المساعد الشخصي الرقمي

مشاهدة النسخة كاملة : Financial Management- MIDTERM EXAMINATION



محاسب متخصص
03-16-2014, 11:54 AM
MIDTERM EXAMINATION
Spring 2009
MGT201- Financial Management (Session - 4)
Time: 60 min
Marks: 50
Question No: 1 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif What are the earnings per share (EPS) for a company that earned Rs.100, 000 last year in after-tax profits, has 200,000 common shares outstanding and Rs.1.2 million in retained earning at the year end?
► Rs.1.00
► Rs. 6.00
► Rs. 0.50
► Rs. 6.50

Question No: 2 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Among the pairs given below select a(n) example of a principal and a(n) example of an agent respectively.
► Shareholder; manager

► Manager; owner

► Accountant; bondholder

► Shareholder; bondholder


Question No: 3 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Which of the following is equal to the average tax rate?
► Total tax liability divided by taxable income
► Rate that will be paid on the next dollar of taxable income
► Median marginal tax rate
► Percentage increase in taxable income from the previous period

Question No: 4 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Which of the following would be deductible as an expense on the corporation's income statement?
► Interest paid on outstanding bonds
► Cash dividends paid on outstanding common stock
► Cash dividends paid on outstanding preferred stock
► All of the given options

Question No: 5 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif In conducting an index analysis every balance sheet item is divided by __________ and every income statement is divided by __________ respectively.
► Its corresponding base year balance sheet item; its corresponding base year income statement item
► Its corresponding base year income statement item; its corresponding base year balance sheet item
► Net sales or revenues; total assets
► Total assets; net sales or revenues

Question No: 6 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Which group of ratios measures a firm's ability to meet short-term obligations?
► Liquidity ratios
► Debt ratios
► Coverage ratios
► Profitability ratios

Question No: 7 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Which group of ratios relates profits to sales and investment?
► Liquidity ratios
► Debt ratios
► Coverage ratios
► Profitability ratios

Question No: 8 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Interest paid on the original principal borrowed is often referred to as __________.

► Compound interest
► Present value

► Simple interest

► Future value


Question No: 9 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif If the following are the balance sheet changes, which one of them would represent use of funds by a company?

► Rs. 8,950 decrease in net fixed assets

► Rs. 5,005 decrease in accounts receivable

► Rs. 10,001 increase in accounts payable

► Rs. 12,012 decrease in notes payable


Question No: 10 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif In preparing a forecast balance sheet, it is likely that either cash or __________ will serve as a "plug figure" or balancing factor to ensure that assets equal liabilities plus shareholders' equity.
► Retained earnings

► Accounts receivable

► Shareholders' equity

► Notes payable (short-term borrowings)

Question No: 11 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif What is the present value of Rs.8,000 to be paid at the end of three years if the interest rate is 11%?
► Rs.5,850
► Rs.4,872
► Rs.6,725

► Rs.1,842

Question No: 12 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif What is the present value of Rs.1,000 to be paid at the end of 5 years if the interest rate is 8%.
► Rs.680.58
► Rs.1,462.23
► Rs.322.69
► Rs.401.98

Question No: 13 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif As interest rates go up, the present value of a stream of fixed cash flows _____.

► Goes down
► Goes up
► Stays the same
► Can not be found

Question No: 14 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif The benefit we expect from a project is expressed in terms of:
► Cash in flows
► Cash out flows
► Cash flows
► None of the given options

Question No: 15 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif A proposal is accepted if payback period falls within the time period of 3 years. According to the given criteria which of the following project will be accepted?





Payback period



Project A

1.66



Project B

2.66



Project C

3.66






► Project A
► Project B
► Project C
► Project A & B

Question No: 16 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif If a project’s initial cash outflow of Rs. 100,000 is followed by four annual receipts of 36,000 we can get the nearest discount factor by:
► Interpolation
► Dividing 100,000 by 36,000
► Dividing 36,000 by 100,000
► Insufficient information

Question No: 17 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif In which of the following situations you can expect multiple answers of IRR?
► More than one sign change taking place in cash flow diagram
► There are two adjacent arrows one of them is downward pointing & the other one is upward pointing

► During the life of project if you have any net cash outflow

► All of the given options


Question No: 18 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Which of the following technique would be used for a project that has non-normal cash flows?

► Internal rate of return

► Multiple internal rate of return

► Modified internal rate of return

► Net present value


Question No: 19 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif What is the advantage of a longer life of the asset?

► Cash flows from the asset becomes non-predictable
► Cash flows from the asset becomes more predictable
► Cash inflows from the asset becomes more predictable
► Cash outflows from the asset becomes more predictable

Question No: 20 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Which one of the following is NOT the disadvantage of the asset with very short life?


► Money has to be reinvested in some other project with uncertain NPV

► Money has to be reinvested in some other project with certain NPV

► Money has to be reinvested in some other project with return so risky

► None of the given options


Question No: 21 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif You are selecting a project from a mix of projects, what would be your first selection in descending order to give yourself the best chance to add most to the firm value, when operating under a single-period capital-rationing constraint?
► Profitability index (PI)
► Net present value (NPV)
► Internal rate of return (IRR)
► Payback period (PBP)

Question No: 22 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Which one of the following is the right of the issuer to call back or retire the bond by paying off the bondholders before the maturity date?


► Call in

► Call option

► Call provision


► Put option


Question No: 23 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Which of the following is a characteristic of a coupon bond?

► Pays interest on a regular basis (typically every six months)
► Does not pay interest on a regular basis but pays a lump sum at maturity
► Can always be converted into a specific number of shares of common stock in the issuing company
► Always sells at par

Question No: 24 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif When a bond will sell at a discount?

► The coupon rate is greater than the current yield and the current yield is greater than yield to maturity
► The coupon rate is greater than yield to maturity
► The coupon rate is less than the current yield and the current yield is greater than the yield to maturity
► The coupon rate is less than the current yield and the current yield is less than yield to maturity

Question No: 25 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif An investment opportunity set formed with two securities that are perfectly negatively correlated. What will be standard deviation in the global minimum variance portfolio?
► Equal to zero
► Greater than zero
► Equal to the sum of the securities' standard deviations
► Equal to -1

Question No: 26 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif How efficient portfolios of "N" risky securities are formed?
► These are formed with the securities that have the highest rates of return regardless of their standard deviations
► They have the highest risk and rates of return and the highest standard deviations
► They are selected from those securities with the lowest standard deviations regardless of their returns
► They have the highest rates of return for a given level of risk

Question No: 27 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Which of the following is NOT an example of hybrid equity?

► Convertible bonds
► Convertible debenture
► Common shares
► Preferred shares

Question No: 28 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif The value of dividend is derived from which of the following?

► Cash flow streams
► Capital gain /loss
► Difference between buying & selling price
► All of the given options

Question No: 29 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif How dividend yield on a stock is similar to the current yield on a bond?

► Both represent how much each security’s price will increase in a year
► Both represent the security’s annual income divided by its price
► Both are an accurate representation of the total annual return an investor can expect to earn by owning the security
► Both incorporate the par value in their calculation

Question No: 30 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif The market capitalization rate on the stock of Fast Growing Company is 20%. The expected ROE is 22% and the expected EPS ia Rs. 6.10. If the firm's plowback ratio is 90%, the P/E ratio will be ________.

► 8.33
► 50.0
► 9.09
► 7.69

Question No: 31 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif In the dividend discount model, which of the following is (are) NOT incorporated into the discount rate?


► Real risk-free rate
► Risk premium for stocks
► Return on assets
► Expected inflation rate

Question No: 32 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif A company whose stock is selling at a P/E ratio greater than the P/E ratio of a market index, most likely has _________.

► An anticipated earnings growth rate which is less than that of the average firm
► A dividend yield which is less than that of the average firm
► Less predictable earnings growth than that of the average firm
► Greater cyclicality of earnings growth than that of the average firm

Question No: 33 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Which of the following is the variability of return on stocks or portfolios not explained by general market movements. It is avoidable through diversification?
► Systematic risk
► Standard deviation
► Unsystematic risk
► Financial risk

Question No: 34 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif When Return is being estimated in % terms, the units of Standard Deviation will be mention in __________.

► %
► Times
► Number of days
► All of the given options

Question No: 35 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif A well-diversified portfolio is defined as:

► One that is diversified over a large enough number of securities that the nonsystematic variance is essentially zero
► One that contains securities from at least three different industry sectors
► A portfolio whose factor beta equals 1.0
► A portfolio that is equally weighted

Question No: 36 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Which of the following is NOT a major cause of unsystematic risk.

► New competitors
► New product management
► Worldwide inflation
► Strikes

Question No: 37 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif You are considering two investment proposals, project A and project B. B's expected net present value is Rs. 1,000 greater than that for A and A's dispersion of net present value is less than that for B. On the basis of risk and return, what would be your conclusion?

► Project A dominates project B
► Project B dominates project A
► Neither project dominates the other in terms of risk and return
► Incomplete information

Question No: 38 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Which of the following is a drawback of percentage of sales method?






► It is a rough approximation
► There is change in fixed asset during the forecasted period
► Lumpy assets are not taken into account
► All of the given options

Question No: 39 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Which of the following need to be excluded while we calculate the incremental cash flows?







► Depreciation
► Sunk cost
► Opportunity cost
► Non-cash item

Question No: 40 ( Marks: 1 ) - Please choose one
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif Why companies invest in projects with negative NPV?





► Because there is hidden value in each project
► Because they have chance of rapid growth
► Because they have invested a lot
► All of the given options

Question No: 41 ( Marks: 10 )
file:///C:/Users/Atatork/AppData/Local/Temp/msohtmlclip1/01/clip_image002.gif ICO Company must decide between two mutually exclusive projects. The following information describes the cash flows of each project.


Year Project "A" Project "B"

0 Rs. (20,000) Rs. 24,000
1 10,000 10,000
2 8,000 10,000
3 6,000 10,000


a. Assume that 15% is the appropriate required rate of return. What decision should the firm make about these two projects?
b. If the firm reevaluated these projects at 10%, what decision should the firm make about these two projects?


A) We have 2 project A , B

Project A, Io= - Rs20000, Yr 1 = +Rs10000, Yr2= Rs8000, Yr3= Rs6000
Project B, Io= -Rs24000, Yr1= +Rs10000, Yr2=Rs10000, yr3=Rs10000

In simple NPV=

Project A= -20000+10000+8000+6000/(1.15)^3
Rs= 2630.19

Project B= -24000+10000+10000+10000/(1.15)^3
Rs= 3945.29

The firm will decide to take the 2nd project B. becz its NPV is greater tha project A.

B)

Project A= -20000+10000+8000+6000/(1.10)^3
Rs= 3005.25

Project B= -24000+10000+10000+10000/(1.10)^3
Rs= 4507.88

Again on 10%, project B is better tha project A.