A three year project's NPV is negative. The cash flows of the project include a negative cash flow at the very start and positive cash flows over its short life. The required return of the project is 10% pa. Select the most correct statement.
A three year corporate bond yields 12% pa with a coupon rate of 10% pa, paid semi-annually.
Find the effective six month yield, effective annual yield and the effective daily yield. Assume that each month has 30 days and that there are 360 days in a year.
All answers are given in the same order:
##r_\text{eff semi-annual}##, ##r_\text{eff yearly}##, ##r_\text{eff daily}##.
A stock is expected to pay a dividend of $15 in one year (t=1), then $25 for 9 years after that (payments at t=2 ,3,...10), and on the 11th year (t=11) the dividend will be 2% less than at t=10, and will continue to shrink at the same rate every year after that forever. The required return of the stock is 10%. All rates are effective annual rates.
What is the price of the stock now?
Which of the following statements about effective rates and annualised percentage rates (APR's) is NOT correct?
A young lady is trying to decide if she should attend university or begin working straight away in her home town.
The young lady's grandma says that she should not go to university because she is less likely to marry the local village boy whom she likes because she will spend less time with him if she attends university.
What's the correct way to classify this item from a capital budgeting perspective when trying to decide whether to attend university?
The cost of not marrying the local village boy should be classified as:
A firm is considering a business project which costs $10m now and is expected to pay a single cash flow of $12.1m in two years.
Assume that the initial $10m cost is funded using the firm's existing cash so no new equity or debt will be raised. The cost of capital is 10% pa.
Which of the following statements about net present value (NPV), internal rate of return (IRR) and payback period is NOT correct?
A Chinese man wishes to convert AUD 1 million into Chinese Renminbi (RMB, also called the Yuan (CNY)). The exchange rate is 6.35 RMB per USD, and 0.72 USD per AUD. How much is the AUD 1 million worth in RMB?
Question 702 utility, risk aversion, utility function, gamble
Mr Blue, Miss Red and Mrs Green are people with different utility functions.
Each person has $50 of initial wealth. A coin toss game is offered to each person at a casino where the player can win or lose $50. Each player can flip a coin and if they flip heads, they receive $50. If they flip tails then they will lose $50. Which of the following statements is NOT correct?
Question 771 debt terminology, interest expense, interest tax shield, credit risk, no explanation
You deposit money into a bank account. Which of the following statements about this deposit is NOT correct?