5. If you are evaluating a project that has a cost of capital of 12% and your an

Question

5. If you are evaluating a project that has a cost of capital of 12% and your analysis results in a negative NPV, which of the following statements is true?

Question 5 options:

The IRR is higher than 12%.

There is no relationship between the IRR and the NPV.

The IRR is lower than 12%.

The IRR is exactly equal to 12%.

6. You wish to have $1,500,000 by the age of 60 (30 years from now). If you can earn 8% interest on your investments, how much do you need to save per month, in order to achieve your goal?

$409.88

$1,006.47

$45,332.49

$822.39

7.  You decide you can afford house payments (principle and interest) of $900 per month. Given an annual rate of 5.5% for a 30 year loan, how much will you be able to borrow?

$25,172.21

$158,509.59

$324,000.00

$65,191.93

12. A company's 'bottom line' or net income decreased. Which of the following statements is most correct?

Question 12 options:

Either sales decreased, expenses increased, or both may have happened.

The only possible cause is that sales decreased.

Either sales increased, expenses decreased, or both may have happened.

The only possible cause is that expenses increased.

The IRR is higher than 12%.

There is no relationship between the IRR and the NPV.

The IRR is lower than 12%.

The IRR is exactly equal to 12%.

6. You wish to have $1,500,000 by the age of 60 (30 years from now). If you can earn 8% interest on your investments, how much do you need to save per month, in order to achieve your goal?

Question 6 options:

$409.88

$1,006.47

$45,332.49

$822.39

7.  You decide you can afford house payments (principle and interest) of $900 per month. Given an annual rate of 5.5% for a 30 year loan, how much will you be able to borrow?

Question 7 options:

$25,172.21

$158,509.59

$324,000.00

$65,191.93

12. A company's 'bottom line' or net income decreased. Which of the following statements is most correct?

Question 12 options:

Either sales decreased, expenses increased, or both may have happened.

The only possible cause is that sales decreased.

Either sales increased, expenses decreased, or both may have happened.

The only possible cause is that expenses increased.

Explanation / Answer

5.

Correct option is > The IRR is lower than 12%.

NPV is Zero if IRR and Cost of capital is same. Hence, IRR is lower than 12%.

.

6.

Correct option is > $1,006.47

Using financial calculator BA II Plus - Input details:

#

FV = Future Value =

-$1,500,000.00

PV = Present Value =

$0.00

I/Y = Rate / Frequency = 8/12 =

0.666667

N = Number of years x frequency = 30 x 12 =

360

CPT > PMT = Payment =

$1,006.47

.

7.

Correct option is > $158,509.59

Using financial calculator BA II Plus - Input details:

#

I/Y = Rate /12 = 5.5/12 =

              0.458333

PMT = Payment =

-$900.00

N = Number of years remaining x frequency =

360

FV = Future Value =

$0.00

CPT > PV = Present value = Investment Value =

$158,509.59

.

8.

Correct option is > Either sales decreased, expenses increased, or both may have happened.

Either sales would have decreases or expenses would have increased or both could be the case.

5.

Correct option is > The IRR is lower than 12%.

NPV is Zero if IRR and Cost of capital is same. Hence, IRR is lower than 12%.

.

6.

Correct option is > $1,006.47

Using financial calculator BA II Plus - Input details:

#

FV = Future Value =

-$1,500,000.00

PV = Present Value =

$0.00

I/Y = Rate / Frequency = 8/12 =

0.666667

N = Number of years x frequency = 30 x 12 =

360

CPT > PMT = Payment =

$1,006.47

.

7.

Correct option is > $158,509.59

Using financial calculator BA II Plus - Input details:

#

I/Y = Rate /12 = 5.5/12 =

              0.458333

PMT = Payment =

-$900.00

N = Number of years remaining x frequency =

360

FV = Future Value =

$0.00

CPT > PV = Present value = Investment Value =

$158,509.59

.

8.

Correct option is > Either sales decreased, expenses increased, or both may have happened.

Either sales would have decreases or expenses would have increased or both could be the case.

Using financial calculator BA II Plus - Input details:

#

FV = Future Value =

-$1,500,000.00

PV = Present Value =

$0.00

I/Y = Rate / Frequency = 8/12 =

0.666667

N = Number of years x frequency = 30 x 12 =

360

CPT > PMT = Payment =

$1,006.47

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