Professional Documents
Culture Documents
ACC501 01 FINAL Fall20082
ACC501 01 FINAL Fall20082
com
FINALTERM EXAMINATION
Fall 2008
ACC501- Business Finance (Session - 1)
Marks: 81
What would be the capital spending for an organization who has purchased
fixed assets of Rs. 200,000 and sold fixed assets of Rs. 45,000?
Rs. 245,000
Rs. 200,000
Rs. 155,000
Rs. 45,000
SNT Com pany has a current ratio of 3:2. Current Liabilities reported by
the com pany are Rs. 30 ,0 0 0 . What would be the Net Working Capital
for the company?
Rs. 45,000
Rs. 15,000
( Rs. 45,000)
( Rs. 15,000)
Which of the following are incorporated into the calculation of the Du-
Pont Identity?
I. Return on assets
II. Equity Multiplier
III. Total Assets Turnover
IV. Profit Margin
Which of the following is a special case of annuity, where the stream of cash
flows continues forever?
Special Annuity
Ordinary Annuity
Annuity Due
Perpetuity
Mortgage
Debenture
Collateral
Note Payable
vulmshelp.com
Question No: 10 ( Marks: 1 ) - Please choose one
Nominal return
Real return
Inflation return
When real rate is _____, all interest rates will tend to be _____.
Low; higher
High; lower
High; higher
Which of the following is the extra yield that investors dem and on a taxable
bond as a compensation for the unfavorable tax treatment?
Taxability premium
Secondary Market
Tertiary Market
Place the following items in the proper order of completion regarding the
capital budgeting process.
(I) Perform a post-audit for completed projects;
(II) Generate project proposals;
(III) Estimate appropriate cash flows;
(IV) Select value-maximizing projects;
(V) Evaluate projects.
An investm ent w ill be ___________ if the IRR d oesn t exceed s the requ ired return
and ___________ otherwise.
Accepted; rejected
Accepted; accepted
Rejected; rejected
Rejected; accepted
A project whose acceptance does not prevent or require the acceptance of one
or more alternative projects is referred to as :
An independent project
A dependent project
A contingent project
Finding Net Present Value comes under which type of capital budgeting
criteria ?
Accounting Criteria
Payback Criteria
___________ Cost is an outlay that has already occurred and hence is not affected
by the decision under consideration.
vulmshelp.com
Sunk
Opportunity
Fixed
Variable
Which of the following is the overall return the firm must earn on its
existing assets to maintain the value of the stock ?
Sunk cost
Opportunity cost
The current price of SNT stock is Rs. 50. Dividends are expected to grow at
7 percent indefinitely and the most current dividend was Rs. 1.00. What is
the required rate of return on SNT stock?
vulmshelp.com
9.00 percent
9.14 percent
9.33 percent
10.65 percent
Which one of the following typically applies to preferred stock but not
to common stock?
Dividend yield
Cumulative dividends
Voting rights
You must own which of the following to vote against a merger proposal
from another corporation?
Preferred share
vulmshelp.com
A debenture
Common stock
Suppose you have Rs. 10,000 on deposit. One day, you write a cheque for Rs.
2,000 and deposit Rs. 4,000. What is your collection float ?
Rs. 4,000
+ Rs. 2,000
vulmshelp.com
Rs. 2,000
+ Rs. 4,000
Suppose you have Rs. 10,000 on deposit. One day, you write a cheque for Rs.
2,000 and deposit Rs. 4,000. What is your net float ?
Rs. 4,000
+ Rs. 2,000
Rs. 2,000
+ Rs. 4,000
Which of the following is known as the group of assets such as stocks and
bonds held by an investor ?
Stock Bundle
Portfolio
Capital Structure
Probability distribution
The MC Inc. purchased a share of common stock exactly one year ago for Rs.
45. During the past year the common stock paid an annual dividend of Rs. 2.40.
The firm sold the stock today for Rs. 80. What is the rate of return the firm has
earned?
5.3%
194.2%
83.11%
94.2%
Mr. Sami has bought 50 shares of a corporation one year ago at Rs. 20 per
share. Over the last year, he received a dividend of Rs. 2 per share. At the end
of the year, the stock sells for Rs. 25. As per given information, what will be
his total percentage return ?
10 %
20 %
35 %
45 %
While p erform ing the feasibility analysis for a p roject, an op erating cash flow of
Rs. 225,000 has been calculated . N et w orking cap ital has d eclined by Rs.
40,000. There w as a net capital sp end ing of Rs. 100,000 d u ring the year. What
w ill be the total cash flow for the project?
Rs. 85,000
vulmshelp.com
Rs. 165,000
Rs. 285,000
Rs. 365,000
The total m arket valu e of a com p any s stocks is calcu lated as Rs. 250 m illion
and the total m arket valu e of the com pany s d ebt are calcu lated as Rs. 150 m
illion. What percent of the firm s financing is d ebt ?
37.50%
50.00%
62.50%
70.00%
Su p pose a firm borrow s Rs. 800,000 at 7%. What w ill be the after-tax interest
rate if tax rate is 34%?
3.00%
4.62%
5.20%
8.00%
Carrying costs
Opportunity costs
vulmshelp.com
Restocking costs
What w ill be the Econom ic Ord er Qu antity (EOQ) if total u nit sales (T) =
400, fixed costs (F) = Rs. 30 and carrying costs (CC) = Rs. 5 ?
65 units
79 units
89 units
95 units
20%
33%
40%
vulmshelp.com
67%
The book valu e of a system is Rs. 50,350 at the end of year 3 of its life. What w
ill be the total after-tax cash flow from sale if w e sell this system for Rs. 30,000
at this time? (Tax rate is 34%)
Rs. 20,350
Rs. 30,919
Rs. 36,919
Rs. 80,350
What w ill be the variance if stand ard d eviation for the retu rns of an investm
ent is 0.2829 ?
0.0800
0.0892
0.5319
Write down the components of total return in terms of dividend growth model.
A firm has a total value of Rs. 1 million and debt valued at Rs. 400,000. What is
the after-tax weighted average cost of capital if the cost of debt is 12%, the cost
of equity is 15% and tax rate is 35% ?
Bonds carry an interest rate of 11.5%. Common stocks and Preferred stocks have a
return of 15.50 % and 12% respectively and corporate tax rate is 40%. Compute the
present Weighted Average Cost of Capital (WACC) for SNT & Co.
Stand ard Manu facturing Com pany (SMC) need s one of tw o m achines.
Machine X costs Rs. 25,000 and has cash flow s of Rs. 8,000 a year for six years.
Machine Y costs Rs. 30,000 and has cash flow s Rs. 7,000 a year for six years.
SMC has 12% cost of capital. Calcu late each m achine s Payback Period and N
PV (N et Present Value) and evaluate the results.