1. Which of the following is not considered as the advantage of a company structure?
a. A company is a legal entity distinct from the owners, which enables it to conduct its operations in its own name.
b. There can be conflict of interest between those who own the company (shareholders) and those who make decisions on their behalf (managers).
c. The shareholders of most companies have limited liability.
d. A company has an indefinite life, unlike a sole proprietorship or partnership, its existence and operations are unaffected by the death or retirement of its owners.
2. You found an interesting investment which the owner promises to pay you $100 in year 1, $150 in year 2, $200 in year 3, $250 in year 4 and $300 in year 5. You feel that the owner is as reliable as the local bank, which is currently paying 5% interest per annum. Calculate the present value of this investment.
a. The present value of investment is $844.79.
b. The present value of investment is $900.
c. The present value of investment is $887.03.
d. The present value of investment is $1000.
3. Find the present value of an ordinary annuity of $4,000 per annum for 5 years if the interest rate is 8% per annum.
a. The present value is $20,000.
b. The present value is $15,970.84.
c. The present value is $25,852.85.
d. The present value is $25,000