1. If you assume that a project being considered has normal cash flows, with one outflow followed by a series of inflows, which statement would be correct?
a) The lower the cost of capital used to calculate a project's NPV, the lower the calculated NPV will be.
b) If a project's NPV is less than zero, then its IRR must be less than the cost of capital.
c) A project’s NPV is found by compounding the cash inflows at the IRR to find the terminal value (TV), then discounting the TV at the cost of capital.
d) The NPV of a relatively low-risk project should be found using relatively high cost of capital.
2. The CEO of the Riszen Group has started the planning process for the company's operations next year and she needs a forecast of the firm's AFN. Assuming the firm is operating at full capacity, and using the provided data and the AFN equation, what is the AFN for the coming year? Dollars are in millions. Last year's sales = S0 $350 Last year's accounts payable $40 Sales growth rate = g 30% Last year's notes payable $50 Last year's total assets = A0* $500 Last year's accruals $30 Last year's profit margin = PM 5% Target payout ratio 60%
a) $125.9
b) $119.9
c) $113.9
d) $108.2
3. The CEO of the Riszen Group has started the planning process for the company's operations next year and she needs a forecast of the firm's AFN. Assuming the firm is operating at full capacity, and using the provided data and the AFN equation, what is the AFN for the coming year? Dollars are in millions. Last year's sales = S0 $350 Last year's accounts payable $40 Sales growth rate = g 30% Last year's notes payable $50 Last year's total assets = A0* $500 Last year's accruals $30 Last year's profit margin = PM 5% Target payout ratio 60%
a) $125.9
b) $119.9
c) $113.9
d) $108.2
4. If a coupon bond sells at par, its current yield is equal its yield to maturity. Question 8 options:
a) True
b) False