1. What\'a the present value of a 6-year ordinary annuity of $1,000 per year Plu

Q: 1. What'a the present value of a 6-year ordinary annuity of $1,000 per year Plu

Calculation of Present value of ordinary annuity: Year Cash Flows (CF) PVF(6%) PV = CF*PVF Annual cash flows 1 to 6 $1,000 4.91732 $ 4,917.32 Additional Cash flows 6 1500 0.70496 $ 1,057.44 Present value = $ 5,974.77 Calculation of Present value of ordinary annuity: Year Cash Flows (CF) PVF(6%) PV = CF*PVF Annual cash flows 1 to 6 $1,000 4.91732 $ 4,917.32 Additional Cash flows 6 1500 0.70496 $ 1,057.44 Present value = $ 5,974.77

ID: 2721217 • Letter: 1

Question

1. What'a the present value of a 6-year ordinary annuity of $1,000 per year Plus an additional $1,500 at the end of Year 6 if the interest rate is 6 )$5,324.89 $5,591.45 c. $5,974.77 d. $6,011.87 e. $4,854.13 2. Which of the following statements best describes what would be expected to happen as you randomly select stocks and add them to your portfolio? Adding more such stocks will reduce the porttolio's company-specific (diversifiable) risk. b. Adding more such stocks will reduce the portfolio's beta. c. Adding more such stocks wi11 increase the portfolio's expected return. d. Adding more such stocks will reduce the portfolio's market risk. e. Adding more such stocks will have no effect on the portfolio's risk. 3. Which of the following statements is cORRECT? Assume that the project being considered has normal cash flows, with one outflow followed by a series of inflows. a. If Project A has a higher IRR than Project B, then Project A must have b. If Project A has a higher IRR than Project B, then Project A must also c. The IRR calculation implicitly assumes that all cash flows are d. The IRR calculation implicitly assumes that cash flows are withdrawn e) If a project has normal cash flows and its IRR exceeds its WACC, then the lower NPV have a higher NPV reinvested at the WACC from the business rather than being reinvested in the business. the project's NPv must be positive. Apex Roofing's stock has a beta of 1.50, its required return is 14.00, and the risk-free rate is 5.00. What is the required rate of return on the stock market? 4. a. 10.50 b. 11.00% c. 11.50% d. 12.00% e. 12.50

Explanation / Answer

Calculation of Present value of ordinary annuity:

Year

Cash Flows (CF)

PVF(6%)

PV = CF*PVF

Annual cash flows

1 to 6

$1,000

4.91732

$ 4,917.32

Additional Cash flows

1500

0.70496

$ 1,057.44

Present value =

$ 5,974.77