FIN301 First Midterm Calculation Solutions
Multiple Choice + Extra Credit • answers shown immediately • HTML/JS

FIN301 First Midterm — Calculation Solutions

TVM MC: 10 questions Financial Statements MC: 12 questions Total MC: 22 Extra Credit: 1 worked solution
How this solutions page works instant key + optional self-check
Each item shows the correct answer immediately plus a short explanation and calculation steps. Students can still click a choice (A/B/C/D or True/False style) to self-check.
Assumption notes for a few items to avoid confusion
  • Weekly FV problem: uses weekly rate = APR / 52 and n = 52×5.
  • CFI question: uses the standard textbook capex identity Capex = ΔNFA + Dep, then CFI = -Capex.
  • NWC / equity question: uses the textbook simplification that current liabilities represent short-term debt for this item.
  • Extra credit lottery: treated as a 30-payment growing annuity due (first payment at t=0).

Time Value of Money — Multiple Choice Solutions

PV, FV, annuities, EAR, mortgage PMT, NPV/NFV, and weekly payment FV.
Questions: 0
Show / Hide TVM solutions Q1–Q10

Financial Statement Analysis — Multiple Choice Solutions

EBIT, net income, cash flows, source/use of cash, leverage, and tax calculation.
Questions: 0
Show / Hide Financial Statement solutions Q11–Q22

Extra Credit — Growing Annuity Due (Lottery) Solution

You have just won a lottery. However, the prize money will be paid out in annual installments over the next 30 years. The first payment of $50,000 will be made immediately, and subsequent payments will increase by 5% each year. What is the present value of all the future payments, assuming a discount rate of 8%? (hint: CF0=50000, CF1 = 50000*1.05,…).
Worked Solution
Show / Hide extra credit worked solution PV of growing annuity due
Interpretation used: 30 total payments, with the first payment of $50,000 at t=0. That means payments occur at t=0,1,2,...,29, growing at g=5%, discounted at r=8%.
PV ≈ $1,026,894.41
Method 1 (direct sum):
PV = Σ [ 50,000 × (1.05)^t / (1.08)^t ], for t = 0 to 29 PV = 50,000 + 50,000(1.05/1.08) + 50,000(1.05/1.08)^2 + ... + 50,000(1.05/1.08)^29 PV ≈ $1,026,894.41
Method 2 (formula check):
This is a growing annuity due, so: PV_due = C0 × [1 - ((1+g)/(1+r))^n] / [1 - ((1+g)/(1+r))] where: C0 = 50,000 (payment at t=0) g = 0.05 r = 0.08 n = 30 PV_due ≈ $1,026,894.41
If someone interprets the wording as 30 years after today plus an immediate payment (31 payments total), the value would be higher.