Economics Homework Help

Hi, I need support in completing 12 multiple choice questions from “fundementals to corporate finance” book.

Chapter 1

1. Vocabulary Check. Choose the term within the parentheses that best matches each of the following descriptions. (LO1-1–LO1-7)

a. Expenditure on research and development (financing decision / investment decision)

b. A bank loan (real asset / financial asset)

c. Listed on a stock exchange (closely held corporation / public corporation)

d. Has limited liability (partnership / corporation)

e. Responsible for bank relationships (the treasurer / the controller)

f. Agency cost (the cost resulting from conflicts of interest between managers and shareholders /

the amount charged by a company’s agents such as the auditors and lawyers)

2. Financial Decisions. Which of the following are investment decisions, and which are financing decisions? (LO1-1)

a. Should we stock up with inventory ahead of the holiday season?

b. Do we need a bank loan to help buy the inventory?

c. Should we develop a new software package to manage our inventory?

d. With a new automated inventory management system, it may be possible to sell off our Birdlip

warehouse.

e. With the savings we make from our new inventory system, it may be possible to increase our

dividend.

f. Alternatively, we can use the savings to repay some of our long-term debt.

3. Financial Decisions. What is the difference between capital budgeting decisions and capital structure decisions? (LO1-1)

4. Real versus Financial Assets. Which of the following are real assets, and which are financial?(LO1-2)

a. A share of stock

b. A personal IOU

c. A trademark

d. A truck

e. Undeveloped land

f. The balance in the firm’s checking account

g. An experienced and hardworking sales force

h. A bank loan agreement

5. Real and Financial Assets. Read the following passage and fit each of the following terms into the most appropriate space: financing, real, bonds, investment, executive airplanes, financial, capital budgeting, brand names. (LO1-2)

Companies usually buy _____ assets. These include both tangible assets such as _____ and

intangible assets such as _____. To pay for these assets, they sell _____ assets such as _____.

The decision about which assets to buy is usually termed the _____ or _____ decision. The

decision about how to raise the money is usually termed the _____ decision.

6. Corporations. Choose in each case the type of company that best fits the description. (LO1-3)

a. The business is owned by a small group of investors. (private corporation / public corporation)

b. The business does not pay income tax. (private corporation / partnership)

c. The business has limited liability. (sole proprietorship / public corporation)

d. The business is owned by its shareholders. (partnership / public corporation.

Chapter 2

1. Compound Interest. Old Time Savings Bank pays 4% interest on its savings accounts. If you

deposit $1,000 in the bank and leave it there: (LO5-1)

a. How much interest will you earn in the first year?

b. How much interest will you earn in the second year?

c. How much interest will you earn in the 10th year?

2. Compound Interest. New Savings Bank pays 4% interest on its deposits. If you deposit $1,000 in the bank and leave it there, will it take more or less than 25 years for your money to double? You should be able to answer this without a calculator or interest rate tables. (LO5-1)

3. Compound Interest. Suppose that the value of an investment in the stock market has increased at an average compound rate of about 5% since 1900. It is now 2019. (LO5-1)

a. If your great-grandfather invested $1,000 in 1900, how much would that investment be

worth today?

b. If an investment in 1900 has grown to $1 million, how much was invested in 1900?

4. Future Values. Compute the future value of a $100 cash flow for the following combinations of rates and times. (LO5-1)

a. r = 8%, t = 10 years

b. r = 8%, t = 20 years

c. r = 4%, t = 10 years

d. r = 4%, t = 20 years

5. Future Values. You deposit $1,000 in your bank account. (LO5-1)

a. If the bank pays 4% simple interest, how much will you accumulate in your account after

10 years?

b. How much will you accumulate if the bank pays compound interest?

6. Future Values. If you earn 6% per year on your bank account, how long will it take an account with $100 to double to $200? (LO5-1)