Final Exam Review Part 2 - Answers

1. You have four projects from which to choose one. Project A is being done over a six-year period
and has a net present value (NPV) of $70,000. Project B is being done over a three-year period
and has an NPV of $30,000. Project C is being done over a five-year period and has an NPV of
$40,000. Project D is being done over a one-year period and has an NPV of $60,000. Which
project would you choose?
A. Project A C. Project C
B. Project B D. Project D

2. Project A has an internal rate of return (IRR) of 21 percent. Project B has an IRR of 7 percent.
Project C has an IRR of 31 percent. Project D has an IRR of 19 percent. Which of these would
be the BEST project?
A. Project A C. Project C
B. Project B D. Project D

3. As a project manager, you are presented with the following information on the net present value
(NPV) of several potential projects. Which project is your BEST choice?
A. Project A with an NPV of $95,000
B. Project B with an NPV of $120,000
C. Project C with an NPV of $20,000
D. Project D with an NPV of -$30,000

4. Your company can accept one of three possible projects. Project A has a net present value
(NPV) of $30,000 and will take six years to complete. Project B has an NPV of $60,000 and will
take three years to complete. Project C has an NPV of $90,000 and will take four years to
complete. Based on this information, which project would you pick?
A. They all the same value C. Project B
B. Project A D. Project C

5.

What is the NPV based on the table above?

A. 353 B. 291 C. 62 D. 300

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Answer Questions 7 – 11 based on the information given below:
Presented below are the amounts of (a) the assets and liabilities of Spectrum Sounds as of December 31 and (b) the
revenues and expenses of the company for the year ended on that date. The items are listed in alphabetical order:

Accounts Payable $ 36,000 Insurance Expense $ 2,000

Accounts Receivable 22,000 Interest Expense 9,000
Advertising Expense 13,000 Note Payable 125,000
Building 170,000 Rent Expense 23,000
Cash 10,000 Salary Expense 120,000
Consulting Expense 18,000 Salary Payable 9,000
Electronic Equipment 110,000 Service Revenue 255,000
Furniture 20,000 Supplies 3,000

The opening balance of owner’s equity was $150,000. At year end, after the calculation of net income, the owner, Kool
Upal, withdrew $55,000

6. What is the Net Income / Loss for the year reference above:
a. $ 79,000
b. $ 70,000
c. $ 235,000
d. $ 69,000

7. What is the owner’s equity on the December 31st?

a. $ 95,000
b. $ 150,000
c. $ 205,000
d. $ 165,000

8. What is the value of total assets on the December 31 st?

a. $ 345,000
b. $ 335,000
c. $ 225,000
d. $ 255,000

9. If the total debt at the beginning of the year was $ 180,000, what would be the Debt to Equity Ratio (D2E)
on the December 31st?
a. 1.09
b. 1.11
c. 0.91
d. Not enough information provided

10. How much profit was generated by the equity invested in the organization as of December 31 st?
a. 44.44%
b. 27.45%
c. 92.94%
d. 76.12%

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