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FINA 4330 Exam 1 Review Questions And Answers $9.79   Add to cart

Exam (elaborations)

FINA 4330 Exam 1 Review Questions And Answers

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  • Course
  • FINC 4330
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  • FINC 4330

NPV Rule - ANS Accept projects with NPV>0 Fisher Separation Theorem - ANS Investment decision DOES NOT depend on preferences of individual investors for current versus future income IRR - ANS The discount rate that makes the NPV zero IRR Rule - ANS Accep...

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  • November 8, 2024
  • 2
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • FINC 4330
  • FINC 4330
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FINA 4330 Exam 1 Review Questions
And Answers


NPV Rule - ANS Accept projects with NPV>0

Fisher Separation Theorem - ANS Investment decision DOES NOT depend on preferences
of individual
investors for current versus future income

IRR - ANS The discount rate that makes the NPV zero

IRR Rule - ANS Accept projects with IRR>r (discount rate)

IRR Pitfalls - ANS Two opposite projects

No IRR or multiple IRRs

Wrong decision when choosing among mutually exclusive projects

Payback Rule - ANS Accept a project if its payback period is less than some specified
cutoff period

Payback Period - ANS # of years to recover initial investment

Payback Rule Pitfalls - ANS It ignores all cash flows after the cutoff date.

No time value of money is considered.

Enterprise Value - ANS The market value of the firm's operating assets

EBT - ANS Earnings before tax or income before tax

EBIT - ANS Earnings Before Interest and Tax

Bonds - ANS Liability

Stocks - ANS Equity

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