Test Bank for
Principles of Corporate Finance 14th Edition by Richard Brealey, Stewart Myers,
Franklin Allen and Alex Edmans
Answers are at the end of each chapter
Student name:__________
1) Mr. Free has $90 in income this year and will have zero income next year. The market
interest rate is 10 percent per year. If Mr. Free consumes $40 this year and invests the rest in the
market, what will be available for his consumption next year?
1) ______
A) $28
B) $33
C) $55
D) $78
Question Details
Difficulty : 2 Medium
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
AACSB : Analytical Thinking
Bloom's : Apply
Learning Objective : 01-01 Corporate Investment and Financing Decisions
Topic : Investment vs Financing Decision
Gradable : automatic
2) Mr. Bird has $110 in income this year and will have zero income next year. The market
interest rate is 10 percent per year. Mr. Bird also has an investment opportunity in which he can
invest $30 today and receive $94 next year. Suppose Mr. Bird consumes $30 this year and
invests in the project. How much will be available for his consumption next year?
2) ______
Version 1 1
, A) $127
B) $129
C) $147
D) $149
Question Details
Difficulty : 2 Medium
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
AACSB : Analytical Thinking
Bloom's : Apply
Learning Objective : 01-01 Corporate Investment and Financing Decisions
Topic : Investment vs Financing Decision
Gradable : automatic
3) Ms. Venus has $100 in income this year and will have $134 next year. The market
interest rate is 10 percent per year. Suppose Ms. Venus consumes $60 this year. How much will
be available for her consumption next year?
3) ______
A) $144
B) $178
C) $194
D) $234
Question Details
Difficulty : 2 Medium
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
AACSB : Analytical Thinking
Bloom's : Apply
Learning Objective : 01-01 Corporate Investment and Financing Decisions
Topic : Investment vs Financing Decision
Gradable : automatic
Version 1 2
,4) Mr. Thomas has $100 in income this year and will have zero income next year. The
market interest rate is 10 percent per year. Mr. Thomas also has an investment opportunity in
which he can invest $60 this year and receive $62 next year. Suppose Mr. Thomas consumes $50
this year and invests in the project. What will be his consumption next year?
4) ______
A) $21
B) $26
C) $51
D) $81
Question Details
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
AACSB : Analytical Thinking
Bloom's : Apply
Learning Objective : 01-01 Corporate Investment and Financing Decisions
Topic : Investment vs Financing Decision
Gradable : automatic
Difficulty : 3 Hard
5) Mr. Dell has $100 in income this year and will have zero income next year. The expected
return from investing in the stock market is 10 percent a year. Mr. Dell also has an investment
opportunity—having the same risk as the market in which he can invest $50 this year and receive
$104 next year. Suppose Mr. Dell consumes $50 this year and invests in the project. What is the
NPV of the investment opportunity?
5) ______
A) $0
B) $6
C) $44.55
D) none of the options
Version 1 3
, Question Details
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
AACSB : Analytical Thinking
Bloom's : Apply
Learning Objective : 01-01 Corporate Investment and Financing Decisions
Gradable : automatic
Difficulty : 3 Hard
Topic : Net Present Value
6) Ms. Delgado has $76,000 in income this year and will have $56,000 next year. The
market interest rate is 10 percent per year. Suppose Ms. Delgado consumes $96,000 this year.
How much will be available for her consumption next year?
6) ______
A) $34,000
B) $38,000
C) $76,000
D) $86,000
Question Details
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
AACSB : Analytical Thinking
Bloom's : Apply
Learning Objective : 01-01 Corporate Investment and Financing Decisions
Gradable : automatic
Difficulty : 3 Hard
Topic : Net Present Value
7) Ms. Newcastle has $60,000 in income this year and will have $51,000 next year. The
market interest rate is 10 percent per year. Suppose Ms. Newcastle wishes to consume $85,100
next year. How much will she be able to consume this year?
7) ______
Version 1 4
Principles of Corporate Finance 14th Edition by Richard Brealey, Stewart Myers,
Franklin Allen and Alex Edmans
Answers are at the end of each chapter
Student name:__________
1) Mr. Free has $90 in income this year and will have zero income next year. The market
interest rate is 10 percent per year. If Mr. Free consumes $40 this year and invests the rest in the
market, what will be available for his consumption next year?
1) ______
A) $28
B) $33
C) $55
D) $78
Question Details
Difficulty : 2 Medium
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
AACSB : Analytical Thinking
Bloom's : Apply
Learning Objective : 01-01 Corporate Investment and Financing Decisions
Topic : Investment vs Financing Decision
Gradable : automatic
2) Mr. Bird has $110 in income this year and will have zero income next year. The market
interest rate is 10 percent per year. Mr. Bird also has an investment opportunity in which he can
invest $30 today and receive $94 next year. Suppose Mr. Bird consumes $30 this year and
invests in the project. How much will be available for his consumption next year?
2) ______
Version 1 1
, A) $127
B) $129
C) $147
D) $149
Question Details
Difficulty : 2 Medium
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
AACSB : Analytical Thinking
Bloom's : Apply
Learning Objective : 01-01 Corporate Investment and Financing Decisions
Topic : Investment vs Financing Decision
Gradable : automatic
3) Ms. Venus has $100 in income this year and will have $134 next year. The market
interest rate is 10 percent per year. Suppose Ms. Venus consumes $60 this year. How much will
be available for her consumption next year?
3) ______
A) $144
B) $178
C) $194
D) $234
Question Details
Difficulty : 2 Medium
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
AACSB : Analytical Thinking
Bloom's : Apply
Learning Objective : 01-01 Corporate Investment and Financing Decisions
Topic : Investment vs Financing Decision
Gradable : automatic
Version 1 2
,4) Mr. Thomas has $100 in income this year and will have zero income next year. The
market interest rate is 10 percent per year. Mr. Thomas also has an investment opportunity in
which he can invest $60 this year and receive $62 next year. Suppose Mr. Thomas consumes $50
this year and invests in the project. What will be his consumption next year?
4) ______
A) $21
B) $26
C) $51
D) $81
Question Details
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
AACSB : Analytical Thinking
Bloom's : Apply
Learning Objective : 01-01 Corporate Investment and Financing Decisions
Topic : Investment vs Financing Decision
Gradable : automatic
Difficulty : 3 Hard
5) Mr. Dell has $100 in income this year and will have zero income next year. The expected
return from investing in the stock market is 10 percent a year. Mr. Dell also has an investment
opportunity—having the same risk as the market in which he can invest $50 this year and receive
$104 next year. Suppose Mr. Dell consumes $50 this year and invests in the project. What is the
NPV of the investment opportunity?
5) ______
A) $0
B) $6
C) $44.55
D) none of the options
Version 1 3
, Question Details
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
AACSB : Analytical Thinking
Bloom's : Apply
Learning Objective : 01-01 Corporate Investment and Financing Decisions
Gradable : automatic
Difficulty : 3 Hard
Topic : Net Present Value
6) Ms. Delgado has $76,000 in income this year and will have $56,000 next year. The
market interest rate is 10 percent per year. Suppose Ms. Delgado consumes $96,000 this year.
How much will be available for her consumption next year?
6) ______
A) $34,000
B) $38,000
C) $76,000
D) $86,000
Question Details
Accessibility : Keyboard Navigation
Accessibility : Screen Reader Compatible
AACSB : Analytical Thinking
Bloom's : Apply
Learning Objective : 01-01 Corporate Investment and Financing Decisions
Gradable : automatic
Difficulty : 3 Hard
Topic : Net Present Value
7) Ms. Newcastle has $60,000 in income this year and will have $51,000 next year. The
market interest rate is 10 percent per year. Suppose Ms. Newcastle wishes to consume $85,100
next year. How much will she be able to consume this year?
7) ______
Version 1 4
