You found a house you want to buy with a price of $299,900.

You found a house you want to buy with a price of $299,900.

1. You found a house you want to buy with a price of $299,900. The bank will loan you the money for 20% down at 3.77% APR for 15 years with monthly payments. You think you can make monthly payments of $1,650. Can you afford the house? a- Yes; monthly payments= $1113.83; b- Yes; monthly payments= $13922.24; c- No; monthly payments= $1747.13; d- No; monthly payments= $2183.92

2. The valuation process can be described as ______. a- calculating the present value of an expected future cash flow using the investor’s required rate of return as the discount rate; b- lating the future value of an expected future cash flow using the investor’s required rate of return as the discount rate; c- amortizing the value of the asset over its holding period.

3. The ______ is the minimum required rate of return a firm must earn on its investments. a- net present value; b- opportunity cost of capital or weighted average cost of capital; c- internal rate of return; d- gross profit margin

4. couple wants retire in 40 years. They want spend $130,000 a year for 25 years.

They would need to save ___ per year to reach this goal. All investments are expected to earn 6%.

a- $81250; b- $27544; c- $10738; d-$6224

5. You are offered a business that has expected after-tax cash flows of $100,000 a year for the next 10 years, the time period for your investment horizon. You require a 15% return on similar risk investments. The owner will sell the business at a special price of $501,900 right now. You ____ consider this business because ____.

a- would; it earns enough to meet your required return; b- would; you want to own a business; c- both of the above; d- would not; you can spend more than that for the business so the price is low; e- would not; the asking price would not earn your required rate of return.