facilitate the capital flows between investors and companies.

Select one:

a.

Investments

b.

Financial institutions and markets

c.

Financial management

d.

Treasury management

Question 6

Complete

1.00 points out of 1.00

Flag question

Question text

Which of these are NOT basic approaches to minimizing the agency problem?

Select one:

a.

All of these are basic approaches to minimizing the agency problem.

b.

Ignore the conflict of interest

c.

Align managers' personal interest with those of the owners by making the managers owners

d.

Monitor managers' actions

Question 7

Complete

1.00 points out of 1.00

Flag question

Question text

This sub-area of finance looks at firm decisions in acquiring and utilizing cash received from investors or from retained earnings.

Select one:

a.

treasury management

b.

investments

c.

None of these

d.

financial management

Question 8

Complete

1.00 points out of 1.00

Flag question

Question text

Which of the below is the goal that according to most finance professionals corporate managers ought to pursue?

Select one:

a.

Maximize shareholder wealth

b.

Maximize market share

c.

Maximize profit

d.

Maximize the net profit marginFinish review

a

Question 1

Complete

1.00 points out of 1.00

Flag question

Question text

The board of directors serves mainly to

Select one:

a.

Minimize the conflict of interest between managers and shareholders.

b.

Audit the financial statements of the company.

c.

Increase the expertise of the managers in running the business.

d.

Ensure workers are properly treated and compensated.

Feedback

The correct answer is: Minimize the conflict of interest between managers and shareholders.

Question 2

Complete

1.00 points out of 1.00

Flag question

Question text

This subarea of finance involves methods and techniques to make appropriate decisions about what kinds of securities to own, which firms' securities to buy, and how to be paid back in the form that the investor wishes.

Select one:

a.

Financial management

b.

None of these

c.

Real markets

d.

Investments

Feedback

The correct answer is: Investments

Question 3

Complete

1.00 points out of 1.00

Flag question

Question text

This group is elected by stockholders to oversee management in a corporation.

Select one:

a.

Chief Executives

b.

Chief Counselors

c.

Auditors

d.

Board of Directors

Feedback

The correct answer is: Board of Directors

Question 4

Complete

1.00 points out of 1.00

Flag question

Question text

Not all cash a company generates will be returned to the investors. Which of the following will NOT reduce the amount of capital returned to the investors?

Select one:

a.

Retained earnings

b.

None of these will reduce the amount of capital returned to the investors.

c.

Dividends

d.

Taxes

Feedback

The correct answer is: Dividends

Question 5

Complete

1.00 points out of 1.00

Flag question

Question text

The practice generally known as double taxation is due to

Select one:

a.

corporate income being taxed at both the federal and state levels.

b.

corporate incomes being taxed at the corporate level, then again at the shareholder level when corporate profits are paid out as dividends.

c.

interest on shareholders' dividends being taxed as income.

d.

shareholders' dividends being taxed at both the federal and state levels.

Feedback

The correct answer is: corporate incomes being taxed at the corporate level, then again at the shareholder level when corporate profits are paid out as dividends.

Question 6

Complete

1.00 points out of 1.00

Flag question

Question text

The agency relationship in corporate finance refers to _______________________.

Select one:

a.

when the corporate hires an advertising agency to market their new product/service

b.

when the board of directors are elected to staggered terms

c.

when the shareholders hire a manager to run their company

d.

when the board of directors oversee the CEO

Feedback

The correct answer is: when the shareholders hire a manager to run their company

Question 7

Complete

1.00 points out of 1.00

Flag question

Question text

The portion of a company's profits that are kept by the company rather than distributed to the stockholders as cash dividends is referred to as:

Select one:

a.

restricted earnings.

b.

institutional investment.

c.

venture capital.

d.

retained earnings.

Feedback

The correct answer is: retained earnings.

Question 8

Complete

1.00 points out of 1.00

Flag question

Question text

Which of the following statements is correct?

Select one:

a.

Profits from the sole proprietorship are subject to double taxation.

b.

If the sole proprietorship gets sued, the owner is liable.

c.

It is relatively easy for sole proprietorships to raise money.

d.

Sole proprietorships are difficult to start.

Feedback

The correct answer is: If the sole proprietorship gets sued, the owner is liable.

Question 9

Complete

1.00 points out of 1.00

Flag question

Question text

The overall goal of the financial manager is to _________________.

Select one:

a.

Maximize the company's stock market price 

b.

Minimize total costs

c.

Maximize earnings per share

d.

Maximize net income

Feedback

The correct answer is: Maximize the company's stock market price 

Question 10

Complete

1.00 points out of 1.00

Flag question

Question text

As individual legal entities, corporations assume liability for their own debts, so the shareholders hold

Select one:

a.

only limited liability.

b.

joint liability.

c.

unlimited liability.

d.

shared liability.

Feedback

The correct answer is: only limited liability.

a

<add here>
 

a

a

<add here>
 

a

a

Week 4

Question 1

Correct

1.00 points out of 1.00

Flag question

Question text

Mango Manufacturing has acquired a new machine for $125,000. The machine is expected to have zero salvage value at the end of its useful life, after producing 75,000 units of output. If 15,000 units are produced during the first year of the machine's use, how much depreciation expense will be recorded for the first year of its operation?

Select one:

a.

$15,000

b.

$50,000

c.

$20,000

d.

$25,000

e.

$100,000

Feedback

Your answer is correct.

(15,000 / 75000) (125,000) = $25,000

The correct answer is: $25,000

Question 2

Correct

1.00 points out of 1.00

Flag question

Question text

Which of the following would be a result of changing from the straight-line to the accelerated (MACRS) method of depreciation?

Select one:

a.

lower taxes in the later years of a project's life.

b.

lower overall depreciation expense.

c.

lower taxable income in the early years of a project's life.

d.

higher overall depreciation expense.

Feedback

Your answer is correct.

Accelerated depreciation methods do not change the overall depreciation amount. When using accelerated depreciation, more of the asset's value is depreciated earlier, and less of the value later, resulting in a lower taxable income in the earlier years and in correspondingly higher taxable income in the later years, effectively resulting in delaying some of the taxes paid by the company. Note that paying taxes later results in a lower present value of the tax payment, and thus in an increase in the present value of the cash flows available to shareholders.

The correct answer is: lower taxable income in the early years of a project's life.

Question 3

Correct

1.00 points out of 1.00

Flag question

Question text

Bansko Inc. has just purchased a new lift for $200,000. The lift's useful life is 8 years, and the company expects the salvage value at the end of year 8 to be $40,000. Using straight-line depreciation, the annual depreciation expense will be _________, and the book value of the lift at the end of year 5 will be _________.

Select one:

a.

$30,000; $50,000

b.

$20,000; $75,000

c.

$20,000; $100,000

d.

$30,000; $100,000

e.

$25,000; $50,000

f.

$25,000; $75,000

Feedback

Your answer is correct.

(200,000 - 40,000) / 8 = $20,000 will be depreciated every year.

200,000 - (20,000)(5) = $100,000 will be the remaining book value after 5 years.

The correct answer is: $20,000; $100,000

Question 4

Correct

1.00 points out of 1.00

Flag question

Question text

Mountain Rescue Inc. reported the following for its most recent fiscal year: revenues of $2,500,000, operating expenses of $1,500,000, acquisition of 5 new snowmobiles $50,000, and depreciation expense of $100,000. Therefore, the company's taxable income is 

Select one:

a.

$850,000.

b.

$1,000,000.

c.

$900,000.

d.

$950,000.

Feedback

Your answer is correct.

The snowmobile acquisition is a capital investment, and is therefore not directly included in the calculation of net income. Instead, a portion of the $50,000 purchase price is included in the company's depreciation expense.

The correct answer is: $900,000.

Question 5

Correct

1.00 points out of 1.00

Flag question

Question text

When a $50,000 depreciation expense is incurred

Select one:

a.

it is equivalent to a $50,000 cash inflow.

b.

there is no impact on cash flows and thus depreciation doesn't need to be included in a cash flow based project analysis.

c.

it is equivalent to a $50,000 cash outflow.

d.

there is no direct impact on the cash flows, but depreciation does impact the amount of cash paid in taxes.

Feedback

Your answer is correct.

Depreciation is non-cash expense (the cash is paid when the asset is purchased), but it lowers taxable income, resulting in tax saving and thus less cash paid in taxes.

The correct answer is: there is no direct impact on the cash flows, but depreciation does impact the amount of cash paid in taxes.

Question 6

Correct

1.00 points out of 1.00

Flag question

Question text

Assume that you are presented with an analysis of a possible expansion project. In the analysis, projected net cash flows resulting from the expansion were discounted using the firm's cost of capital. The net present value of the project was computed to be positive, and therefore the project was recommended to be accepted. In describing the assumptions made, the analyst revealed that the projected cash flows were based entirely on projected quantities sold and current input and product prices, ignoring future price increases likely to be caused by inflation. Which of the below is correct?

Select one:

a.

The analyst must make sure that real cost of capital was used as a discount rate in the calculation. If not, then the future cash flow estimates must be adjusted using higher future prices as indicated by the estimated inflation rate.

b.

The analyst made a mistake and needs to recalculate projected cash flows assuming higher future prices due to inflation, but the analyst also must make sure that the discount rate used is adjusted for inflation by subtracting the estimated inflation rate from the firm's cost of capital.

c.

The analyst was correct in ignoring the inflation rate in the analysis, because what matters is the project's real cash flows, not cash flows artificially increased by inflation.

d.

The analyst made a mistake and needs to recalculate the project's net present value, assuming higher prices in the future as implied by the estimated inflation rate. 

Feedback

Your answer is correct.

There are two correct ways to deal with inflation. Both lead to the same net present value of a project.

1. Use nominal cash flows and nominal discount rate.

2. Use real cash flows and real discount rate.

The correct answer is: The analyst must make sure that real cost of capital was used as a discount rate in the calculation. If not, then the future cash flow estimates must be adjusted using higher future prices as indicated by the estimated inflation rate.

Question 7

Correct

1.00 points out of 1.00

Flag question

Question text

One U.S. dollar is trading for 0.90 euros. One pound is trading for 1.5 euros. How many pounds would you get for $100?

Select one:

a.

60

b.

74

c.

135

d.

167

Feedback

Your answer is correct.

First, you will get ($100)(0.90) = 90 euros

Then, exchanging euros for pounds, you will get (90)/1.5 = 60 pounds

The correct answer is: 60

Question 8

Correct

1.00 points out of 1.00

Flag question

Question text

Assume you plan on exchanging dollars for yen and buy shares of common stock of a Japanese company directly on a Japanese stock exchange. Assume the stock does not pay dividends. If the price of the stock you bought is 8% higher next year, and dollar depreciates against yen by 10% over the same time period, then in terms of the dollar your rate of return is equal to approximately 

Select one:

a.

2%

b.

-2%

c.

18%

d.

10%

Feedback

Your answer is correct.

Japanese yen got stronger and thus will buy 10% more dollars, so in addition to earning an 8% return in Japan you also earn an additional 10% from yen gaining value against the dollar.

The correct answer is: 18%

Question 9

Correct

1.00 points out of 1.00

Flag question

Question text

Assume the price index in years 2016, 2017, and 2018 is equal to 120, 140, and 130 in the same respective order. Thus, the inflation rate in 2017 is equal to approximately

Select one:

a.

-7%

b.

17%

c.

8%

d.

20%

Feedback

Your answer is correct.

Inflation rate is calculated as the percentage increase in the price index from the previous time period, thus the inflation rate in 2017 is calculated as the percentage increase in the price index from year 2016, giving (140-120) / 120 = 17%.

The correct answer is: 17%

Question 10

Correct

1.00 points out of 1.00

Flag question

Question text

You come across a photograph taken in year 1983. The photo displays a gas station with a gasoline price sign stating $0.76 per gallon. We could say that this price is quoted in __________ dollars. All of the choices below would make the previous statement correct, EXCEPT:

Select one:

a.

current dollars

b.

nominal dollars

c.

real dollars

d.

actual dollars

Feedback

Your answer is correct.

To use the term "real dollars" we would need to first adjust for inflation. All of the other terms refer to the price as quoted.

The correct answer is: real dollars

Question 11

Correct

3.75 points out of 3.75

Flag question

Question text

(NOTE: ENTER YOUR ANSWER WITHOUT THE $ AND COMMA, ROUNDED TO THE NEAREST DOLLAR, for instance as 10023, not as $10,022.78)

Thunder Ice Arena has purchased a new zamboni (ice resurfacer) for $59000. It will be depreciated over 7 years using the straight line depreciation method, with zero salvage value assumed at the end of year 7. 

Assuming the ice arena decides to sell the zamboni after 2 years, and is able to sell it for $32000, what will be the after-tax cash amount collected from the sale? The tax rate is assumed to be 24%. DO NOT ROUND IN YOUR CALCULATION STEPS (USE CALCULATOR MEMORY FUNCTIONS)

Answer:

Feedback

The amount of annual depreciation is 59000 / 7 =8428.5714285714 .

The book value after 2 years is then 59000 - (8428.5714285714)(2) = 42142.857142857.

The after-tax cash from sale is then 32000 - (0.24)(32000 - 42142.857142857)

The correct answer is: 34434

Question 12

Correct

3.75 points out of 3.75

Flag question

Question text

(NOTE: ENTER YOUR ANSWER WITHOUT THE $ AND COMMA, ROUNDED TO THE NEAREST DOLLAR, for instance as 10023, not as $10,022.78. Make sure if the answer is negative that you include the negative sign in front of your answer, for example -10023)

Big Cone Ice Cream Inc. purchased a new cutting edge slush making machine for $13000. The machine will be depreciated, using the straight-line method, over 7 years to a zero salvage value. The new machine will result in additional annual revenues of $53000, and an annual increase in expenses of $14000. If the tax rate is 16%, what will be the annual after-tax cash flow from the machine? DO NOT ROUND IN YOUR CALCULATION STEPS (USE CALCULATOR MEMORY FUNCTIONS)

Answer:

Feedback

The annual depreciation is 13000 / 7 = 1857.1428571429

The ATCF is then (53000 - 14000 - 1857.1428571429) (1-0.16) + 1857.1428571429

The correct answer is: 33057

Question 13

Correct

3.75 points out of 3.75

Flag question

Question text

(NOTE: ENTER YOUR ANSWER WITHOUT THE $ AND COMMA, ROUNDED TO THE NEAREST DOLLAR, for instance as 10023, not as $10,022.78)

Pallavi receives $12000 from her uncle. She deposits the money in an account and leaves it there for 14 years. Assuming the account earns 9% interest rate, and the inflation rate is 3%, what is the balance in the account at the end of 14 years, expressed in real terms (in terms of today's purchasing power)? Do not use any approximations in your calculations. DO NOT ROUND IN YOUR CALCULATION STEPS (USE CALCULATOR MEMORY FUNCTIONS)

Answer:

Feedback

Calculating future value first:

12000 (F/P, 9%, 14) = 40100.724326835

Then converting to today's purchasing power:

40100.724326835 (P/F, 3%, 14) gives the correct answer

The correct answer is: 26511

Question 14

Correct

3.75 points out of 3.75

Flag question

Question text

(NOTE: ENTER YOUR ANSWER IN PERCENT, BUT WITHOUT THE % SIGN, rounded to 2 decimal places, for instance as 7.89, not as 7.89%, or not as 0.0789)

Assuming market interest rate is 9.7% and real interest rate is 3.6%, what is the rate of inflation? Use the exact relationship between the rates, not an approximation. Your answer needs to be exact! DO NOT ROUND IN YOUR CALCULATION STEPS (USE CALCULATOR MEMORY FUNCTIONS)

Answer:

Feedback

From (1+NOM) = (1+REAL) (1+INFL) we have (1+INFL) = (1+NOM)/(1+REAL), thus INFLATION RATE = (1+NOM)/(1+REAL) -1

inflation rate = (1 + 0.097) / (1 + 0.036) - 1

The correct answer is: 5.89

 

 

 

 

TrineOnline Accessibility Statements

 

Question 1

Correct

1.00 points out of 1.00

Flag question

Question text

Mango Manufacturing has acquired a new machine for $125,000. The machine is expected to have zero salvage value at the end of its useful life, after producing 75,000 units of output. If 15,000 units are produced during the first year of the machine's use, how much depreciation expense will be recorded for the first year of its operation?

Select one:

a. $20,000

b. $50,000

c. $25,000 

d. $100,000

e. $15,000

Feedback

Your answer is correct.

(15,000 / 75000) (125,000) = $25,000

The correct answer is: $25,000

Question 2

Incorrect

0.00 points out of 1.00

Flag question

Question text

Mountain Rescue Inc. reported the following for its most recent fiscal year: revenues of $2,500,000, operating expenses of $1,500,000, acquisition of 5 new snowmobiles $50,000, and depreciation expense of $100,000. Therefore, the company's taxable income is 

Select one:

a. $900,000.

b. $1,000,000.

c. $850,000.

d. $950,000. 

Feedback

Your answer is incorrect.

The snowmobile acquisition is a capital investment, and is therefore not directly included in the calculation of net income. Instead, a portion of the $50,000 purchase price is included in the company's depreciation expense.

The correct answer is: $900,000.

Question 3

Correct

1.00 points out of 1.00

Flag question

Question text

Bansko Inc. has just purchased a new lift for $200,000. The lift's useful life is 8 years, and the company expects the salvage value at the end of year 8 to be $40,000. Using straight-line depreciation, the annual depreciation expense will be _________, and the book value of the lift at the end of year 5 will be _________.

Select one:

a. $30,000; $100,000

b. $20,000; $75,000

c. $30,000; $50,000

d. $20,000; $100,000 

e. $25,000; $75,000

f. $25,000; $50,000

Feedback

Your answer is correct.

(200,000 - 40,000) / 8 = $20,000 will be depreciated every year.

200,000 - (20,000)(5) = $100,000 will be the remaining book value after 5 years.

The correct answer is: $20,000; $100,000

Question 4

Correct

1.00 points out of 1.00

Flag question

Question text

When a $50,000 depreciation expense is incurred

Select one:

a. it is equivalent to a $50,000 cash inflow.

b. there is no impact on cash flows and thus depreciation doesn't need to be included in a cash flow based project analysis.

c. it is equivalent to a $50,000 cash outflow.

d. there is no direct impact on the cash flows, but depreciation does impact the amount of cash paid in taxes. 

Feedback

Your answer is correct.

Depreciation is non-cash expense (the cash is paid when the asset is purchased), but it lowers taxable income, resulting in tax saving and thus less cash paid in taxes.

The correct answer is: there is no direct impact on the cash flows, but depreciation does impact the amount of cash paid in taxes.

Question 5

Correct

1.00 points out of 1.00

Flag question

Question text

Which of the following would be a result of changing from the straight-line to the accelerated (MACRS) method of depreciation?

Select one:

a. higher overall depreciation expense.

b. lower taxable income in the early years of a project's life. 

c. lower taxes in the later years of a project's life.

d. lower overall depreciation expense.

Feedback

Your answer is correct.

Accelerated depreciation methods do not change the overall depreciation amount. When using accelerated depreciation, more of the asset's value is depreciated earlier, and less of the value later, resulting in a lower taxable income in the earlier years and in correspondingly higher taxable income in the later years, effectively resulting in delaying some of the taxes paid by the company. Note that paying taxes later results in a lower present value of the tax payment, and thus in an increase in the present value of the cash flows available to shareholders.

The correct answer is: lower taxable income in the early years of a project's life.

Question 6

Correct

1.00 points out of 1.00

Flag question

Question text

Assume the price index in years 2016, 2017, and 2018 is equal to 120, 140, and 130 in the same respective order. Thus, the inflation rate in 2017 is equal to approximately

Select one:

a. 17% 

b. 8%

c. -7%

d. 20%

Feedback

Your answer is correct.

Inflation rate is calculated as the percentage increase in the price index from the previous time period, thus the inflation rate in 2017 is calculated as the percentage increase in the price index from year 2016, giving (140-120) / 120 = 17%.

The correct answer is: 17%

Question 7

Correct

1.00 points out of 1.00

Flag question

Question text

One U.S. dollar is trading for 0.90 euros. One pound is trading for 1.5 euros. How many pounds would you get for $100?

Select one:

a. 60 

b. 74

c. 167

d. 135

Feedback

Your answer is correct.

First, you will get ($100)(0.90) = 90 euros

Then, exchanging euros for pounds, you will get (90)/1.5 = 60 pounds

The correct answer is: 60

Question 8

Correct

1.00 points out of 1.00

Flag question

Question text

You come across a photograph taken in year 1983. The photo displays a gas station with a gasoline price sign stating $0.76 per gallon. We could say that this price is quoted in __________ dollars. All of the choices below would make the previous statement correct, EXCEPT:

Select one:

a. nominal dollars

b. actual dollars

c. real dollars 

d. current dollars

Feedback

Your answer is correct.

To use the term "real dollars" we would need to first adjust for inflation. All of the other terms refer to the price as quoted.

The correct answer is: real dollars

Question 9

Correct

1.00 points out of 1.00

Flag question

Question text

Assume that you are presented with an analysis of a possible expansion project. In the analysis, projected net cash flows resulting from the expansion were discounted using the firm's cost of capital. The net present value of the project was computed to be positive, and therefore the project was recommended to be accepted. In describing the assumptions made, the analyst revealed that the projected cash flows were based entirely on projected quantities sold and current input and product prices, ignoring future price increases likely to be caused by inflation. Which of the below is correct?

Select one:

a. The analyst made a mistake and needs to recalculate the project's net present value, assuming higher prices in the future as implied by the estimated inflation rate. 

b. The analyst made a mistake and needs to recalculate projected cash flows assuming higher future prices due to inflation, but the analyst also must make sure that the discount rate used is adjusted for inflation by subtracting the estimated inflation rate from the firm's cost of capital.

c. The analyst must make sure that real cost of capital was used as a discount rate in the calculation. If not, then the future cash flow estimates must be adjusted using higher future prices as indicated by the estimated inflation rate. 

d. The analyst was correct in ignoring the inflation rate in the analysis, because what matters is the project's real cash flows, not cash flows artificially increased by inflation.

Feedback

Your answer is correct.

There are two correct ways to deal with inflation. Both lead to the same net present value of a project.

1. Use nominal cash flows and nominal discount rate.

2. Use real cash flows and real discount rate.

The correct answer is: The analyst must make sure that real cost of capital was used as a discount rate in the calculation. If not, then the future cash flow estimates must be adjusted using higher future prices as indicated by the estimated inflation rate.

Question 10

Correct

1.00 points out of 1.00

Flag question

Question text

Assume you plan on exchanging dollars for yen and buy shares of common stock of a Japanese company directly on a Japanese stock exchange. Assume the stock does not pay dividends. If the price of the stock you bought is 8% higher next year, and dollar depreciates against yen by 10% over the same time period, then in terms of the dollar your rate of return is equal to approximately 

Select one:

a. -2%

b. 10%

c. 2%

d. 18% 

Feedback

Your answer is correct.

Japanese yen got stronger and thus will buy 10% more dollars, so in addition to earning an 8% return in Japan you also earn an additional 10% from yen gaining value against the dollar.

The correct answer is: 18%

Question 11

Correct

3.75 points out of 3.75

Flag question

Question text

(NOTE: ENTER YOUR ANSWER WITHOUT THE $ AND COMMA, ROUNDED TO THE NEAREST DOLLAR, for instance as 10023, not as $10,022.78)

Thunder Ice Arena has purchased a new zamboni (ice resurfacer) for $67000. It will be depreciated over 6 years using the straight line depreciation method, with zero salvage value assumed at the end of year 6. 

Assuming the ice arena decides to sell the zamboni after 3 years, and is able to sell it for $39000, what will be the after-tax cash amount collected from the sale? The tax rate is assumed to be 28%. DO NOT ROUND IN YOUR CALCULATION STEPS (USE CALCULATOR MEMORY FUNCTIONS)

Answer:

Feedback

The amount of annual depreciation is 67000 / 6 =11166.666666667 .

The book value after 3 years is then 67000 - (11166.666666667)(3) = 33500.

The after-tax cash from sale is then 39000 - (0.28)(39000 - 33500)

The correct answer is: 37460

Question 12

Incorrect

0.00 points out of 3.75

Flag question

Question text

(NOTE: ENTER YOUR ANSWER WITHOUT THE $ AND COMMA, ROUNDED TO THE NEAREST DOLLAR, for instance as 10023, not as $10,022.78. Make sure if the answer is negative that you include the negative sign in front of your answer, for example -10023)

Big Cone Ice Cream Inc. purchased a new cutting edge slush making machine for $11000. The machine will be depreciated, using the straight-line method, over 8 years to a zero salvage value. The new machine will result in additional annual revenues of $47000, and an annual increase in expenses of $28000. If the tax rate is 24%, what will be the annual after-tax cash flow from the machine? DO NOT ROUND IN YOUR CALCULATION STEPS (USE CALCULATOR MEMORY FUNCTIONS)

Answer:

Feedback

The annual depreciation is 11000 / 8 = 1375

The ATCF is then (47000 - 28000 - 1375) (1-0.24) + 1375

The correct answer is: 14770

Question 13

Correct

3.75 points out of 3.75

Flag question

Question text

(NOTE: ENTER YOUR ANSWER WITHOUT THE $ AND COMMA, ROUNDED TO THE NEAREST DOLLAR, for instance as 10023, not as $10,022.78)

Pallavi receives $17000 from her uncle. She deposits the money in an account and leaves it there for 13 years. Assuming the account earns 7% interest rate, and the inflation rate is 1%, what is the balance in the account at the end of 13 years, expressed in real terms (in terms of today's purchasing power)? Do not use any approximations in your calculations. DO NOT ROUND IN YOUR CALCULATION STEPS (USE CALCULATOR MEMORY FUNCTIONS)

Answer:

Feedback

Calculating future value first:

17000 (F/P, 7%, 13) = 40967.365003197

Then converting to today's purchasing power:

40967.365003197 (P/F, 1%, 13) gives the correct answer

The correct answer is: 35996

Question 14

Incorrect

0.00 points out of 3.75

Flag question

Question text

(NOTE: ENTER YOUR ANSWER IN PERCENT, BUT WITHOUT THE % SIGN, rounded to 2 decimal places, for instance as 7.89, not as 7.89%, or not as 0.0789)

Assuming market interest rate is 7.3% and real interest rate is 3.9%, what is the rate of inflation? Use the exact relationship between the rates, not an approximation. Your answer needs to be exact! DO NOT ROUND IN YOUR CALCULATION STEPS (USE CALCULATOR MEMORY FUNCTIONS)

Answer:

Feedback

From (1+NOM) = (1+REAL) (1+INFL) we have (1+INFL) = (1+NOM)/(1+REAL), thus INFLATION RATE = (1+NOM)/(1+REAL) -1

inflation rate = (1 + 0.073) / (1 + 0.039) - 1

The correct answer is: 3.27

 

 

a

a

<add here>
 

aa

<add here>
 

a

a

<add here>
 

a