Answered: Which of the following statements about…

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 4MC

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Question

1) Which of the following statements about time value of money is not correct?

Present value of money is today's value of money.
Money grows with interest and time.
Value of $1 today is greater than tomorrow.
Value of $1 today is less than tomorrow.

2) The present value of a lump sum is:

today's value of expected cost savings in the future.
today's value of a total future cash flow.
today's value of multiple equal payments in the future.
today's value of a single payment in the future.

3) ACE Company acquired $500,000 to construct a new warehouse. To obtain this fund, the company issued 3,000 preferred stocks with $100 par value and 8% dividend rate for $300,000 and bonds for $100,000 with 5% interest, and borrowed the rest from its bank with 6% interest rate. The company requires a 3% buffer margin.

What is the required rate of return on this project?

7%
12%
10%
13.9%
10.9%

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