QUESTION: 13

CORRECT TEXT
SQ has the opportunity to invest in project X. The net present value for project X is $12,600. Cash inflows occur in years 1, 2 and 3. The company's cost of capital is 14%.

Calculate the annualized equivalent annuity of project X.

Give your answer to the nearest whole $.

$5429

Answer(s): A

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QUESTION: 14

CORRECT TEXT
A company has just received the latest in a series of annual payments; this payment was $620. The annual payments are expected to continue for three more years with each payment being increased by the expected rate of inflation. The real cost of capital is 8% per year and the expected rate of inflation is 6% per year.

What is the present value of the future payments the company expects to receive?

Give your answer to the nearest $.

$1598

Answer(s): A

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QUESTION: 15

The following data are available for a division for the latest period.

What is the division's residual income for the period?

12.50%
31.25%
$36,000
$3,000

Answer(s): D

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QUESTION: 16

Which of the following statements regarding multinational transfer pricing is INCORRECT?

Transfer prices affect tax liabilities and royalties because of different laws in countries.
If transfer prices are inflated, this will increase profits of buying division.
Companies have incentives to set transfer price to increase revenues in low-tax countries.
Companies have incentives to set transfer price to increase costs in high-tax countries.

Answer(s): B

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QUESTION: 16