FIN 534 Midterm Exam 1

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FIN 534 Midterm Exam 1
1. Of the following investments, which would have the lowest present value? Assume that the effective annual rate for all investments is the same and is greater than zero.
2. You plan to analyze the value of a potential investment by calculating the sum of the present values of its expected cash flows. Which of the following would increase the calculated value of the investment?
3. Which of the following statements regarding a 20-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT?
4. Which of the following statements is CORRECT, assuming positive interest rates and holding other things constant?
5. You are considering two equally risky annuities, each of which pays $25,000 per
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11. Which of the following items cannot be found on a firm's balance sheet under current liabilities?
12. For managerial purposes, i.e., making decisions regarding the firm's operations, the standard financial statements as prepared by accountants under Generally Accepted Accounting Principles (GAAP) are often modified and used to create alternative data and metrics that provide a somewhat different picture of a firm's operations. Related to these modifications, which of the following statements is CORRECT?
14. Lucy's Music Emporium opened its doors on January 1, 2012, and it was granted permission to use the same depreciation calculations for shareholder reporting and income tax purposes. The company planned to depreciate its fixed assets over 20 years, but in December 2012 management realized that the assets would last for only 15 years. The firm's accountants plan to report the 2012 financial statements based on this new information. How would the new depreciation assumption affect the company's financial statements?
17. Danielle's Sushi Shop last year had (1) a negative net cash flow from operations, (2) a negative free cash flow, and (3) an increase in cash as reported on its balance sheet. Which of the following factors could explain this situation?
19. Which of the following would indicate an improvement in a company's financial position, holding other things constant?
20. Cordelion Communications is considering issuing new common stock and

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