Fundamentals of Corporate Finance 3e Test Bank
80.
Rosalia White will invest $3,000 in an IRA for the next 30 years starting at the end of this year.
The investment will earn 13 percent annually. How much will she have at the end of 30 years?
(Round to the nearest dollar.)
A)
$879,598
B)
$912,334
C)
$748,212
D)
$1,233,450
Ans:
A
Fundamentals of Corporate Finance 3e Test Bank
81.
Viviana Carroll needs to have $25,000 in five years. If she can earn 8 percent on any
investment, what is the amount that she will have to invest every year at the end of each year
for the next five years? (Round to the nearest dollar.)
A)
$5,000
B)
$4,261
C)
$4,640
D)
$4,445
Ans:
B
Fundamentals of Corporate Finance 3e Test Bank
82.
Cassandra Dawson wants to save for a trip to Australia. She will need $12,000 at the end of
four years. She can invest a certain amount at the beginning of each of the next four years in a
bank account that will pay her 6.8 percent annually. How much will she have to invest annually
to reach her target? (Round to the nearest dollar.)
A)
$3,000
B)
$2,980
C)
$2,538
D)
$2,711
Ans:
C
Fundamentals of Corporate Finance 3e Test Bank
83.
Dawson Electricals has borrowed $27,850 from its bank at an annual rate of 8.5 percent. It
plans to repay the loan in eight equal installments, beginning at the end of next in a year. What
is its annual loan payment? (Round to the nearest dollar.)
A)
$4,708
B)
$5,134
C)
$4,939
D)
$4,748
Ans:
C
Each payment made by Dawson Electricals will be $4,938.66, starting at the end of next year.
Fundamentals of Corporate Finance 3e Test Bank
84.
Tim Dodson has borrowed $8,600 to pay for his new car. The annual interest rate on the loan is
9.4 percent, and the loan needs to be repaid in four payments. What will be his annual payment
if he begins his payment beginning now? (Round to the nearest dollar.)
A)
$2,229
B)
$2,304
C)
$2,850
D)
$2,448
Ans:
D
Fundamentals of Corporate Finance 3e Test Bank
85.
James Perkins wants to have a million dollars at retirement, which is 15 years away. He already
has $200,000 in an IRA earning 8 percent annually. How much does he need to save each year,
beginning at the end of this year to reach his target? Assume he could earn 8 percent on any
investment he makes. (Round to the nearest dollar.)
A)
$13,464
B)
$14,273
C)
$10,900
D)
$16,110
Ans:
A
Fundamentals of Corporate Finance 3e Test Bank
86.
Stuart Weddle’s father is 55 years old and wants to set up a cash flow stream that would be
forever. He would like to receive $15,000 every year, beginning at the end of this year. If he
could invest in account earning 9 percent, how much would he have to invest today to receive
his perpetual cash flow? (Round to the nearest dollar.)
A)
$166,667
B)
$200,000
C)
$222,222
D)
$135,200
Ans:
A
Fundamentals of Corporate Finance 3e Test Bank
87.
A lottery winner was given a perpetual payment of $25,362. She could invest the cash flows at
7.5 percent. What is the present value of this perpetuity? (Round to the nearest dollar.)
A)
$338,160
B)
$390,215
C)
$238,160
D)
$201,356
Ans:
A
Fundamentals of Corporate Finance 3e Test Bank
88.
Brandon Ramirez wants to set up a scholarship at his alma mater. He is willing to invest
$320,000 in an account earning 11 percent. What will be the annual scholarship that can be
given from this investment? (Round to the nearest dollar.)
A)
$50,000
B)
$32,600
C)
$35,200
D)
$40,300
Ans:
C
AICPA: Measurement
89.
Sid Phillips has funded a retirement investment with $250,000 earning a return of 6.75 percent.
What is the value of the payment that he can receive in perpetuity? (Round to the nearest
dollar.)
A)
$12,150
B)
$15,250
C)
$16,875
D)
$14,900
Ans:
C
Fundamentals of Corporate Finance 3e Test Bank
90.
Ralf Wilson wants to receive $25,000 in perpetuity and will invest his money in an investment
that will earn a return of 14 percent annually. What is the value of the investment that he needs
to make today to receive his perpetual cash flow stream? (Round to the nearest dollar.)
A)
$640,225
B)
$252,325
C)
$144,350
D)
$178,571
Ans:
D
Fundamentals of Corporate Finance 3e Test Bank
91.
You plan to save $1,400 for the next four years, beginning now, to pay for a vacation. If you
can invest it at 6 percent, how much will you have at the end of four years? Round to the
nearest dollar.
A)
$6,124
B)
$5,618
C)
$4,019
D)
$6,492
Ans:
D