You Have an Investment Opportunity Available to You That Requires

question 13

Multiple Choice

You have an investment opportunity available to you that requires $400,000. You have no funds available but you will have income of $120,000 this year. The investment will have a payoff $433,000 at the end of the year. If the market rate is 8.25% what is the net present value?

• A) $33,000
• B) $433,000
• C) $0.00
• D) $23,100
• E) $30,485

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Definitions:

Small Stock Dividend

A dividend paid in the form of additional shares, typically representing less than a 25% increase in outstanding shares.

Capital In Excess

Funds received by a company from issuing shares that exceed the par value of the shares.

Debt-Equity Ratio

A financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets, often used to assess the company's financial leverage.

Residual Dividend Policy

A strategy where dividends paid to shareholders are based on earnings left over after all operational and investment costs are covered.