Question 1: Which of the these activities is a capital budgeting task?
- determining the amount of cash needed on a daily basis to operate a firm
- identifying assets that produce value in excess of the cost to acquire those assets
- establishing the inventory level
- establishing a new credit policy
Question 2: Book values are different from market values because:
- Book values reflect the value of the asset based on generally-accepted accounting principles.
- Book values are used in the company's balance sheet.
- Book values do not reflect the amount someone is willing to pay today for an asset.
- All of the above
- None of the above
Question 3: Regional Bank offers you an APR of 19 percent compounded semiannually, and Local Bank offers you an EAR of 19.50 percent for a new automobile loan. You should choose ______________ because its _______ is lower.
- Regional Bank, APR
- Local Bank, EAR
- Regional Bank, EAR
- Local Bank, APR
Question 4: You deposited $8,000 in your bank account today. Which of the following will increase the future value of your deposit, assuming that all interest is reinvested? Assume the interest rate is a positive value. Select all that apply:
- a decrease in the interest rate
- increasing the initial amount of your deposit
- decreasing the frequency of the interest payments
- extending the length of the investment period
Question 5: You want to have $15,000 for a down payment on a house five years from now. If you can earn 13 percent, compounded annually, on your savings, how much do you need to deposit today to reach your goal?
- $7,858.11
- $8,141.40
- $9,803.58
- $12,464.28
- $14,213.25