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Multiple Choice Quiz
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1

You will receive a $250,000 inheritance 8 years from now. If you had that money today, you could invest it at 6 percent compounded annually. What is the present value of your inheritance?
A)$137,491.53
B)$149,767.15
C)$156,853.09
D)$162,408.15
E)$173,209.70
2

Briden, Inc., is planning to upgrade its computer system 3 years from now at an estimated cost of $365,000. The firm earns 8 percent on its cash investments. This has been a good year for the firm and they currently have excess cash. How much of its surplus cash will Briden need to set aside today if the firm decides to prefund the system upgrade?
A)$267,203
B)$271,909
C)$274,141
D)$282,006
E)$289,749
3

Your firm is supposed to receive an insurance settlement of $225,000 five years from now. At a discount rate of 6 percent, what is that settlement worth today?
A)$167,404
B)$167,898
C)$168,133
D)$172,349
E)$172,827
4

Wislon Electric needs to spend $189,500 today to purchase a new machine. This machine will generate income of $98,000 the first year and $154,000 the second year. After 2 years, the machine will be worthless. What is the net present value of this machine at a discount rate of 14 percent?
A)$4,406
B)$8,200
C)$13,009
D)$14,963
E)$19,620
5

Given the following future value of $1 table, what is the future value factor of $1 invested for 7 years at 8 percent?

Interest Rate
Period 7% 8% 9%
51.40261.46931.5386
61.50071.58691.6771
71.60581.71381.8280
81.71821.85091.9926

A)1.6058
B)1.7138
C)1.7182
D)1.8280
E)1.8509
6

Based on the following future value of $1 table, what is the value of $69,000 invested for 5 years at 8 percent?

Interest Rate
Period 7% 8% 9%
51.40261.46931.5386
61.50071.58691.6771
71.60581.71381.8280
81.71821.85091.9926

A)$96,779
B)$101,382
C)$103,548
D)$106,163
E)$109,496
7

Trevor purchased some land 6 years ago at a cost of $214,900. Today, he sold that land for $360,400. What is his approximate rate of return based on the following future value of $1 table?

     Interest Rate     
Period   7%      8%      9%   
51.40261.46931.5386
61.50071.58691.6771
71.60581.71381.8280
81.71821.85091.9926

A)7.0 percent
B)7.5 percent
C)8.0 percent
D)8.5 percent
E)9.0 percent
8

What is the present value of the following set of end-of-year cash flows if the discount rate is 7 percent. Use the present value of $1 table shown below.

Year Cash Flow
1 $1,600
2 $1,800
3 $2,300
4 $2,500

     Interest Rate     
Period   6%      7%      8%   
1.9434.9346.9259
2.8900.8734.8573
3.8396.8163.7938
4.7921.7629.7350

A)$6,667
B)$6,852
C)$7,008
D)$7,332
E)$7,515
9

What is the net present value of a project with the following cash flows? Assume an interest rate of 8 percent. Base your answer on the present value of $1 table shown below.

Year Cash Flow
0 -$75,000
1 $15,000
2 $15,000
3 $60,000

     Interest Rate     
Period   6%      7%      8%   
1.9434.9346.9259
2.8900.8734.8573
3.8396.8163.7938
4.7921.7629.7350

A)-$624
B)$281
C)$326
D)$413
E)$433
10

All else constant, the present value increases as:
A)either the discount rate or the time period increases.
B)the discount rate increases or the time period decreases.
C)the discount rate decreases or the time period increases.
D)either the discount rate or the time period decreases.
E)either the discount rate or the future value decreases.





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