Feedback assignment 1
Department of Finance
FNCE10002 Principles of Finance
Semester 2, 2018
FEEDBACK ASSIGNMENT
A. Instructions
1. This individual assignment consists of 14 multiple choice questions and is worth 10% of your
overall grade. It covers material mainly from weeks 1 – 4 with a minor portion from week 5.
Besides providing you with continuing feedback on your performance in this subject, this
assignment will also help you prepare for the mid semester exam.
2. This is an individual assignment so you may not discuss it with fellow students, or
collaborate with them. Also, please do not ask your tutor, the online tutor, pit stop tutors or
me for hints and/or suggestions on the assignment.
3. All questions are equally-weighted and responses to these are to be entered online via
Assignment link on the LMS.
4. Your responses need to be entered between 8:00 am on Sunday, August 26 and 10:00 pm on
Tuesday, August 28. Online access to the assignment will only be available during this
period and failure to enter your answers during that period will result in a zero mark being
recorded for this assignment.
5. You need to make sure that you have worked through the assignment questions and that you
have your answers available for input in the online version of the assignment. Note also that
once you access the assignment via the LMS you will have one hour to enter your responses
to all questions. The system will not allow you to go back to previous questions or exit and
re-enter the assignment portal.
Realistically speaking, it should not take you more than around ten minutes to enter your
answers. Please make sure that you save your responses before logging out of the LMS!
B. Assignment Questions
1. An independent film maker is considering producing a new movie. The initial cost for making
this movie will be $20 million today. Once the movie is completed, in one year, the movie will
be sold to a major studio for $25 million with complete certainty. Rather than paying for the
$22 million investment entirely using its own cash, the film maker is considering raising
additional funds by issuing a security that will pay investors $11 million in one year. Suppose
the risk-free rate of interest is 5%.
Without issuing the new security, the NPV for this project is closest to what amount? Should
the film maker make the investment?
A) $1.5 million; Yes
B) $1.5 million; No
C) $1.8 million; Yes
D) $1.8 million; No
E) None of the above
2. Kristy has to make rental payments of $1,000 at the start of every month, throughout the four-
year duration of her university course. Her university fees are $4,000 to be paid at the start of
each year. She earns $1,500 per month (paid at the end of each month) from a part-time job.
Assume a quoted interest rate of 8% per annum with monthly compounding and that she keeps
