Q – The difference between present value of cash inflows and outflows is known as - repeat

 NPV

Q – For a firm, weight of equity & debt is .6 & .4 respectively and cost of equity is 15%. Cost of debt
is 9%, tax rate is 30%. Calculate the WACC fir the firm? - repeat

 .1152
Weight Average Cost of Capital (WACC) =

         {E/V × ke} + [ D/V × Kd × (1-Tc)

E = Market value of the firm's equity             0.6

D = Market value of the firm's debt                0.4

V = total market value of equity & debt (E+D)        0.6+0.4

Ke =  Cost of equity       15%

Kd =  Cost of debt          9%

Tc = Corporate tax          30%

WACC = {(0.6/1) × 0.15 }  +  {(0.4/1 ×0.09×(1-0.3)}

WACC = 0.09+0.0252

    =0.1152

Q – As per liquidity premium theory, interest rates on long term bonds will be ….than short term
bonds?

 Higher

Q – For A Ltd annual demand is 10000 units, carrying cost is 2Rs per unit and order cost is Rs 50.
Calculate the EOQ - repeat

 707
EOQ=√2DP/H = sqrt [(2*10000*50)/2] = 707.10
D = demand in units per year
P = relevant ordering costs per purchase order
H = relevant carrying costs of one unit in stock for the time period used for D (one year inthis
problem (I*C)

Q – Which of the following AAA debentures will have highest price if YTM is

 .07
Follows opposite

Q – In India, dividend is … in the hands of investers?

 Not taxable
Q – Dividend payment linked to profits left out after meeting the expansion needs is based on
theory/policy? - repeat

 Residual payout policy

Q – Which of the following is the spontaneous source of financing the working capital requirements?

 All

Q – If the coupon rate of a debenture is increased then its YTM will - repeat

 Increase

Q – Growth of the company can be expected to be higher when..is high

 Retention ratio

Q – If the cost of capital of a project goes up then NPV will

 Decrease

Q – As per matching approach, permanent working capital requirements should be funded by -

 Long term funds

Q – Brexit, Greece crisis, Chinese crises, Sub-Prime crisis are the examples of which of the following?
- repeat

 Systematic risk

Q – The internal rate of return generated by a fixed income investment, if held till maturity is known
as

 YTM

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

 .67
SD/Mean = 8/12

Q – Which of the following is not the method for calculation of cost of equity? - repeat

 YTM

Q – What will be the price of bond with face value 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 .7513 and
2.4869 respectively.

 826.43
Face value*present value factor = 1000*.7513 = 751.3
751.3 + (751.3*10%) = 751.3 + 75.13 = 826.43

Q – The cashflows invested in a project at t=0 period is known as - repeat

 Initial cashflow
Q – Which of the following are two components of Holding Period Return?

 Periodic return and capital appreciation

Q - Sheela needs Rs 500000 at the end of 5 years. How much amount she should invest right now
@10%. Present value of Rs1 at 10% for 5 years is .6209. - repeat

 310450
FV = PV [1 + r] ⁿ
PV = 500000 ÷ [ 1 + 10% ] ⁵
= 500000 ÷ [1.1]⁵
= 500000 ÷ (1.61051)
= 310460.6615

Q – A liberal working capital policy will lead to

 High inventory

Q – If credit sales is 100000, credit period is 30 days, calculate the average receivables?

 8219
Average collection period= (average receivables/net sales) * 365
30 = (X / 100000) * 365
X = (30*100000)/365
= 8219.17

Q – Current year dividend of Sun Ltd is Rs 5 per share. Expected growth rate is 8% and market
capitalisation rate is 10%. Calculate the intrinsic value of stock? - repeat

 270
P= D1/(r−g)
D1 = 5 + (8% of 5)
= 5.4
So, P = 5.4/(.1-.08)
= 5.4/.02
= 270

Q – When in calculation of IRR, intermittent cashflows are reinvested at required rate of return, the
resultant rate is known as

 MIRR

Q – Which of the following will result in shareholder’s wealth maximization?

 Maximum utilisation of resources

Q – 1/10, 30 credit term means? - repeat

 1% discount for payment within 10 days.

Q – Which of the following is an example of unsystematic risk?

 Increased steel prices

Q – In case of share buy-back, number of outstanding shares will

Q – If the annual rent expense goes up, the operating leverage will…and will give rise to more than
proportionate change in …? - repeat

 Increase, EBIT

Q – Mathematical model for calculating the optimum inventory order quantity is known as

 EOQ

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

 800235
Equated annual amount = NPV or PV of cash out flow or PV value of cash Inflow/PVAF (k%,n
years)
NPV = 5.3349*150000
= 800235

Q – Cost of equity is always equal to or … than WACC.

 Higher

Q – A company replaces an old machinery with salvage value of Rs 100000 replaced by a machinery
costing Rs 500000. The relevant cash flows for evaluation of this project is

 400000
500000 – 100000

Q – In which of the following frequency of compounding, maturity value of the investment will be
higher?

 Daily

Q - Shyam deposits Rs 5000 every year for next 3 years at 6% semi-annual compounding. Calculate
the future value of investment. Future value annuity factor at 3% for 3 years and 6 years is 3.0909 ad
6.4684 respectively and at 6% for 3 years and 6 years is 3.1836 & 6.9753 respectively.

 15918

Q - Which of the following is combined measure of risk and return?

 Coefficient of variation

Q – Interest yields for different maturity periods, plotted on a graph is known as

 Yield curve

Q – Which of the following instrument is riskiest?

 Shares
Then pref shares, debentures, FD

Q – If proportion of debt is increased in capital structure, overall cost of capital will

 Decrease
Q - The underlying assumption in IRR method is that all the intermittent cash flows are reinvested at

 IRR

Q – In Excel, in order to calculate the EMI for loan repayment, which function has to be used

 PMT

Q - … method tells the period in which original investment in a project will be recovered

 Pay-Back period

Q – Preference share is a …. instrument

 Hybrid

Q – Dividend declared at 12% means that this %age will be applied on

 Face value

Q - In case of capital budgeting decision, the project in which choice of one automatically exclude
the other are known as

 Mutually exclusive projects

Q - If the credit period is increased for the customer of the company, cash conversion cycle will

 Reduce

Q – Cost of debt is

 YTM (1-taxrate)