CLICK HERE FOR VARIOUS NEW JOBS 
CLICK HERE FOR VARIOUS EDUCATIONAL NEWS 
CLICK HERE FOR NEW SCHOLARSHIPS 
CLICK HERE FOR ADMISSION NOTICES 
Click And Follow On Google+ To Get Updates
Please Wait 10 Seconds... OR You CanSkip

ADMISSION NOTICES
Scholarships

Scholarship-300x291

BUDGET 2014-15
budget_2014-2015
New Date Sheets
VU SOLVED ASSIGNMENTS
Recent Posts

Posts Tagged ‘VU. FIN622-. Corporate. Finance .(Session – 4). MIDTERM .EXAMINATION. Fall .2009’

VU FIN622- Corporate Finance (Session – 4) MIDTERM EXAMINATION Fall 2009

.

MIDTERM EXAMINATION

Fall 2009

FIN622- Corporate Finance (Session – 4)

Question No: 1 — Please choose one

Which of the following statements is TRUE regarding Profitability Index?

► It ignores time value of money

► It ignores future cash flows

It ignores the scale of investment -

(page 36)

► It ignores return on investment

Question No: 2 — Please choose one

A company can improve (lower) its debt-to-total assets ratio by doing which of the

following?

► By increasing the amount of borrowings

► By shifting short-term to long-term debt

► By shifting long-term to short-term debt

By selling the common stock -

Question No: 3 — Please choose one

A public limited Company had sales of Rs.2 million this year. The marketing manager

expects sales to grow at a 10 percent compound annual rate over the next 10 years. On

this basis, which of the following is the closest amount of sales in 10 years?

Rs.5,187,485. -

2000000 (1.10)10 = 5,187,485

► Rs.2,593,722.

► Rs.4,622,885.

► Rs.5,081,309

.

Question No: 4 — Please choose one

Suppose you wish to set aside Rs.2,000 at the beginning of each of the next 10 years (the

first Rs.2,000 deposit would be made now) in an account paying 12 percent compounded

annually. Approximately how much will you accumulate at the end of 10 years?

► Rs.22,863

Rs.35,097 – Doubted

► Rs.39,310

► Rs.25,151

Question No: 5 — Please choose one

Which of the following terms refers to the process of systematic investigation of the

effects on estimates or outcomes of changes in data or parameter inputs or assumptions to

evaluate a capital project?

.

Sensitivity Analysis -

(page 36)

► Fundamental Analysis

► Technical Analysis

► Trend Analysis

Question No: 6 — Please choose one

The percentage change in a firm’s operating profit (EBIT) resulting from a 1% change in

output (sales) is known as the ________.

Degree of operating leverage -

► Degree of profit leverage

► Degree of total leverage

► Degree of financial leverage

Question No: 7 — Please choose one

A project would be financially feasible in which of the following situations?

► If Internal Rate of Return of a project is greater than zero

► If Net Present Value of a project is less than zero

► If the project has Profitability Index less than one

If the project has Profitability Index greater than one -

Question No: 8 — Please choose one

Which of the following is determined by variance of an investment’s returns?

► Volatility of the rates of return.

► Probability of a negative return.

► Historic return over long periods.

Average value of the investment. -

Question No: 9 — Please choose one

Which of the following conditions, if exist, will make the diversification of stocks more

effective?

Securities contained in a portfolio are positively correlated

Securities contained in a portfolio are negatively correlated -

► Securities contained in a portfolio have high market values

► Securities contained in a portfolio have low market values

Question No: 10 — Please choose one

Which one of the following terms refers to the variability of return on stocks or

portfolios not explained by general market movements, and is avoidable through proper

diversification?

► Total risk

► Systematic risk

Unsystematic risk -

► Market risk

Question No: 11 — Please choose one

Suppose a stock is selling today for Rs.40 per share. At the end of the year, it pays a

.

dividend of Rs.2.00 per share and sells for Rs.44.00. what is the rate of return on this

stock?

► 12%

► 13%

► 14%

15% -

2/40*100 = 5%

4/ 40 *100= 10%

05%+10% + 15%

Question No: 12 — Please choose one

If the common stocks of a company have beta value less than 1, then such stocks refer to

which of the following?

► Normal stocks

► Aggressive stocks

Defensive stocks -

► Income stocks

Question No: 13 — Please choose one

What will be the risk premium if the market portfolio has an expected return of 10% and

the risk free rate is 4%?

► 4%

► 5%

6% -

Market risk premium, (Erm – Rf)

10% – 4% = 6%

► 7%

Question No: 14 — Please choose one

A firm had an interest expense of Rs.400,000 on its outstanding debt during the financial

year 2006-2007. If the firm marginal tax rate is 40%, what was the total tax savings of the

firm during the period 2006-2007?

► Rs.150,000

Rs.160,000 -

400,000 *40/100 = 160,000

► Rs.170,000

► Rs.180,000

Question No: 15 — Please choose one

In which of the following dividend policies, the amount of dividend is relatively fixed?

Constant payout ratio policy -

(page 73)

► Hybrid dividend policy

► Residual dividend policy

► Stable dividend policy

Question No: 16 — Please choose one

Which of the following is a proposition of Miller and Modigliani theory of Capital

structure?

Value of a firm is independent of its capital structure -

.

► Value of a firm is independent of its level of debt

► Value of a firm is dependent of its cost of capital

► Value of a firm is independent on its level of equity finances

Question No: 17 — Please choose one

Which of the following companies may be considered as a Pure Play in the beverages

industry in Pakistan?

► Coca Cola

► Pepsi

► Shezan

Nestlé -

Question No: 18 — Please choose one

Which of the following is a disadvantage of Capital Asset Pricing Model?

► It considers market risk

► It can be used for listed companies

► It can be used for non-listed companies

It is based on past data -

(page 52)

Question No: 19 — Please choose one

Which of the following methods would be most suitable for calculating the return on

stocks of a non-listed company?

Dividend Growth Model -

r = Div1 / Po +g

► Capital Asset Pricing Model

► Security Market Line

► Characteristics Line

Question No: 20 — Please choose one

What will be the effect of reduction in the cost of capital on the accounting break-even

level of revenues?

► It raises the break-even level.

► It reduces the break-even level.

It has no effect on the break-even level. -

► This cannot be determined without knowing the length of the investment horizon.

Question No: 21 — Please choose one

Which of the following statements is TRUE regarding Balance Sheet of a firm?

► It reports how much of the firm’s earnings were retained in the business rather

than paid out in dividends.

► It reports the impact of a firm’s operating, investing, and financing activities on

cash flows over an accounting period.

It shows the firm’s financial position at a specific point in time. -

► It summarizes the firm’s revenues and expenses over an accounting period.

Question No: 22 — Please choose one

Which of the following would be a consequence of a high Inventory Turnover Ratio?

► Low level of inventory and frequent stock-outs

► Seasonal elements peculiar to the business

Efficient inventory management -

► Any of the given option

.

Question No: 23 — Please choose one

Short-term creditors would be most interested in which of the

following ratios of a firm?

► Coverage ratios

Liquidity ratios -

► Profitability ratios

► Debt ratios

Question No: 24 — Please choose one

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 earnings at the

year end?

► Rs. 6.50

► Rs. 6

► Rs. 100,000

Rs. 0.50 -100,000/200,000 = 0.50

Question No: 25 — Please choose one

Which of the following statements is CORRECT with respect to

common-size income and balance sheet statements?

► They show how total sales change over time, but not total

assets.

They show how both total sales and total assets change over

time. -

► They provide no information about how total assets or total

sales change over time.

► They show how total assets change over time, but not total

sales.

Question No: 26 — Please choose one

Which one of the following statements is TRUE regarding Present

Value of an amount

to be received at some future date?

► It increases as the years to receipt increases

► It remains unaffected as the years to receipt increases

It decreases as the years to receipt increases -

► None of the given options

Question No: 27 — Please choose one

How many years will it take for Rs.152,000 to grow to be Rs.

.

405,000 if it is invested in

an account with an annual interest rate of 10%?

► 13.68

► 8.23

10.28 -

► Cannot be calculated from the given data

Question No: 28 — Please choose one

If you deposit Rs. 12,000 per year for 16 years (each deposit is

made at the beginning of

each year) in an account that pays an annual interest rate of 15%,

what will your account

be worth at the end of 16 years?

► Rs. 82,168.44

► Rs. 71,450.82

Rs. 768,901.12 -

► Rs. 668,609.67

Question No: 29 — Please choose one

Which of the following types of bonds pays no annual interest to

the holder, but is sold at discount below the par value?

► An original maturity bond

► A floating rate bond

► A fixed maturity date bond

A zero coupon bond -

Question No: 30 — Please choose one

Which of the following is the rate of return earned on a bond if

held till maturity?

► Yield-to-call

► Coupon payment

Yield-to-maturity -

► Sinking fund yield

Question No: 31 — Please choose one

Which one of the following statements best describes the

relationship between market interest rates and bond prices?

► Market interest rates and bond prices move in the same

direction

Market interest rates and bond prices move in opposite

directions -

.

► Sometimes move in the same direction, sometimes in opposite

directions

► Market interest rate and bond prices have no relationship with

each other

Question No: 32 — Please choose one

When the market’s required rate of return for a particular bond is

much less than its

coupon rate, the bond will be selling at which one of the

following?

At premium -

► At discount

► At par

► Cannot be determined without more information

Question No: 33 — Please choose one

Which of the following techniques of stock evaluation considers

quantitative factors as

well as qualitative factors for valuation?

► Technical Analysis

Fundamental Analysis -

► Constant Growth Model

► No Growth Model

Question No: 34 — Please choose one

In which of the following situations market price of a security will

move down?

When market price of the security is above the intrinsic

value of the security

► When market price of the security is equal to the intrinsic value

of the security

► When market value of the security is equal to the face value of

the security

When market price of the security is below the intrinsic

value of the security

-

Question No: 35 — Please choose one

Which of the following could be used to calculate the cost of

common equity?

► Interpolation method

► Dividend discount model

YTM (Yield-to-Maturity) method

Capital structure valuation -

Question No: 36 — Please choose one

Which of the following is a long-term source of financing for a

.

firm?

Corporate bonds -

► Money market instruments

► Trade credit

► Accounts payables

Question No: 37 — Please choose one

Which of the following focuses on long-term investment decisionmaking

process?

► Working Capital Management

Capital Budgeting -

► Cash Budgeting

► None of the given options

Question No: 38 — Please choose one

Since the capital budgeting techniques use cash flows instead of

accounting flows,therefore, the financial manager must add back

which one of the following to the analysis?

► The cost of fixed assets

► The cost of accounts payable

► Investments

Depreciation –

Question No: 39 — Please choose one

Which of the following capital budgeting methods focuses on

firm’s liquidity?

► Internal Rate of Return

Payback method -

► Net Present Value

► None of the given options

Question No: 40 — Please choose one

When faced with mutually exclusive options, which project should

be accepted under the ‘Payback Method’?

► The one with the longest payback period

The one with the shortest Payback period

It doesn’t matter because the payback method is not

theoretically correct

► None of the given options

ALL NEW RESULTS
Educational News

Updated Educational News

Categories
POSTS BY DATE
December 2016
M T W T F S S
« Sep    
 1234
567891011
12131415161718
19202122232425
262728293031