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Posts Tagged ‘VU. ACC501 – .BUSINESS. FINANCE. (Session – 3 ) .FINALTERM .EXAMINATION. SPRING .2007’

VU ACC501 – BUSINESS FINANCE (Session – 3 ) FINALTERM EXAMINATION SPRING 2007

.

.

FINALTERM EXAMINATION

SPRING 2007

ACC501 – BUSINESS FINANCE (Session – 3 )

Marks: 60

Time: 150min

StudentID/LoginID: ______________________________

Student Name: ______________________________

Center Name/Code: ______________________________

Exam Date: Wednesday, July 11, 2007

Please read the following instructions carefully before attempting any question:

All questions are compulsory.

This exam consists of 10 Multiple Choice Questions (MCQ’s), 5 True/False Questions, 3 Short

Questions and 3 Numerical Questions.

Question No. 1-10 are MCQs carrying 1 Mark each, Question No. 11-15 are True/False

Questions carrying 1 Mark each, Question No.16-18 are short questions carrying 5 Marks each

and Question No. 19-21 are numerical questions carrying 10 Marks each.

For each MCQ, read the choices available carefully and select the choice which you consider is the

correct one.

You are required to show all the working of short questions as well as Numerical questions.

The use of calculator and financial tables is allowed.

The use of mobile phones in exam center is strictly prohibited.

A clock has been given in the exam software. Software will automatically be closed after 150

minutes.

Remember do not spend too much time on any one MCQ. Since all MCQ’s carry equal marks, it is

important to manage your time and responses to test questions effectively.

This Examination is closed book, closed notes and closed neighbours.

Failure to comply with the supervisor’s directions will result in your test being cancelled. Please

comply with supervisor’s directions to avoid any unpleasant event.

For Teacher’s use only

Question 1 2 3 4 5 6 7 8 9 10 Total

Marks

Question 11 12 13 14 15 16 17 18 19 20

Marks

Question 21

.

.

Marks

Question No: 1 ( Marks: 1 ) – Please choose one

The process of planning and managing a firm’s long-term investments is called :

Planning Process

Capital Structure

Capital Budgeting

Managing Process

Question No: 2 ( Marks: 1 ) – Please choose one

Return on Equity (ROE) = _________ x Total Assets Turnover x Equity Multiplier

Profit Margin

Total Sales

Net Income

Total Equity

Question No: 3 ( Marks: 1 ) – Please choose one

If a bank loans out Rs. 10,000 for 90 days at 8% simple interest, the Present Value (PV) will

be :

Rs. 9,105

Rs. 9,807

Rs. 10,325

Rs. 10,765

Question No: 4 ( Marks: 1 ) – Please choose one

The ____________ is the rate where NPV (Net Present Value) equals to zero.

WACC (Weighted Average Cost of Capital)

► IRR (Internal Rate of Return)

.

.

MIRR (Modified Internal Rate of Return)

AAR (Average Accounting Return)

Question No: 5 ( Marks: 1 ) – Please choose one

______________ is adopted to permit minority participation.

Cumulative Voting

Straight Voting

Proxy Voting

Staggering

Question No: 6 ( Marks: 1 ) – Please choose one

Which one of the following statements projects future years’ operations in a summarized

format ?

Income Statement

Cash Flow Statement

Pro Forma Financial Statement

None of the given options

Question No: 7 ( Marks: 1 ) – Please choose one

The direct and indirect costs associated with going bankrupt or experiencing financial

distress, are known as :

Direct Bankruptcy Costs

Indirect Bankruptcy Costs

Financial Distress Costs

All of the given options

Question No: 8 ( Marks: 1 ) – Please choose one

Suppose you bought 1,500 shares of a corporation at Rs. 25 each. After a year, you

received Rs. 3,000 (Rs. 2 per share) in dividends. The dividend yield will be :

.

.

5.00 %

8.00%

10.00%

12.00%

Question No: 9 ( Marks: 1 ) – Please choose one

You earn a 7% real return. If the inflation rate is 5 percent, what is your nominal return ?

8.96 %

9.05 %

11.65 %

12.35%

Question No: 10 ( Marks: 1 ) – Please choose one

The projected cash flows from a project are :

Years Cash flows

1 Rs. 100

2 Rs. 300

3 Rs. 600

4 Rs. 800

The project costs Rs. 1,000. What would be the payback period for the project ?

2.00 Years

2.67 Years

3.00 Years

3.67 Years

Question No: 11 ( Marks: 1 ) – Please choose one

Sole Proprietorship is a business created as a distinct legal entity owned by one or more

.

.

individuals or entities.

True

False

Question No: 12 ( Marks: 1 ) – Please choose one

The term discounting is associated with Future Value concept whereas the term

compounding is associated with Present Value concept.

True

False

Question No: 13 ( Marks: 1 ) – Please choose one

Constant Growth Stock is a share of common stock in a company with a constant rate of

dividend.

True

False

Question No: 14 ( Marks: 1 ) – Please choose one

Portfolio is the group of assets (stocks and bonds) held by an investor.

True

False

Question No: 15 ( Marks: 1 ) – Please choose one

The difference between bank cash and book cash, representing the net effect of cheques in

the process of clearing is called float.

True

False

Question No: 16 ( Marks: 5 )

Following are given cash inflows of a project. Assume that all cash flows are received at

the end of the period.

.

.

Period Cash Flows

1 Rs.10,000

2 Rs.15,000

3 Rs.20,000

4 Rs.30,000

5 Rs.35,000

Calculate the future value of cash flows stream at the end of year 5 with a compound

annual interest rate of 10%.

Question No: 17 ( Marks: 5 )

Write down the statements for the followings:

a. NPV (Net Present Value) Rule

b. IRR (Internal Rate of Return) Rule

c. Payback Rule

d. PI (Profitability Index) Rule

e. AAR (Average Accounting Return) Rule

Question No: 18 ( Marks: 5 )

What do M&M Proposition I and Proposition II state ?

Question No: 19 ( Marks: 10 )

Mr. Jamil has Rs. 70,000 that he can deposit in savings accounts of any of three banks A, B

or C for a three years period. Bank A compounds interest on annual basis; Bank B

compounds interest semi-annually (twice each year); and Bank C compounds interest

quarterly (four times each year). All three banks have a stated annual interest rate of 12%.

1. How much Mr. Jamil will have in his account after three years if he deposits

his money in Bank A ?

2. How much He will have in his account after three years if he deposits his

money in Bank B ?

3. How much He will have in his account after three years if he deposits his

money in Bank C ?

4. On the basis of your findings in above parts, describe which bank should

Mr. Jamil deal with and why ?

Question No: 20 ( Marks: 10 )

SNT Company presently paid a dividend of Rs.1.5 per share and has a share price of

Rs.25. The dividends are expected to grow @ 15% forever. SNT Company has Rs.100

.

.

million in equity and Rs.75 million in debt in its total capital. The tax rate for the firm is

35% and the Cost of debt is 12%. Calculate the Weighted Average Cost of Capital

(WACC) for SNT Company?

Question No: 21 ( Marks: 10 )

Magi Inc. specializes in toys and receives all income from sales.

Quarters * 1 2 3 4 1 (next year)

Sales (Rs.) 500,000 600,000 650,000 800,000 550,000

* Each quarter consists of 3 months (90 days)

 Accounts Receivable:

o Beginning receivables = Rs. 250,000

o Average Collection Period = 30 days

 Accounts Payable:

o Purchases = 50 % of next quarter’s sales

o Beginning payables = Rs. 125,000

o Accounts Payable Period is 45 days

 Other expenses:

o Wages, taxes and other expenses are 25% of sales

o Interest and dividend payments are Rs. 50,000

o A major capital expenditure of Rs. 200,000 is expected in the second quarter

You are just required to calculate the Cash Collections (Receipts) and Cash Disbursements

(Payments) for four Quarters.

VU ACC501 – BUSINESS FINANCE (Session – 3 ) FINALTERM EXAMINATION SPRING 2007

.

FINALTERM EXAMINATION

SPRING 2007

ACC501 – BUSINESS FINANCE (Session – 3 )

Marks: 60

Time: 150min

StudentID/LoginID: ______________________________

Student Name: ______________________________

Center Name/Code: ______________________________

Exam Date: Wednesday, July 11, 2007

Please read the following instructions carefully before attempting any question:

All questions are compulsory.

This exam consists of 10 Multiple Choice Questions (MCQ’s), 5 True/False Questions, 3 Short

Questions and 3 Numerical Questions.

Question No. 1-10 are MCQs carrying 1 Mark each, Question No. 11-15 are True/False

Questions carrying 1 Mark each, Question No.16-18 are short questions carrying 5 Marks each

and Question No. 19-21 are numerical questions carrying 10 Marks each.

For each MCQ, read the choices available carefully and select the choice which you consider is the

correct one.

You are required to show all the working of short questions as well as Numerical questions.

The use of calculator and financial tables is allowed.

The use of mobile phones in exam center is strictly prohibited.

A clock has been given in the exam software. Software will automatically be closed after 150

minutes.

Remember do not spend too much time on any one MCQ. Since all MCQ’s carry equal marks, it is

important to manage your time and responses to test questions effectively.

This Examination is closed book, closed notes and closed neighbours.

Failure to comply with the supervisor’s directions will result in your test being cancelled. Please

comply with supervisor’s directions to avoid any unpleasant event.

For Teacher’s use only

Question 1 2 3 4 5 6 7 8 9 10 Total

Marks

Question 11 12 13 14 15 16 17 18 19 20

Marks

Question 21

Marks

Question No: 1 ( Marks: 1 ) – Please choose one

.

The process of planning and managing a firm’s long-term investments is called :

Planning Process

Capital Structure

Capital Budgeting

Managing Process

Question No: 2 ( Marks: 1 ) – Please choose one

Return on Equity (ROE) = _________ x Total Assets Turnover x Equity Multiplier

Profit Margin

Total Sales

Net Income

Total Equity

Question No: 3 ( Marks: 1 ) – Please choose one

If a bank loans out Rs. 10,000 for 90 days at 8% simple interest, the Present Value (PV) will

be :

Rs. 9,105

Rs. 9,807

Rs. 10,325

Rs. 10,765

Question No: 4 ( Marks: 1 ) – Please choose one

The ____________ is the rate where NPV (Net Present Value) equals to zero.

WACC (Weighted Average Cost of Capital)

IRR (Internal Rate of Return)

MIRR (Modified Internal Rate of Return)

AAR (Average Accounting Return)

Question No: 5 ( Marks: 1 ) – Please choose one

.

______________ is adopted to permit minority participation.

Cumulative Voting

Straight Voting

Proxy Voting

Staggering

Question No: 6 ( Marks: 1 ) – Please choose one

Which one of the following statements projects future years’ operations in a summarized

format ?

Income Statement

Cash Flow Statement

Pro Forma Financial Statement

None of the given options

Question No: 7 ( Marks: 1 ) – Please choose one

The direct and indirect costs associated with going bankrupt or experiencing financial

distress, are known as :

Direct Bankruptcy Costs

Indirect Bankruptcy Costs

Financial Distress Costs

All of the given options

Question No: 8 ( Marks: 1 ) – Please choose one

Suppose you bought 1,500 shares of a corporation at Rs. 25 each. After a year, you

received Rs. 3,000 (Rs. 2 per share) in dividends. The dividend yield will be :

5.00 %

8.00%

10.00%

12.00%

Question No: 9 ( Marks: 1 ) – Please choose one

.

You earn a 7% real return. If the inflation rate is 5 percent, what is your nominal return ?

8.96 %

9.05 %

11.65 %

12.35%

Question No: 10 ( Marks: 1 ) – Please choose one

The projected cash flows from a project are :

Years Cash flows

1 Rs. 100

2 Rs. 300

3 Rs. 600

4 Rs. 800

The project costs Rs. 1,000. What would be the payback period for the project ?

2.00 Years

2.67 Years

3.00 Years

3.67 Years

Question No: 11 ( Marks: 1 ) – Please choose one

Sole Proprietorship is a business created as a distinct legal entity owned by one or more

individuals or entities.

True

False

Question No: 12 ( Marks: 1 ) – Please choose one

The term discounting is associated with Future Value concept whereas the term

compounding is associated with Present Value concept.

True

.

False

Question No: 13 ( Marks: 1 ) – Please choose one

Constant Growth Stock is a share of common stock in a company with a constant rate of

dividend.

True

False

Question No: 14 ( Marks: 1 ) – Please choose one

Portfolio is the group of assets (stocks and bonds) held by an investor.

True

False

Question No: 15 ( Marks: 1 ) – Please choose one

The difference between bank cash and book cash, representing the net effect of cheques in

the process of clearing is called float.

True

False

Question No: 16 ( Marks: 5 )

Following are given cash inflows of a project. Assume that all cash flows are received at

the end of the period.

Period Cash Flows

1 Rs.10,000

2 Rs.15,000

3 Rs.20,000

4 Rs.30,000

5 Rs.35,000

Calculate the future value of cash flows stream at the end of year 5 with a compound

annual interest rate of 10%.

Question No: 17 ( Marks: 5 )

.

Write down the statements for the followings:

a. NPV (Net Present Value) Rule

b. IRR (Internal Rate of Return) Rule

c. Payback Rule

d. PI (Profitability Index) Rule

e. AAR (Average Accounting Return) Rule

Question No: 18 ( Marks: 5 )

What do M&M Proposition I and Proposition II state ?

Question No: 19 ( Marks: 10 )

Mr. Jamil has Rs. 70,000 that he can deposit in savings accounts of any of three banks A, B

or C for a three years period. Bank A compounds interest on annual basis; Bank B

compounds interest semi-annually (twice each year); and Bank C compounds interest

quarterly (four times each year). All three banks have a stated annual interest rate of 12%.

1. How much Mr. Jamil will have in his account after three years if he deposits

his money in Bank A ?

2. How much He will have in his account after three years if he deposits his

money in Bank B ?

3. How much He will have in his account after three years if he deposits his

money in Bank C ?

4. On the basis of your findings in above parts, describe which bank should

Mr. Jamil deal with and why ?

Question No: 20 ( Marks: 10 )

SNT Company presently paid a dividend of Rs.1.5 per share and has a share price of

Rs.25. The dividends are expected to grow @ 15% forever. SNT Company has Rs.100

million in equity and Rs.75 million in debt in its total capital. The tax rate for the firm is

35% and the Cost of debt is 12%. Calculate the Weighted Average Cost of Capital

(WACC) for SNT Company?

Question No: 21 ( Marks: 10 )

Magi Inc. specializes in toys and receives all income from sales.

Quarters * 1 2 3 4 1 (next year)

Sales (Rs.) 500,000 600,000 650,000 800,000 550,000

* Each quarter consists of 3 months (90 days)

 Accounts Receivable:

o Beginning receivables = Rs. 250,000

o Average Collection Period = 30 days

 Accounts Payable:

o Purchases = 50 % of next quarter’s sales

o Beginning payables = Rs. 125,000

o Accounts Payable Period is 45 days

 Other expenses:

.

o Wages, taxes and other expenses are 25% of sales

o Interest and dividend payments are Rs. 50,000

o A major capital expenditure of Rs. 200,000 is expected in the second quarter

You are just required to calculate the Cash Collections (Receipts) and Cash Disbursements

(Payments) for four Quarters.

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