Choose one of the following incidents involving religious freedom..docx

Choose one of the following incidents involving religious
freedom.
1. A Jainist student attending public high school has requested
that the cafeteria staff clearly list the contents of each dish so
that he can be certain he does not eat any animal products.
2. Native American members of a church want to be allowed to
ingest peyote because this drug has historically been part of
their religious rituals.
3. Following his baptism, a Sikh student wants to wear his
required symbolic knife (kirpan) to school.
4. An employee who is a Seventh-Day Adventist wants to be
excused from work every Saturday because it is their Sabbath.
Describe how each of the different perspectives on diversity
(Anglo-conformism, melting pot, separatism, and pluralism)
would assess the situation.
· Are the individual’s rights to behave in accordance with their
faith in danger of being violated?
· How do you think the incident should be resolved?
· Remember to respond to two of your classmates’ initial posts
with your own opinions and ideas.
COURSE REVIEW HOMEWORK
(
MULTIPLE CHOICE. Choose the one alternative that best
answers the question.
)
1. Which of the following appears to be the most appropriate
goal for corporate management?
A) Maximizing the company's market share.
B) Minimizing the company's liabilities.

C) Maximizing the current profits of the company.
D) Maximizing market value of the company's shares.
2. Corporate managers are expected to make corporate decisions
that are in the best interest of:
A) top corporate management.
B) the corporation's board of directors.
C) the corporation's shareholders.
D) all corporate employees.
3. Which one of the following can best be characterized as an
agency problem?
A) Having a higher than industry average rate of defects on the
firm's products.
B) Differing opinions among directors as to the merits of paying
a higher dividend.
C) Management dispute over which accounting firm to use.
D) Differing incentives between managers and owners.
4. A primary market would be utilized when:
A) shares of common stock are exchanged.
B) a commission must be paid on the transaction.
C) securities are initially issued.
D) investors buy or sell existing securities.
5. The primary distinction between securities sold in the
primary and secondary markets is:
A) the riskiness of the securities.
B) whether the securities are new or already exist.
C) the price of the securities.
D) the profitability of the issuing corporation.
6. Assume the total expense for your current year in college
equals $20,000. How much would your parents have needed to
invest 21 years ago in an account paying 8% compounded
annually to cover this amount?

A) $1,728.08
B) $2,952.46
C) $3,973.12
D) $1,600.00
7. Approximately how much must you have saved by retirement
if you want to withdraw $100,000 for 25 years if your account
earns 9% annually and the first withdrawal occurs one year after
retiring?
A) $982,258
B) $887,320
C) $1,128,433
D) $925,667
8. You just won the lottery. You will receive $50,000 per year
for 10 years with the first payment being made 5 years from
today. If the discount rate is 7%, what is the present value of
your winnings?
A) $277,152.33
B) $310,547.48
C) $250,385.83
D) $291,662.95
9. A struggling college student only has $5,000 in her bank
account. What interest rate must she earn on her account if she
wants to accumulate $1 million in 35 years by adding $10,000
annually?
A) 5.34%
B) 7.85%
C) 9.67%
D) 6.42%
10. Cleveland signed a contract that will provide four annual
cash inflows of $41,000, $11,000, $35,000, and $56,000
respectively with the first payment of $41,000 occurring three
years from today. What is the contract worth today at a discount

rate of 6%?
A) $106,559
B) $108,769
C) $199,999
D) $112,555
11. You want your 10-year-old child to have a million dollars in
the future. Today you deposit $25,000 in an account that earns
8.5%. The money will be distributed to your child when the
total reaches $1 million. How old will your child be when the
money is distributed?
A) 59
B) 55
C) 45
D) 61
12. You just bought a new car. You paid $5,000 down at time
zero. You will then make payments of $500 per month for the
next 48 months. At the end of 48 months you will make a
balloon payment of
$10,000. Based on this payment schedule and an interest rate of
6%, what is the value (present value) of your car today?
A) $51,338.12
B) $37,987.54
C) $34,161.14
D) $29,481.27
13. The present value of an ordinary annuity is $1600 when
valued at 10%. How much would the value change if this was an
annuity due?
A) $1,440
B) $178
C) $82
D) $160
14. Using a discount rate of 8%, how much more is a perpetuity

of $800 worth than a 30-year annuity of the same amount?
A) $994
B) $876
C) $723
D) $919
15. What is the expected real rate of interest for an account that
offers a 12% nominal rate of return when the rate of inflation is
6% annually?
A) 5.00%
B) 9.46%
C) 6.00%
D) 5.66%
16. If the effective annual rate of interest is known to be
16.08% on a debt that has quarterly payments, what is the
annual percentage rate?
A) 15.19%
B) 16.02%
C) 14.50%
D) 12.02%
17. What is the effective annual interest rate on a 9% APR
automobile loan that has monthly payments? A) 9.00%
B) 8.65%
C) 9.38%
D) 9.81%
18. The coupon rate of a bond equals:
A) the annual interest divided by the current market price.
B) its yield to maturity.
C) the yield to maturity when the bond sells at a discount.
D) a defined percentage of its face value.
19. When an investor purchases a $1,000 par value bond that
was quoted at 97.162, the investor:

A) receives $971.62 upon the maturity date of the bond.
B) pays 97.162% of face value for the bond.
C) pays $10,971.62 for a $10,000 face value bond.
D) receives 97.162% of the stated coupon payments.
20. Assume a bond is currently selling at par value. What will
happen in the future if the yield on the bond is lower than the
coupon rate?
A) The coupon rate of the bond will increase.
B) The coupon payments will be adjusted to the new discount
rate.
C) The par value of the bond will decrease.
D) The price of the bond will increase.
21. How much should you pay for a $1,000 bond with a 10%
coupon, annual payments, and 5 years to maturity if the interest
rate is 12%?
A) $927.90
B) $981.40
C) $1,000.00
D) $1,075.82
22. A bond has a coupon rate of 8%, pays interest annually,
sells for $962, and matures in 3 years. What is its yield to
maturity?
A) 9.52%
B) 4.78%
C) 12.17%
D) 5.48%
23. What is the coupon rate for an annual coupon bond with 3
years to maturity, a price of $1,026, and a yield to maturity of
7.5%?
A) 9.25%
B) 6.67%
C) 8.50%

D) 7.42%
24. When a fixed-rate bond has its rating upgraded from B to A,
then:
A) the bond's current yield increases.
B) the bond's price increases.
C) the bond's face value decreases.
D) the bond's coupon rate increases.
25. If a project's expected rate of return exceeds its opportunity
cost of capital, one would expect:
A) the NPV to be zero.
B) the project to have a positive NPV.
C) the profitability index to be negative.
D) the opportunity cost of capital to be too low.
26. What is the NPV of a project that costs $100,000 and
returns $50,000 annually for 3 years if the opportunity cost of
capital is 14%?
A) $33,749
B) $14,473
C) $13,398
D) $16,082
27. The ratio of net present value to initial investment is known
as the:
A) net present value.
B) profitability index.
C) internal rate of return.
D) payback period.
28. What is the profitability index for a project costing $40,000
and returning $15,000 annually for 4 years at an opportunity
cost of capital of 12%?
A) 0.861
B) 0.500

C) 0.139
D) 0.320
29. A polisher costs $10,000 and will cost $20,000 a year to
operate and maintain. If the discount rate is 10% and the
polisher will last for 5 years, what is the equivalent annual
cost?
A) $17,163
B) $22,638
C) $19,411
D) $22,188
30. What is the equivalent annual cost for a project that requires
a $40,000 investment at time zero, and a
$10,000 annual expense during each of the next 4 years, if the
opportunity cost of capital is 12%? A) $21,356
B) $25,237
C) $23,169
D) $20,000
31. When is it appropriate to include sunk costs in the
evaluation of a project?
A) If they are considered to be overhead costs.
B) If they improve the project's NPV.
C) Whenever they are relatively large.
D) Never.
32. Investments in working capital:
A) do not matter because the cash is generally recovered when
the project ends.
B) reduce project NPV.
C) increase NPV because they make the project more valuable.
D) are simply accounting entries and do not affect NPV.
33. What is the net effect on a firm's cash flow of a $100,000
increase in accounts receivable, $250,000 increase in inventory

and $75,000 increase in accounts payable?
A) -$275,000
B) -$425,000
C) -$225,000
D) $75,000
34. In what manner does depreciation expense affect investment
projects?
A) It reduces taxes by the amount of the depreciation expense.
B) It reduces taxable income by the amount of the depreciation
expense.
C) It reduces cash flows by the amount of the depreciation
expense.
D) It increases cash flows by the amount of the depreciation
expense.
35. Cookie Castle [CKC] issued $1,000,000 of debt with a cost
of debt of 8%. If CKC has a 25% tax rate and intends to
maintain the debt continuously, what is the present value of the
perpetual debt tax shield? A) $250,000
B) $170,000
C) $320,000
D) $20,000
36. When a depreciable asset is ultimately sold, the after-tax
cash flow from the sale is:
A) not used in capital budgeting.
B) reduced by the book value of the asset.
C) the total sales price minus tax.
D) the same as the after-tax accounting amount.
37. Seven years ago, you purchased a new packaging machine
for $90,000 and depreciated it straight-line over a 10-year life.
Today, you sold the machine for $35,000. If your tax rate is
25%, what is the after- tax cash flow from the sale of the
machine?

A) $33,000
B) $26,250
C) $24,819
D) $8,000
38. What is the annual depreciation tax shield for a $100,000
annual depreciation expense if the tax rate is 21%?
A) $79,000
B) $15,500
C) $21,000
D) $25,000
39. A firm invests $10 million in a new stamping machine. It
depreciates the machine straight-line over 5 years. The tax rate
is 21% and the discount rate is 8%. What is the PV of the
depreciation tax shield? A) $3,000,000
B) $634,978
C) $2,579,497
D) $1,676,938
40. What is the NPV of an 8-year project that costs $200,000,
has annual revenues of $75,000 and cash expenses of $25,000?
Assume the investment is depreciated straight-line over 8 years,
the corporate tax rate is 21%, and the discount rate is 13%.
A) $13,411
B) $14,182
C) $15,560
D) $14,745
41. Suppose marginal tax rates are 18% for income below
$50,000, 22% from $50,000 to $60,000, and 25% for income
above $60,000. What is the average tax rate for an individual
that earned $72,000? A) 19.72%
B) 21.67%
C) 20.28%
D) 18.76%

42. A stock's beta measures the:
A) sensitivity of the stock's returns to those of the market
portfolio.
B) market risk premium on the stock.
C) difference between the return on the stock and the return on
the market portfolio.
D) average return on the stock.
43. When using CAPM to find required rates of return, why is
diversifiable risk ignored?
A) Only systematic risk is rewarded.
B) There is no method for quantifying diversifiable risk.
C) Beta includes a component to compensate for diversifiable
risk.
D) Diversifiable risk is compensated by the market risk
premium.
44. The 4-week T Bill rate is 2% and the market risk premium is
8%. If you have a portfolio consisting of 50% of the risk-free
asset and 50% in the market, what is the expected return on
your portfolio?
A) 2%
B) 4%
C) 5%
D) 6%
45. What is the beta of a 3-stock portfolio consisting of $10,000
of Stock A with a beta of 0.90, $8,000 of Stock B with a beta of
1.05, and $2,000 of Stock C with a beta of 1.70?
A) 1.00
B) 1.04
C) 1.17
D) 1.22
46. A project has a beta of 1.24, the risk-free rate is 3.8%, and

the market rate of return is 9.2%. What is the project's expected
rate of return?
A) 11.41%
B) 15.21%
C) 10.50%
D) 14.61%
47. The project cost of capital is:
A) not necessarily related to the company cost of capital.
B) greater than the company cost of capital because the project
has specific risk.
C) less than the company cost of capital.
D) equal to the company cost of capital.
48. TJ Maxx (beta 0.67) is evaluating a project in the airline
industry (beta 1.70). If the risk-free rate is 1.9% and the market
risk premium is 11%, what is the required rate of return on this
project?
A) 20.60%
B) 17.37%
C) 9.27%
D) 8.00%
49. A company's nominal pre-tax cost of debt is represented by
the:
A) yield to maturity on outstanding bonds.
B) coupon rate of current bonds.
C) return calculated by CAPM.
D) company's beta.
50. A firm has 12,500 shares of stock outstanding that sell for
$42 each. The book value of equity is
$400,000. The firm has also issued $250,000 face value of debt
that is currently quoted at 101.2. What value should be used as
the weight of equity when computing WACC?
A) 72.09%

B) 61.54%
C) 67.48%
D) 69.74%
51. If a firm with no current liabilities has a long-term debt to
equity ratio of 1, then:
A) The firm has a total debt ratio of 0.5.
B) The firm has more equity than debt.
C) The firm has no diversifiable risk.
D) The firm has a high cost of equity.
52. Debt provides a tax shield for the company because:
A) the amount of debt reduces taxable income.
B) the amount of interest reduces the total taxes payable.
C) the amount of interest reduces taxable income.
D) the amount of debt reduces the total taxes payable.
53. Dell Technologies [DELL] has 700 million shares of
common stock outstanding which currently sell at
$55 per share. It also has $10 billion in book value debt
currently quoted at 101. What value should be used as the
weight on debt when computing DELL's WACC?
A) 79.22%
B) 19.41%
C) 28.63%
D) 20.78%
54. Wayfair [W] has 90 million shares of common stock
outstanding which currently sell at $86 per share. W has a beta
of 1.85. If the risk-free rate is 1.8% and the expected return on
the market is 12.2%, what is W's cost of equity?
A) 21.04%
B) 24.37%
C) 22.57%
D) 25.90%

55. Dick's Sporting Goods [DKS] has 110 million shares of
common stock outstanding which currently sell at $39 per share.
DKS also has 1.3 million outstanding bonds that mature in 14
years. The bonds have a face value of $1,000, pay an annual
coupon of 9% and currently sell at 110. DKS has a beta of 0.59
and a tax rate of 21%. If the risk-free rate is 1.85% and the
market risk premium is 12%, what is DKS's WACC?
A) 8.24%
B) 7.05%
C) 5.71%
D) 6.98%
Answer Key
1. D
2. C
3. D
4. C
5. B
6. C
7. A
8. C
9. A
10. B
11. B
12. C
13. D
14. A
15. D
16. A
17. C
18. D
19. B
20. D
21. A

22. A
23. C
24. B
25. B
26. D
27. B
28. C
29. B
30. C
31. D
32. B
33. A
34. B
35. A
36. C
37. A
38. C
39. D
40. D
41. A
42. A
43. A
44. D
45. B
46. C
47. A
48.
A
49. A
50. C
51. A
52. C
53. D
54. A
55. A
COURSE REVIEW HOMEWORK SOLUTIONS

Question 06
N I/Y PV PMT FV
INPUTS
21
8
0
20,000
CPT
−��, ��. ��
Question 07
N I/Y PV PMT FV
INPUTS
25
9
100,000
0
CPT
−��, ��

Question 08
0
0
50,000
7
250,385.83
5
10

Question 09
N I/Y PV PMT FV
INPUTS
35
−5,000
−10,000
1,000,000
CPT
5.34
Question 10

0
0
41,000
11,000
35,000
56,000
6
108,769
2
1
1
1
1
Tip: To push inflow 1 out to year 3, enter 2 cash flows of zero
amount in C01
Question 11

N I/Y PV PMT FV
INPUTS
8.5
−25,000
0
1,000,000
CPT
45.22
Add N to the age of the child today. 45.22 + 10 = ��.
��
Question 12
−$5,000
−$500
−$10,500
6 ÷ 12 = 0.5

−��, ��. ��
47
1
Note: This is a simple PV question when using the CF
worksheet. You could also calculate each payment separately
using TVM and then sum their PV’s.
(
��
��
��
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=
��
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(
1
+

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)
=
$1
,
600
(
1
.
10
)
=
$1
,
760
$1,760 − $1,600 =
$
��
A shortcut to find the difference is to multiply
��
��
×
��
= $1,600 × 0.10 = $160
)Question 13
Question 14

�� $800
�� = �� = 0.08 = $10,000
N I/Y PV PMT FV
INPUTS
30
8
800
0
CPT
−9,006.23
Difference: $10,000 − 9,006.23 = ��. ��
(
1.06
1.12
−
1
=
−
1
=
0.0566
=

��
.
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1
+
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)Question 15

Question 16
�� = 16.08
�� = 4
�� = ��. ��
Use “ICONV” function:
16.08
4
15.19
Question 17
�� = 9
�� = 12
�� = ��. ��
Use “ICONV” function:
9

12
9.38
Question 21
N I/Y PV PMT FV
INPUTS
5
12
100
1,000
CPT
−��. ��
You need to find the coupon payment PMT:
�� = �� ×
�� = $1,000 × 0.10 = $100
Question 22
N I/Y PV PMT FV

INPUTS
3
−962
80
1,000
CPT
��. ��
Unless specifically told otherwise, assume the face value of a
bond is $1,000. To find coupon payment (��
�� × �� )
Question 23
N I/Y PV PMT FV
INPUTS
3
7.5
−1,026
1,000
CPT
85
Unless specifically told otherwise, assume the face value of a
bond is $1,000.
Solve for PMT then divide it by the face value:
�� = 85 ÷ 1,000 = 0.10 = ��.

��%
Question 26
−100,000
50,000
3
14
16,082
Question 28
−40,000
15,000

4
12
5,560.24
�� = 5,560.24 ÷ 40,000 = ��. ��
Question 29
−10,000
−20,000
5
10
−85,815.74
Find NPV of costs, then use TVM Worksheet to find the
equivalent annual annuity.
N I/Y PV PMT FV
INPUTS
5
10
−85,815.74
0
CPT

��, ��
Question 30
−40,000
−10,000
4
12
−70,373.49
Find NPV of costs, then use TVM Worksheet to find the
equivalent annual annuity.
N I/Y PV PMT FV
INPUTS
4
12
−70,373.49
0
CPT
��, ��. ��

(
Investments in WC decrease cash flows, while reductions in WC
increase cash flows. WC Reductions include current liabilities,
e.g., Accounts Payable
WC Investments include current assets, e.g., Accounts
Receivable, Inventory
�
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= $75,000 − $100,000 − $250,000 =
−
$
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,
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)Question 33
(
PV of Perpetual Debt Tax Shield =
��
×
��
��
= $1,000,000 × 0.25 =
$
��
,

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,
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×
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.
25
)
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)Question 37
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$100
,
000
×
0
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21
=
$
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,
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)Question 38

Question 39
Annual Depreciation = (��
�� ÷ ��) =
$10,000,000 ÷ 5 = $2,000,000
Annual Depreciation Tax Shield =
(�� × ��
��) = $2,000,000 × 0.21 = $420,000
Then use TVM Worksheet to find PV of Depreciation Tax
Shield.
N I/Y PV PMT FV
INPUTS
5
8
420,000
0
CPT
−��, ��, ��
Question 40
Depreciation = (��
�� ÷ ��) =
$200,000 ÷ 8 = $25,000
Operating CF:
Revenue $75,000
Expenses -$25,000

Depreciation -$25,000
Pre-Tax Profit $25,000
Tax @ 21% -$5,250
Net Income $19,750
Add Depreciation $25,000
Operating CF $44,750
−200,000
44,750
8
13
14,745
(
Calculating marginal tax rates is a simple weighted average:
$50,000 × 0.18 = $9,000
$10,000 × 0.22 = 2,200
(72,000 − 60,000) × 0.25 = 3,000
Average Tax Rate =
(
$9,000 + $2,200 + $3,000
)
÷ $72,000 = 0.1972 =
��
.
��

%
)Question 41
(
��
�
��
��
�
�
��
��
�
��
ℎ
��
�
�
�
�
��
�
�
�
��
=
(
�
�
�
�

��
�
�
�
��
�
�
�
�
�
�
��
�
�
�
�
�
�
��
�
��
��
+
�
�
��
�
-
��
��
�
��

��
�
��
�
�
)
=
8%
+
2%
=
10%
��
�
��
��
�
�
��
��
�
��
ℎ
��
�
�

��
�
��
��
��
�
��
=
(
0
.
5
×
2%
)
+
(
0
.
5
×
10%
)
=
��
%

)Question 44
(
�
�
��
�
��
��
��
�
��
��
��
�
��
=
$10
,
000
+
$8
,
000
+
$2
,
000

=
$2
0
,
000
��
�
�
��
�
ℎ
��
��
�
��
��
��
��
��
=
$10
,
000
÷
$2
0
,

000
=
0
.
50
��
�
�
��
�
ℎ
��
��
�
��
��
��
��
��
=
$
8
,
000
÷
$2
0

,
000
=
0
.
40
��
�
�
��
�
ℎ
��
��
�
��
��
��
��
��
=
$2
,
000
÷
$20
,

000
=
0
.
10
��
��
=
(
0.50 × 0.90
)
+
(
0.40 × 1.05
)
+
(
0.10 × 1.70
)
=
��
.
��
)Question 45
(
��
��
=
��
��

+
��
��
�
��
��
−
��
��
�
��
��
= 3.8 + 1.24
(
9.2 − 3.8
)
=
��
.
��
%
)Question 46
(
Use the project beta if its risk is different than that of the
company.
��
��

=
��
��
+
��
��
(
��
)
��
��
= 1.9 + 1.70
(
11
)
=
��
.
��
%
)Question 48
(
��
$525
��
��
��
��
=
=

$778
=
0.6748
=
��
.
��
%
��
��
= $42 × 12,500 = $525,000
��
��
= $250,000 × 1.012 = $253,000
��
=
��
��
+
��
��
=

$525,000
+
$253,000
=
$778,000
)Question 50
(
��
$10,100
��
��
��
��
=
=
$48,600
=
0.2078
=
��
.
��
%
(In Millions)

��
��
= $55 × 700 = $38,500
��
��
= $10,000 × 1.01 = $10,100
��
=
��
��
+
��
��
=
$38,500
+
$10,100
=
$48,600
)Question 53
(
��

��
=
��
��
+
��
��
�
��
��
−
��
��
�
��
��
= 1.8 + 1.85
(
12.2 − 1.8
)
=
��
.
��
%
)Question 54
Question 55

(In Millions)
�� = $39 × 110 = $4,290
�� = $1100 × 1.3 = $1,430
�� = �� + �� = $4,290 + $1,430 = $5,720
�� $4,290
�� = �� = $5,720 = 0.75 = 75%
�� = 1 − 0.75 = 0.25 = 25%
�� = �� + ��(��) = 1.85 + 0.59(12) = 8.93%
��
N I/Y PV PMT FV
INPUTS
14
-1,100
90
1,000
CPT
7.8
�� = (�� × �� ) + [�� × �� × (1
− ��)]
�� = (0.75 × .0893) + [0.25 × 0.078 × (1 − 0.21)] =
0.0824 = ��. ��%

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