Assignment-1

1-A company replaces old machinery with salvage value of Rs 100000 replaced by machinery costing
Rs 500000. The relevant cash flows for evaluation of this project is _____ ?

a. 100000 b. 500000 c. 400000 d. 600000

2-Which of the following AAA debentures will have highest price if YTM is ?

a) 0.07 b) 0.08 c) 0.075 d) 0.085

3-Sheela needs Rs 500000 at the end of 5 years. How much amount she should investnow @ 10%?
Present Value of 1 Rs at 10% for 5 years is .6209.

a) 100000 b) 155225 c) 310450 d) 400000

4-In Excel, in order to calculate the EMI for loan repayment, which function has to be used?

a. PV b. FV Unrestricted c. NPV d. PMT

5-. For A Ltd. Annual demand is 10000 units, carrying cost is 2 Rs per unit and order cost is Rs 50.
Calculate the EOQ.

A)707 b)28 c)1000 d)200

6-For accepting the project IRR has to be compared with _____?

a. Cut off rate b. Required rate of return c. Cost of capital d. All of the above

7-Calculate the expected return with the help of following data: p=0.3, r=30%, p=0.4, r=16%, p=0.3,
r=8%

a. 17.8 b. 18 c. 5.8 d. 7.35

8-Which of the following is combined measure of risk & return?

a. Mean b. HPR c. Expected return d. Coefficient of variation

9-. The underlying assumption in irr method is that all the intermittent cash flows are reinvested at

a)cut off rate b)required rate of return c)cost of capital d)irr

10-The MM Proposition without taxes, Value of firm is _______ by changing its capital structure?

a. Affected b. Not affected c. Increases d. Decreases

11-For Projects with different scales, which of the evaluation techniques should be used?

a. NPV b. IRR c. Payback period d)Probability Index

12-Which of the following method is considered the best evaluation techniques for long-term
investment decisions?

a) NPV b) IRR c) Pay-Back period d) Profitability Index

13-The risk which can be reduced by diversification is known as ?

a) Systematic Risk b) Unsystematic Risk c) Total Risk d) Market Risk

 14-Which of the following evaluation techniques for long-term investment decisions doesn’t
consider the time value of money?

a. NPV b. IRR c. Pay-back period d. Profitability index

15-If the credit period is increased by the suppliers of the company cash conversion cycle will

A) Reduced B) Increase C) Remain same D) Unaffected

16-. If growth rate of expected earnings goes up than price of stock will_____?

A)Increase b)decrease c)remain same d)fluctuate

17-Calculate standard deviation with the help of following data: p=0.3, r=30%, p=0.4, r=16%, p=0.3,
r=8%

a. 74.76 b. 24.92 c. 4.21 d. 8.64

18-Sales of Zing ltd for 2016 was Rs.10000, COGS Rs.6000, Depreciation Rs.1000 interest Rs.800, tax
rate 30%. Calculate the operating cash flows of Zing ltd for 2016

a. Rs.4000 b. Rs.1540 c. Rs.2540 (answer) d. Rs.2200

19-In which of the following frequency of compounding present value of annuity will be lowest?

a. Daily b. Quarterly c. Monthly d. Annual

20-If proportion of debt is increased in capital structure overall cost of capital will_____?

A)Increase b)decrease c)remain same d)fluctuate

21- In which of following frequency of compounding, maturity value of investment will behighest?
a) Annual b) Quarterly c) Monthly d) Daily

22- . As per MM proposition with taxes, value of unlevered firm is _____than levered firm?

a. Lower b. Same c. Higher d. Fluctuating

23- . Stream of equal cash flows at regular interval starting at the beginning of the period is known
as?

a. Lumpsum cash flows b. Annuity c. Conventional cash flows d. Annuity due

24- Stream of equal cashflows at regular interval is known as?

a) Lumpsum cash flows b) Annuity c) Conventional cash flows d) Annuity due

25- If credit sales 100000, credit period is 30 days, calculate the average receivables

a. 8219 b. 8333 c. 3333 d. 3288

26- Dividend declared at 12% means that this %age will be applied on ______?

a. Issue price b. Market price c. Face value d. Profits

27- . If the coupon rate of a debenture is increased then its YTM will ______?

a. Decrease b. Increase c. Remain same d. Fluctuate

28- Arun buys a stock at Rs 20 and sells at Rs 25 after 10 months. During this period, he receives a
dividend of Rs 5 on his investments. Calculate Holding Period return?

a. 0.25 b. 0.5 c. 0.2 d. 0.4

29- . Increased financial leverage gives rise to ___volatile EPS?

a) More b) Less c) Non d) None of the above

30- If business risk of company goes up than price of stock will _____?

a. Decrease b. Increase c. Remain same d. Fluctuate

31- If the cost of capital of a project goes up the NPV Will ______?

a. Decrease b. Increase c. Remain same d. Fluctuate

32- ______ Method tells the period in which original investment in a project will be recovered?

a. NPV b. IRR c. Pay-back period d. Profitability index

33- Moon Ltd invests Rs. 800000 in a paper manufacturing plant. This is expected to generate Rs.
150000 every year for next seven years. Cost of capital for the project is 10%PVAF for 7 years at 10%
is 5.3349. Calculate NPV off the project?

Ans:235

34- Shyam deposits Rs 5000 every year for next 3 years at 6% semiannual compounding. Calculate
the future value if investment? Future value annuity factor at 3% for 3years and 6 years is 3.0909 &
6.4684 respectively and at 6% for 3years and 6 years is 3.1836 & 6.9753 respectively.

a. 15454.5 b. 16171 c. 15918 d. 17438.25

35- As per matching approach permanent working capital requirements should be funded by ______
? a)long term funds b)short term funds c)medium term funds d)any of the above

36- In case of capital budgeting decisions, the projects in which choice of one automatically excludes
the other are known as _______?

a. Dependent projects b. Independent projects c. Mutually exclusive projects d. Mutually

inclusive projects

37- In case of share buyback number of outstanding share will _____?

a. Reduce b. Increase c. Remain same d. Unaffected

38- Days Inventory + days sales outstanding is known as _____? Unrestricted

a. Operating cycle b. Cash conversion cycle c. Collection period d. Inventory conversion period

39- Which of the following will result in Shareholder’s wealth maximization?

a) Optimum utilization of resources b) Maximum utilization of resources c) Leverage

Minimization d) Funding maximization
40- If the annual rent expense goes up the operating leverage will________and will give rise to more
than proportionate change in______?

a. decrease, EPS b. decrease, EBIT c. increase ,EPS d. increase , EBIT

41- Brexit, Greece Crises, Chinese Crises, Sub -Prime Crises are example of which of the following?

a. Systematic Risk b. Unsystematic Risk c. Total Risk d. Specific Risk

42- For daily ltd Beta is 0.8. Nifty returns = 15% and T-Bill rate is 8% what is the cost of equity?

a. 13.56% b. 15% c. 5.6% d. 7%

43- . When in the calculation of IRR, intermitant cashflows are reinvested at required rateof return,
the resultant rate is known as ?

a) CIRR b) MIRR c) IRR d) None of the above

44- . If the credit period is increased for the customers of the company, operating cyclewill ?

a) Reduce b) Increase c) Remain same d) Unaffected

45- Which of the following is an example of unsystematic risk?

a) Interest rates fluctuations b) Political Uncertainty c) Increased steel prices d) Global

economic crises

46- A stock’s average return in last 3 years were 12% and standard deviation is 8%. Calculate the
coefficient of variation?

a) 1.5 b) 0.33 c) 0.67 d) 9.6

47- Cost of preference share is ?

a) Preference Dividend Rate b) Pref Dividend/Pref. share market price c) Both of the above d)
None of the above

48- Cost of equity is always equal to or than WACC.

a) Lower b) Same c) Higher d) Fluctuating

Assignment-2

1-Dividend payment linked to profits left out after meeting the expansion needs is based on ____
theory/policy?

Ans - Residual payout policy

2-If the credit period is increased for the customers of the company operating cycle will _____?

a. Reduce b. Increase c. Remain same d. Unaffected

3-The risk which can be reduced by diversification is known as _____?

a. Systematic risk b. Unsystematic risk c. Total risk d. Market Risk

4- The cashflows invested in a project at t=0 period is known as______?

a) Initiall cash flows b)operating cash flows c)terminal cash flows d) regular cash flows

5-. For daily ltd Beta is 0.8. Nifty returns = 15% and T-Bill rate is 8% what is the cost of equity?

a. 13.56% b. 15% c. 5.6% d. 7%

6-Cost of debt is ?

a) Coupon rate b) YTM (1-tax rate) c) YTM d) YTM/Bond Price

7-Which of the following cost is important while evaluating the investment decision?

1. sunk cost 2. incremental cost 3. both 4. none of above

8-Which of the following is ultimate objective of financial management?

a. profit maximization b. share holder’s wealth maximization c. leverage minimization d.

funding maximization

9-1/10,30 credit term means?

a. 1% discount b. 0.1% discount c. 1% discount for payment within 10 days d. 0.1% discount for
payment within 30 days

10-Sheela needs Rs 100000 at the end of each year in the next 5 years. How much amount she
should invest now @ 10%? Present Value of annuity factor at 10% for 5years is 3.7908.

a) 131898.28 b) 500000 c) 100000 d) 379080

11-What will be the price of bond with face value of Rs 1000 carrying a coupon of 10% maturing in 3
years at 10% premium on par value? Present value factor and PVAF at 10% for 3 years is 0.7513 and
2.4869 respectively

a. 1000 b. 826.43 c. 1075.12 d. 1348.69

12-Mathematical model for calculating the optimum inventory order quantity is known as________?
a. JIT b. ABC c. EOQ d. All of the above

13-. After the 2 for 1 share split number of shares will _____ ?

A- Remain same B-Reduce C-Be half d- Double

14-The rate beyond which the preference between two independent projects reverses is knows
as____?

a. IRR b. Reversal rate c. Cross over rate d. Cut off rate

15-Which of the following instrument is riskiest?

A)shares b) preference shares c)debentures d)fixed deposit

16-Market interest rate is 9%. A bond with 10% coupon will sell ____ par value?

a. Above b. below c. at d. none of the above

17-Growth of the company can be expected to be higher when _____ is high?

a. Pay-out ratio b. Distribution ratio c. Dividend ratio d. Retention ratio

18-Discounted payback period is considered an improvement over payback period because it

considers____?

a. all cash flows b. time value of money c. easy to understand d. all of the above

19- The cash flows forecasted during the projection period for capital budgeting decisions are known
as ___?

a. initial cash flows b. operating cash flows c. terminal cash flows d. regular cash flows

20- If the face value of a bond is 100 and its redemption value is 110, bond is maturing at ______?

a. 10% discount b. 10% premium c. At par d. None of the above