8. Which is an example of discounting? A. Prejudice B. Depreciation Interest pay

Question

8. Which is an example of discounting? A. Prejudice B. Depreciation Interest payments on bonds Future free cash flows 9. What is the future value of $100 deposited today in 60 years, earning annual compound interest of 13%? a. $97,333.14 $153,00s.35 c. $213,741.82 d. $224,741.82 10. What is the future value of $100 deposited today in 100 years, earning annual compound interest of 13%? $20,316,287.42 b. $72,554,963.01 c. $76,541,221.90 d. $113,761,965.54 11. Which of the following pertain to the Agency Problem: a. aligning manager's actions for the best interest of shareholders b. having a Board of Directors oversee top management providing incentives for management to act with fiduciary responsibility for the owners all of the above d 12. The yield curve: a. typically has a negative slope b. is flat because the coupon on T-bills is the same regardless of maturity date c. plots current YTM versus maturity date d. none of the above 13. What is the corporate tax rate in the U.S.? a. ranges from 0 %to 39% in a progressive structure depending on the firm's EBT b ranges from 0% to 25% in a progressive structure depending on the firm's EBT C) 21% regardless of a firm's EBT d. None of the above

Explanation / Answer

8.

Discounting is the process of determining present value of future cash flows and compounding is the process of calculating future value of present value. Example of Discounting is to determinng present value of future cash flows.

Option (D) is correct answer.

9.

Future value = $100 × (1 + 13%) ^ 60

= $100 × 1,530.0535

= $153,005.35.

Future value is $153,005.35.

Option (B) is correct answer.

10.

Future value = $100 × (1 + 13%) ^ 100

= $100 × 203,162.8742

= $20,316,287.42.

Future value is $20,316,287.42.

Option (A) is correct answer.

11.

Agency Conflict is the conflict of interest arise between owner of company (Shareholders) and Agent (Manager). In company manager act as an agent and work for the owner that is shareholder and maximize the worth of shareholder. Sometime manager ignores shareholder interest and tries to maximize their own benefit. in this case conflict of interest between manager and shareholder arise which is called agency problem.

So, all of the option are correct.

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