Fight Finance

(a) 90.6421

(b) 95.1524

(c) 95.2055

(d) 96.1219

(e) 103.9751

(a) 'Straight line' or 'prime cost' depreciation, which allocates equal depreciation expenses over each year of the asset's life.

(b) 'Diminishing value' or 'reducing balance' depreciation, which allocates more depreciation expense at the start of the asset's life and less towards the end.

(c) No depreciation at all, so the asset is always kept on the books as being the same value that it was bought for. The asset will cause no depreciation expense in any year.

(d) Allocating all of the depreciation expense to the final year of the asset's life.

(e) Allocating all of the depreciation expense to the first year of the asset's life. Accountants would call this 'expensing' the asset, rather than 'capitalising' it and depreciating it slowly.

(a) -$1,000

(b) $209.2132

(c) $644.7393

(d) $1,040.6721

(e) $1,400.611

(a) Income and capital returns both rise over time.

(b) Income and capital returns both fall over time.

(c) Income return rises and its capital return falls over time.

(d) Income return falls and its capital return rises over time.

(e) Income and capital returns are constant through time.

(a) Real returns approximately equal nominal returns less the inflation rate.

(b) Constant prices are the same as real prices.

(c) Current prices are the same as nominal prices.

(d) If your nominal wage grows by inflation, then your real wage won't change because you will be able to buy the same amount of goods and services as before.

(e) Interest rates advertised at the bank are usually quoted in real terms.

(a) $758.30

(b) $773.62

(c) $889.87

(d) $944.90

(e) $1,003.33

(a) Less than its expected total return.

(b) Equal to its expected total return.

(c) More than its expected total return.

(d) More than its coupon rate.

(e) Equal to its coupon rate.

(a) The firm currently has 3m shares on issue and will need to sell 2m new shares in the rights issue.

(b) The company should do a 2-for-3 rights issue.

(c) After the rights issue the market share price will be $17.

(d) The value of one right would be $3.

(e) If you don't take part in the rights issue and it is non-renounceable, you will lose $2 per share.

(a) The cash cycle is typically measured in days.

(b) The lower the cash cycle, the better.

(c) The cash cycle represents the time that money is invested or ‘tied up’ in inventory.

(d) Companies should avoid negative cash cycles.

(e) The cash cycle is the time between the inventory payment date to the supplier and cash receipt date from the customer.

(a) Adam has the absolute advantage at picking coconuts.

(b) Adam has the absolute advantage at picking dates.

(c) Adam has the comparative advantage at picking coconuts.

(d) Bella has the comparative advantage at picking coconuts.