Finance

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Highlight The Major Differences Between Finance And Managerial Accounting

QuestionIdentify some of the major differences between the fields of financial and managerial accounting. Compare and contrast these differences in terms of usefulness to managers for decision making. How do organizations cope with managers who have little knowledge of accounting? Summary The quest ... Read More

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What Is Arbitrage And Calculation Of Net Present Value

Question1. Peter has a business opportunity that requires him to invest $10000 today, and receive $12000 in one year. He can either use $10000 that he already has for this investment, or borrow the money from his bank at an interest rate of 10%. However, the $10000 he has right now is needed for urg ... Read More

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Calculation Of Net Present Value And Future Value

Question1. What is the present value (PV) of $80000 received ten years from now, assuming the interest rate is 5% per year, compounding annually?A. $38422.76B. $40000.00C. 49113.06D. 76000.002. An investor can invest $1000 at the start of a certain year, then $1000 at the end of that year and the ne ... Read More

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Calculation Of Present Value And Internal Rate Of Return

Question1. What is the present value (PV) of an investment that will pay $4000 in one year’s time and $400 every year after that, when the interest rate is 5% per year?A. $2400B. $3600C. $7200D. $80002. You are considering investing in a zero-coupon bond that will pay you its face value of $10 ... Read More

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Calculation Of Interest Rate On Investment

Question1. A truck costing $112000 is paid off in monthly installments over four years with 8% APR. After three years the owner wishes to sell the truck. What is the closest amount from the following list that he needs to pay on his loan before he can sell his truck?A. $24867B. $28678C. $31432D. $87 ... Read More

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Option Used For Calculating Opportunity Cost Of Capital

Question1. Of the following, which is most likely to be used to calculate the opportunity cost of capital on an investment?A. The best available expected return offered in any investment available in the market.B. The interest rate on 90 day bank bills.C. The interest rate of any investments’ ... Read More

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Calculate Yield To Maturity For Bonds

Question1. Maturity (years) 1 2 3 4 5 Price $97.25 $94.53 $91.83 $89.23 $87.53 The above table shows the price per $100 face value of several risk-free, zero-coupon bonds. What is the yield to maturity of the three-year, z ... Read More

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Bond Trading Below Par

Question1. Which of the following statements is FALSE?A. Zero-coupon bonds are also called pure discount bonds.B. The internal rate of return (IRR) of an investment opportunity is the discount rate at which the net present value (NPV) of the investment opportunity is equal to zero.C. The yield to ma ... Read More

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Calculation Of Payback Period

Question1. Which of the following is NOT a limitation of the payback rule?A. It does not consider the time value of moneyB. It lacks a decision criterion that is economically basedC. It is difficult to calculateD. It does not consider cash flows occurring after the payback period2. Consider the foll ... Read More

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Choosing Better Investment Option

Question1. A garage is comparing the cost of buying two different car hoists. Hoist A will cost $20000, will require servicing of $1000 every two years and last ten years. Hoist B will cost $15000, requires servicing of $800 per year and last eight years. If the cost of capital is 7%, which is bette ... Read More

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Calculation Of Incremental And Free Cash Flows

Question1. The Natural Candy Co. will release a new range of ‘healthy’ lollies containing antioxidants. New equipment to manufacture the lollies will cost $2million, which will be depreciated by straight-line depreciation over five years. In addition, there will be $5million spent on pro ... Read More

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Calculation of Manufacturing Overhead Allocation

QuestionXYZ Inc. uses machine-hours as the single indirect-cost rate to allocate manufacturing overhead costs to various jobs. XYZ budgets that it will incur the following amounts during the year: $25,000 in direct materials, $5,000 in direct manufacturing labor, $20,000 in manufacturing overhead, a ... Read More

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