100% satisfaction guarantee Immediately available after payment Both online and in PDF No strings attached
logo-home
BFIN300 Final Review Exam Questions With Solutions $17.49   Add to cart

Exam (elaborations)

BFIN300 Final Review Exam Questions With Solutions

 3 views  0 purchase
  • Course
  • BFIN300
  • Institution
  • BFIN300

BFIN300 Final Review Exam Questions With Solutions Formula of NPV NPV = PV of Cash Flows - Initial Investment What is your role as an investor, treasurer, CEO or CFO? To determine which investment has a positive net present value (shareholder value) -done through capital budgeting process +...

[Show more]

Preview 3 out of 23  pages

  • October 13, 2024
  • 23
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • BFIN300
  • BFIN300
avatar-seller
UpperClass
BFIN300 Final Review Exam Questions With
Solutions

Formula of NPV NPV = PV of Cash Flows - Initial Investment




What is your role as an investor, treasurer, CEO or CFO? To determine which investment

has a positive net present value (shareholder value)

-done through capital budgeting process




+ NPV, -NPV, 0 NPV + NPV = accept (binary decision investment)


- NPV = reject

0 NPV = agnostic




5 Capital Budgeting Methods 1) Payback Period Rule


2) Discounted Payback Period

3) Average Accounting Return

4) Internal Rate of Return

5) Profitability Index

,BFIN300 Final Review Exam Questions With
Solutions
Payback Period Rule the amount of time required for an investment to pay itself (original

cost)




Discounted Payback Period Amount of time for discounted cash flow to equal 0




Discounted Cash Flow What you are losing by not investing (in a given period)




Average Accounting Return Average net income/average book value


-> average annual profit/ initial investment




Internal rate of return Discount rate that makes the NPV of a particular investment 0




Profitability Index Present value of investment future cash flows divided by its initial cost

(1+ = accept, below 1 = reject)




Internal Rate of Return (IRR) the single rate of return that summarizes the merits of a

specific project.

-depends ONLY on the cash flows of the SPECIFIC project!

, BFIN300 Final Review Exam Questions With
Solutions

IRR formula IRR = (It's value to you at the end of the term - initial investment you paid)/

Initial investment you paid

-PERCENTAGE




Formula for calculating IRR without discount rate NPV = (Initial investment) + [Value at

the end of term/(1 + R)]

NPV = ($100) + [$110/(1+R)]

1 + R = $110/$100 = 1.1

R = 10%




IRR advantages -closely related to NPV


-Leads to identical Decisions




IRR disadvantages -may result in multiple answers with nonconventional cash flows


-may lead to incorrect decisions in comparisons of mutually exclusive investments




Discounted Cash Flow Projected cash flows = important to discounted cash flow analysis

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller UpperClass. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for $17.49. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

83637 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling
$17.49
  • (0)
  Add to cart