AFM 273 - Quiz #4

Name:
Student ID:
Answer the questions on all "2" tabs.

Convert the following rates to an EAR

APR
15%
8%
12%
8%

Compounding
Period
Annually
Semi annually
Weekly
Monthly

EAR

0.000%

2 marks

Convert the following rates to an APR with the stated compounding period

EAR
4%
14%
8%
15%

Total marks

Compounding
Period
Annually
Semi annually
Weekly
Monthly

APR

0.000%

2 marks

0.000%

4 marks total

pounding period

marks total

Q1.

A small commercial property is for sale near your university. Given its location, you believe

would be very successful there. You have researched several possibilities and come up wi
(including the cost of purchasing the property).

Project

Initial

First Year

Investment

Csah Flow

Bookstore

$300,000

$63,000

Coffee Shop

$400,000

$80,000

Music Store

$400,000

$104,000

Electronics Store

$400,000

$100,000

For the Electronics Store, its IRR is:

2 marks

Q2.

Project
Alpha

Year 0

Year 1

C/F

C/F

-79

20

2) The NPV for project Alpha is closest to:

A) $20.96
B) $16.92
C) $24.01
D) $14.41

Use the data below for the following two questions.

Year 0

Year 1

Cash Flow

Cash Flow

-100

40

-73

30

Project

3) The payback period for project A assuming the cashflows occur evenly throughout the year is clos
A) 2.0 years
B) 2.4 years
C) 2.5 years
D) 2.2 years

4) The payback period for project B assuming the cashflows occur at the end of the year is closest to:
A) 2.0 years
B) 2.0 years
C) 2.5 years
D) 3.0 years

rsity. Given its location, you believe that a student-oreiented business

several possibilities and come up with the following cash flow estimates

Growth

Cost of

Rate

Capital

3.0%

8.0%

3.0%

8.0%

0.0%

8.0%

3.0%

11.0%

Year 2

Year 3

Year 4

Year 5

Year 6

Year 7

C/F

C/F

C/F

C/F

C/F

C/F

25

30

35

40

N/A

N/A

2 marks

estions.

Year 2

Year 3

Year 4

Cash Flow

Cash Flow

Cash Flow

Discount
Rate

50

60

N/A

0.15

30

30

30

0.15

ows occur evenly throughout the year is closest to:

ows occur at the end of the year is closest to:

Discount
Rate
15%

1 marks

1 marks