Which of the following is not a source of conflict in the project ranking in capital budgeting decision as per NPV and IRR?
A. Independent Investment Project
B. No Capital Budget constraints
C. No time disparity
D. None of the above
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How should the Minimum Lease Payment (MLP) of a land and building lease get apportioned?
A. Treat entirely as building
B. Treat entirely as land
C. Apportion MLP between land and buildings based on fair value of leasehold interests
D. Apportion MLP between land and buildings based on management's judgement
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Risk, as it relates to working capital, means there is jeopardy to the firm for not maintaining sufficient current assets to
A. Meet its cash obligations as they occur and take advantage of prompt payment discounts
B. Support the proper level of sales and take prompt payment discounts
C. Maintain current and acid-test ratios at or above industry norms
D. Meet its cash obligations as they occur and support the proper level of sales
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Assertion (a): When two or more investment proposals are mutually exclusive, ranking the proposals on the basis of IRR, NPV and PI methods may givecontradictory results.
Reason (R): The contradictory results in the ranking are due to differing dimensions relating to the scale of investments, cash flow patterns and project lives.
Indicate the correct answer:
A. Both (A) and (R) are true
B. (A) is true, but (R) is a necessary condition, but not a sufficient condition
C. Both (A) and (R) are false
D. Both (A) and (R) are true and (R) explains the reason sufficiently
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Every business undertaking requires funds for
A. investment in fixed assets
B. investment in current assets
C. Both A and B
D. None of the above
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The profitability index of a project is the ratio of the present value of cash inflows to
A. Total cash inflows
B. Total cash outflows
C. Present value of cash outflows
D. Initial cost minus depreciation
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A set of possible values a random variable can assume, and their associated probabilities of occurrence are referred to as
A. Probability distribution
B. The expected return
C. The standard deviation
D. Coefficient of variation
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If a bank thinks lending money to a certain business is risky, it will
A. charge a lower interest rate
B. charge a higher interest rate
C. send the business packing
D. think about it
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Which method is a 'crude rule thumb' of capital budgeting?
A. NPV method
B. Payback method
C. Adjusted rate of return method
D. None of the above
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Which is not the technique of capital structure analysis?
A. Trading on equity
B. Capital gearing
C. Capital budgeting
D. Cost of capital
Select an option to see the answer and solution.
Which of the following statement is incorrect?
A. Capital budgeting is the process of making investment decisions in the capital expenditure
B. Capital budgeting is the process of making investment decisions in fixed assets
C. Both A and B
D. None of the above
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Which of the following dividend promises to pay the shareholders at a future date?
A. Interest
B. SCRIP
C. Cash flow
D. Property
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The repurchase of stock is considered . . . . . . . . decision rather than . . . . . . . . decision.
A. An investment; a financing
B. A financing; an investment
C. An investment; a dividend
D. A dividend; a financing
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Which of the following is an internal source of finance?
A. Factoring
B. Trade credit
C. Retained earnings
D. Debentures
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Which of the following portfolio statistics statements is correct?
A. A portfolio's expected return is a simple weighted average of expected returns of the individual securities comprising the portfolio
B. A portfolio's standard deviation of return is a simple weighted average of individual security return standard deviations
C. The square root of a portfolio's standard deviation of return equalsits variance
D. The square root of a portfolio's standard deviation of return equalsits coefficient of variation
Select an option to see the answer and solution.
The cost of equity share capital is more than the cost of debt because
A. Equity shares are not easily saleable
B. Equity shares do not provide a fixed dividend rate
C. Generally, the face value of equity shares is less than the face value of debentures
D. Equity shares havehigh risk than debts
Select an option to see the answer and solution.
A lease is likely to be most beneficial to both parties when
A. the lessor's tax rate is lower than the lessee's
B. the lessor's tax rate is higher than the lessee's
C. the lessor's tax rate is equal to the lessee's
D. a lease can not be beneficial to both parties
Select an option to see the answer and solution.
Consider the following statements.
In case of overcapitalisation,
1. market value of shares come down from its face value.
2. organisation failed to earn sufficient profit.
Which of the statement(s) given above is/are correct?
A. Only 1
B. Both 1 and 2
C. Only 2
D. None of the above
Select an option to see the answer and solution.
International liquidity comprises which of the following?
(i) Gold held by central banks
(ii) Gold held by families
(iii) Forex reserve held by commercial banks
(iv) Mineral wealth
(v) SDRs
(vi) Borrowing facilities
(vii) NRIs and FDRs
(viii) Credit facilities available under SWAP
A. (i), (ii), (iii), (iv)
B. (ii), (iii), (iv), (viii)
C. (i), (iii), (v), (viii)
D. (iii), (iv), (vii), (viii)
Select an option to see the answer and solution.
XYZ Co earns Rs. 10 per share, capitalised at 10% and has a return on investment of 12%. What is the optimum dividend payout ratio as per Walter's dividend policy model?
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