Finance Management MCQ

Question 91 : In order to find out the present value of a sum of Rs. 10,000 to be received at the end of each year for the next 5 years at 10% rate, we use:

  1. Future value formula
  2. Present value formula
  3. Present value of annuity formula
  4. Future value of annuity formula

Question 92 : Which are the following options does not generate cash?

  1. Issue of security
  2. Redeem security
  3. Raises a bank loan
  4. Payment from firms customers

Question 93 : ABC Ltd is considering undertaking a project that would yield average annual profits (after depreciation) of Rs. 68,000 for 5 years. The initial outlay of the project would be Rs. 800,000. What would be the accounting rate of return for this project?

  1. 0.17
  2. 0.085
  3. 0.08
  4. 0.091

Question 94 : The process of calculating future values of cash flows is called

  1. Discounting
  2. Compounding
  3. Capital recovery
  4. Perpetuity

Question 95 : What is the weighted average cost of capital for a firm?

  1. Discount rate which the firm should apply to all of the projects it undertakes.
  2. Maximum rate which the firm should require on any projects it undertakes
  3. Overall rate which the firm must earn on its existing assets to maintain the value of its stock
  4. Rate the firm should expect to pay on its next bond issue

Question 96 : Acid test ratio is also known as __________

  1. Current ratio
  2. Net profit ratio
  3. Net sales ratio
  4. Quick ratio

Question 97 : What is PV of Rs 100 one year hence with discounting factor 25% ?

  1. Rs 125
  2. Rs 25
  3. Rs 250
  4. Rs 80

Question 98 : The concept of homemade leverage is most associated with:

  1. MM Proposition I with no tax.
  2. MM Proposition II with no tax.
  3. MM Proposition I with tax.
  4. MM Proposition II with tax.

Question 99 : Which of the following statements lends most support to the theory that dividend payments are irrelevant to the value of ordinary shares?

  1. Shareholders making homemade dividends face dealing costs
  2. Shareholders are concerned with total earnings rather than with the split between distributed and retained earnings.
  3. Investors' discount rates increase with time due to uncertainty.
  4. Firms have particular clienteles due to their dividend policy

Question 100 : A quick approximation of the typical firm's cost of equity may be calculated by

  1. Adding a 5 percent risk premium to the firm's before-tax cost of debt.
  2. Adding a 5 percent risk premium to the firm's after-tax cost of debt.
  3. Subtracting a 5 percent risk discount from the firm's before-tax cost of debt.
  4. Subtracting a 5 percent risk discount from the firm's after-tax cost of debt.
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