MODULE 13: TIME VALUE OF MONEY

True or False:
1. FALSE
2. FALSE
3. FALSE
4. TRUE
5. FALSE
6. TRUE
7. FALSE
8. TURE
9. TRUE
10. FALSE
11. TRUE
12. TRUE
13. TRUE
14. TRUE
15. TRUE
16. FALSE
17. TRUE
18. FALSE
19. TRUE
20. TRUE
21. TRUE
22. TRUE
23. FALSE
24. TRUE
25. FALSE
26. FALSE
27. TRUE
28. FALSE
29. FALSE
30. FALSE

Multiple Choice:
1. C
2. B
3. B
4. A
5. D
6. B
7. C
8. A
9. D
10. B
11. B
12. B
13. D
14. E
15. D

Practice Exercises:
Answers:
1. 3,558
2. 5,131
 3. 952
4. 14.87
5. 11.6
6. 5,727, 6,300
7. 673
8. 193
9. 1,100
10. 12.68
11. 12.55
12. 12.36
13. 4,144, 3,699
14. 9.7
15. 8.19
16. 117,647, 118,824
17. 1,433
18. 108,026
19. Value of winning is 6,079,058. After tax is 0.65 * 6,079,058 = 3,951,387. Expected value is then 1/7,000,000 *
3,951,387 = P.56. Thus, the expected value of the P1 ticket is only 56 cents. That’s how the state makes
money! Plus most states only pay out 50% of all receipts so they are already up 10,000,000 to start with.
20. 5,493 days
21. 679 months, 680 months
22. P1,254
23. P19,964.12
24. P1,428.57
25. P203,391.33
26. P35,720.84
27. P7,440.94
28. P121,663.50
29. P38,415
30. P54,908.55
31. P13821
32. P27,548
33. P102,228 and P95,312
34. P36,897
35. P361,374

MODULE 13: COST OF CAPITAL

True or false
1. True
2. False
3. False
4. True
5. True
6. False
7. False
8. True
9. True
10. False
11. False
12. False
13. True
14. False
15. True
16. False
17. True
18. False
19. False
 20. False
21. False
22. False
23. False
24. False
25. True
26. True
27. False
28. False
29. False
30. True

Multiple choice theories

1. C
2. A
3. A
4. A
5. D
6. A
7. B
8. A
9. D
10. B
11. A
12. C
13. D
14. C
15. D
16. D
17. C
18. D
19. A
20. A

CAPM
21. A
22. A
23. C
BONDS PLUS APPROACH
24. D
25. C
26. D
PREFERRED STOCK
27. B
28. C
29. B
RETAINED EARINGS
30. C
31. A
32. C
WEIGHTED AVERAGE COST OF CAPITAL MARKET VALUE
33. C
34. B
35. D
ISSUANCE OF NEW COMMON STOCK EQUITY
36. B
37. A
38. B
GORDON’S GROWTH MODEL
39. A
40. B
41. A
WEIGHTED AVERAGE COST OF CAPITAL BOOK VALUE
42. C
43. C
44. A
WEIGHTED AVERAGE COST OF CAPITAL MARGINAL WEIGHTS
45. A
46. A
47. A
COST OF DEBT
48. B
49. A
50. B
MODULE 15: BOND VALUATION

True or False
1 TRUE
2 FALSE
3 FALSE
4 FALSE
5 FALSE
6 FALSE
7 TRUE
8 TRUE
9 TRUE
10 TRUE
11 TRUE
12 TRUE
13 FALSE
14 FALSE
15 FALSE
16 TRUE
17 TRUE
18 TRUE
19 TRUE
20 TRUE

Multiple Choice

1 A 26 B
2 D 27 C
3 C 28 E
4 D 29 B
5 A 30 C
6 D 31 B
7 D 32 D
8 B 33 B
9 B 34 B
10 C 35 C
11 B 36 B
12 B 37 A
13 C 38 B
14 C 39 C
15 D 40 D
16 E 41 A
17 A 42 B
18 E 43 A
19 B 44 C
20 E 45 A
21 C 46 A
22 A 47 A
23 D 48 B
24 A 49 C
25 B 50 D