Introduction to Corporate Finance (Week 1 – 4) Quiz Answers

Introduction to Corporate Finance Week 1 Quiz Answers – Coursera!

Module 1 Quiz Answers

Q1. You will receive an inheritance of \$500,000$500,000 in
20 years on your 40th birthday. What is the value of the inheritance today if
the discount rate is 10\%10%?

• 74,321.8174,321.81
• 500,000500,000
• 50,00050,000
• 3,363,7493,363,749

Q2. What is the present value (i.e., price) today of a bond
that will pay its owner \$1,000,000$1,000,000 five years from today if the
discount rate is 4\%4% per annum?

• 821,927.11
• 40,00040,000
• 1,000,0001,000,000
• 1,216,652.901,216,652.90

Q3. Imagine that you deposit \$6,000$6,000 a year, starting
one year from today, for four years into a savings account paying 6\%6% per
annum.

(That is one deposit of \$6,000$6,000 per year.)

How much money will you have immediately after you make your
fourth and final deposit?

• 30,299.4430,299.44
• 27,822.5627,822.56
• 26,247.7026,247.70
• 24,00024,000

Q4. Imagine that your goal is to retire 34 years from today
with $1,000,000 in savings. Assuming that you currently (i.e., today) have
$5,000 in savings, what rate of return must you earn on that savings to hit
your goal?

• 0.16860.1686
• 0.20000.2000
• 4.88244.8824
• 0.48820.4882

Q5. Assume that a bond makes 30 equal annual payments of
\$1,000$1,000 starting one year from today. (This security is sometimes
referred to as an amortizing bond.)

If the discount rate is 3.5\%3.5% per annum, what is the
current price of the bond?

• 2,856.792,856.79
• 18,329.0518,329.05
• 356.27356.27
• 2806.792806.79

Q6. Assume that a bond makes 10 equal annual payments of
\$1,000$1,000 starting one year from today. The bond will make an additional
payment of \$100,000$100,000 at the end of the last year, year 10. (This
security is sometimes referred to as a coupon bond.)

If the discount rate is 3.5\%3.5% per annum, what is the
current price of the bond?

• 79,208.48579,208.485
• 8,316.6058,316.605
• 70,891.8870,891.88
• 89,283.9389,283.93

Q7. Your daughter will start college one year from today, at
which time the first tuition payment of \$58,000$58,000 must be made. Assuming
that tuition does not increase over time and that your daughter remains in
school for four years, how much money do you need today in your savings
account, earning 5\%5% per annum, in order to make the tuition payments over
the next four years?

• 70,499.3670,499.36
• 1,657,142.851,657,142.85
• 205,665.13205,665.13
• 290,000290,000

Q8. Imagine that the government decided to fund its current
deficit of \$431$431 billion dollars by issuing a perpetuity offering a 4\%4%
annual return. How much would the government have to pay bondholders each year
in perpetuity?

• 17.2417.24
  Billion Dollars
• 448.24448.24
  Billion Dollars
• 107.75107.75
  Billion Dollars
• 10.7810.78
  Billion Dollars

Q9. Your daughter will start college one year from today,
at which time the first tuition payment of \$58,000$58,000 must be made. Assume
that tuition does not increase over time and that your daughter remains in
school for four years. How much money do you need today in your savings
account, earning 5\%5% per annum, in order to make the tuition payments over
the next four years, provided that you have to pay 35\%35% per annum in taxes
on any earnings (e.g., interest on the savings)?

• 214,309.02214,309.02
• 1,784,615.381,784,615.38
• 115,822.98115,822.98
• 205,665.13205,665.13

Introduction to Corporate Finance Week 2 Quiz Answers – Coursera!

Module 2 Quiz Answers

Q1. You have just purchased a home by
borrowing \$400,000$400,000 for 30-years at a fixed APR
of 3.87\%3.87%. The loan payments are monthly and interest is compounded
monthly.

What is the periodic interest rate? (I.e., what is the
monthly interest rate?)

• 0.00320.0032
• 0.01290.0129
• 0.00130.0013
• 0.03940.0394

Q2. You have just purchased a home by
borrowing \$400,000$400,000 for 30-years at a fixed APR
of 3.87\%3.87%. The loan payments are monthly and interest is compounded
monthly.

What is the effective annual rate on the loan? (I.e., what
is the interest rate once we take into account compounding?)

• 2.03942.0394
• 0.03940.0394
• 1.03941.0394
• 2.12392.1239

Q3. You have just purchased a home by
borrowing \$400,000$400,000 for 30-years at a fixed APR
of 3.87\%3.87%. What is the monthly mortgage payment?

So, use the annuity formula, but solved for the cash flow in
terms of the present value:

CF = \frac{PV\times R/k}{1 – (1 + R/k)^{(-T\times k)}} 1−(1+R/k)(−T×k)PV×R/k​

• 1,879.801,879.80
• 751.92751.92
• 1,895.851,895.85
• 757.95757.95

Q4. You invest \$100$100 into a CD offering 5% APR with
semi-annual compounding (i.e., two times per year).

How much money will you have in the account after 1 year?

• 125.32125.32
• 120.00120.00
• 118.54118.54
• 105.06105.06

Q5. You put \$1,000$1,000 into a savings account today that
offers a 5\%5% APR with semi-annual compounding (i.e., two times per year).

How much money will you have in the account after 2 years?

• 1,215.511,215.51
• 814.50814.50
• 1,102.501,102.50
• 902.50902.50

Q6. You put \$1,000$1,000 into a savings account today that
offers a 5\%5% APR with semi-annual compounding (i.e., two times per year).

What is the effective annual rate of the saving account?

• 0.02500.0250
• 0.09750.0975
• 0.10250.1025
• 1.10251.1025

Q7. Consider the following figure that presents three yield
curves: 

Based on the yield curves in the figure, what is the
approximate cost of borrowing for highly rated corporate borrowers over a
5-year term?

• 3.54\%3.54%
• None
  of the answers are correct
• 1.50\%1.50%
• 0.00\%0.00%
• 2.27\%2.27%

Q8. Consider the following figure that presents three yield
curves:

Based on the yield curves in the figure, what is the
approximate cost of borrowing for highly rated corporate borrowers over a
20-year term?

• 0.00\%0.00%
• 4.66\%4.66%
• 3.54\%3.54%
• 1.50\%1.50%
• None
  of the answers are correct

Q9. A one-year zero coupon bond costs \$99.43$99.43 today.
Exactly one year from today, it will pay \$100$100.

What is the annual yield-to-maturity of the bond? (I.e.,
what is the discount rate one needs to use to get the price of the bond given
the future cash flow of \$100$100 in one year?)

• 1.00571.0057
• 0.00570.0057
• -0.0057−0.0057
• 2.00572.0057

Q10. You have a treasury bond that pays \$100$100 one year
from today and \$1,100$1,100 two years from today.

You notice that the yield-to-maturity on a one year-zero
coupon treasury bond is 1\%1% and the yield-to-maturity on a two year-zero
coupon treasury bond is 2\%2%. What should the price of your bond be?

• 1,156.301,156.30
• 1,246.371,246.37
• 1,177.441,177.44
• 1,223.461,223.46

Introduction to Corporate Finance Week 03 Quiz Answers – Coursera!

Module 3 Quiz Answers

Q1. GoPro’s earnings before interest and taxes (EBIT) was
\$190$190 million.

Assuming GoPro’s tax rate is 35\%35%, what is their net
operating profit after taxes (NOPAT) for 2014 expressed in millions of dollars?

• 256.5256.5
• 123.5123.5
• 66.566.5
• 292.3292.3

Q2. Fusion Energy Co’s earnings before interest and taxes
(EBIT) was \$275$275 million.

Assuming Fusion Energy’s tax rate is 25\%25%, what is their
net operating profit after taxes (NOPAT) for 2015 expressed in millions of
dollars?

• 366.67366.67
• 343.75343.75
• 206.25206.25
• 68.7568.75

Q3. Momo’s Candy Inc.’s earnings before interest and taxes
(EBIT) was \$12$12 million.

Assuming Momo’s Candy’s tax rate is 10\%10%, what is their
net operating profit after taxes (NOPAT) for 2013 expressed in millions of
dollars?

• 13.213.2
• 10.810.8
• 12.912.9
• 13.313.3

Q4. Fragile Express Delivery Company’s earnings before
interest and taxes (EBIT) was \$725$725 million.

Assuming Fragile Express Delivery’s tax rate is 37\%37%,
what is their net operating profit after taxes (NOPAT) for 2019 expressed in
millions of dollars?

• 725.63725.63
• 993.25993.25
• 1,150.791,150.79
• 456.75456.75

Q5. In 2014, GoPro spent \$27.5$27.5 million on capital
expenditures, experienced an increase in net working capital (including cash)
equal to \$239$239 million, and realized \$18$18 million in depreciation.

What is GoPro’s unlevered free cash flow for 2014?

• 8
• -125−125
• -161−161
• 43.843.8

Q6. In 2015, Fusion Energy spent \$30$30 million on capital
expenditures, experienced a decrease in net working capital (including cash)
equal to \$70$70 million, and realized \$10$10 million in depreciation.

What is Fusion Energy’s unlevered free cash flow for 2015?

• 256.25256.25
• 373.75373.75
• 393.75393.75
• 116.25116.25

Q7. In 2013, Momo’s Candy spent \$2$2 million on capital
expenditures, experienced an increase in net working capital (including cash)
equal to \$3$3 million, and realized \-0.5 million in depreciation.

What is Momo’s Candy’s unlevered free cash flow for 2013?

• 5.35.3
• 11.311.3
• 9.39.3
• 6.36.3

Q8. In 2019, Fragile Express Delivery spent \$28.9$28.9
million on capital expenditures, experienced a decrease in net working capital
(including cash) equal to \$72.8$72.8 million, and realized \$26$26 million in
depreciation.

What is Fragile Express Delivery’s unlevered free cash flow
for 2019?

• 329.05329.05
• 526.65526.65
• 381.05381.05
• 438.85438.85

Q9. What does a negative value for unlevered free cash flow
imply for the claimants of a firm?

• Revenues
  are less than costs
• Shareholders
  have made a bad investment
• The
  firm must raise capital from the capital markets (e.g., debt, equity), or
  liquidate internal assets (e.g., cash)
• The
  firm is over-investing
• Management
  is doing a bad job

Q10. True/False: When a firm changes its capital structure
by issuing or retiring debt, for example, this change alters the firms
unlevered free cash flow.

Introduction to Corporate Finance Week 4 Coursera Quiz Answers!

Module 4 Quiz Answers

Q1. Jones Corp is evaluating a project that has the
following annual free cash flows:

Period	00	11	22
Free Cash Flow	-150−150	100100	150150

If the project’s discount rate is 12\%12%, then what is the
NPV of the project?

• 52.5652.56
• 58.8658.86
• 157.33157.33
• 178.79178.79

Q2. Jones Corp is evaluating a project that has the
following annual free cash flows:

Period	00	11	22
Free Cash Flow	-200−200	150150	-70−70

If the project’s discount rate is 12\%12%, then what is the
NPV of the project?

• -119.94−119.94
• -108.82−108.82
• -121.875−121.875
• -136.29−136.29

Q3. Fusion Energy is evaluating a project that has the
following annual free cash flows:

Period	00	11	22
Free Cash Flow	-500−500	250250	300300

If the project’s discount rate is 27\%27%, then what is the
NPV of the project?

• 255.35255.35
• 471.49471.49
• 262.37262.37
• 489.08489.08

Q4. Momo’s Candy is evaluating a project that has the
following annual free cash flows:

Period	00	11	22
Free Cash Flow	-100−100	-100−100	250250

If the project’s discount rate is 10\%10%, then what is the
NPV of the project?

• 97.5397.53
• 14.2714.27
• 108.37108.37
• 15.7015.70

Q5. Fragile Express Delivery is evaluating a project that
has the following annual free cash flows:

Period	00	11	22
Free Cash Flow	-500−500	200200	320320

If the project’s discount rate is 36\%36%, then what is the
NPV of the project?

• 593.75593.75
• -132.30−132.30
• -179.93−179.93
• 927.73927.73

Q6. Donald’s Inc. is evaluating a project that has the
following annual free cash flows:

Period	00	11
Free Cash Flow	-175−175	200200

What is the project’s IRR?

• 1.1431.143
• 0.1430.143
• 2.1432.143
• -0.125−0.125

Q7. Jones Corp is evaluating a project that has the
following annual free cash flows:

Period	00	11
Free Cash Flow	-150−150	100100

What is the project’s IRR?

• 1.6671.667
• -0.333−0.333
• 0.6670.667
• 0.50.5

Q8. Fusion Energy is evaluating a project that has the
following annual free cash flows:

Period	00	11
Free Cash Flow	-500−500	250250

What is the project’s IRR?

• 1.51.5
• 3.53.5
• 2.52.5
• -0.6−0.6

Q9. Momo’s Candy is evaluating a project that has the
following annual free cash flows:

Period	00	11
Free Cash Flow	-100−100	-100−100

What is the project’s IRR?

Q10. Fragile Express Delivery is evaluating a project that
has the following annual free cash flows:

Period	00	11
Free Cash Flow	-500−500	200200

What is the project’s IRR?

• -0.6−0.6
• 0.40.4
• 1.41.4
• 1.51.5