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Fins 1613 Paper

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THE UNIVERSITY OF NEW SOUTH WALES

JUNE / JULY 2006

FINS1613 Business Finance – Final Exam

(1)

TIME ALLOWED - 2 hours

(2)

TOTAL NUMBER OF QUESTIONS - 50

(3)

ANSWER ALL QUESTIONS

(4)

ALL QUESTIONS ARE OF EQUAL VALUE.

(5)

THIS PAPER MAY NOT BE RETAINED BY CANDIDATE

(6)

CANDIDATES MAY BRING A PENCIL AND ERASER TO THE EXAMINATION. CANDIDATES MAY NOT BRING THEIR OWN CALCULATORS

(7)

THE FOLLOWING MATERIALS WILL BE PROVIDED BY THE EXAMINATIONS SECTION: Calculators, and Mathematical tables (PV and FV)

PRINT YOUR STUDENT NUMBER ON TOP RIGHT HAND CORNER

ANSWER ALL QUESTION ON THE PROVIDED ANSWER SHEET

ALL ANSWERS MUST BE ANSWERED IN PENCIL.

FINS 1613 Final Exam

1

S1 2006

Multiple Choice - 50 Questions: 1 mark each No negative marking 1) Hiphop Limited must choose between one of two mutually exclusive projects. • Project A has an up-front cost (t = 0) of $120,000, and it is expected to produce cash inflows of $80,000 per year at the end of each of the next two years. Two years from now, the project can be repeated at a higher up-front cost of $125,000, but the cash inflows will remain the same. • Project B has an up-front cost of $100,000, and it is expected to produce cash inflows of $41,000 per year at the end of each of the next four years. Project B cannot be repeated. Both projects have a cost of capital of 10 percent.

Hiphop wants to select the project that provides the most value over the next four years. What is the net present value (NPV) of the project that creates the most value for the company? a) b) c) d) e) $34,425 $30,283 $29,964 $29,240 $24,537

2)

Which of the following statements is most correct? a) b) c) d) e) Corporations generally face fewer regulations than sole proprietorships do. Corporate shareholders have unlimited liability. It is

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