IMT Solved Assignment For FINC521 Corporate Finance
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IMT Solved Assignment For FINC521 Corporate Finance

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Short Name or Subject Code FINC521 Corporate Finance
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FINC521 Corporate Finance



 

1. Why depreciation has to be added back in the calculation of cash-flow as it is a ___ ?

  • manufacturing expense

  • Cash expense

  • Non-cash expense

  • non-operating expense

2. Dividend payment linked to profits left-out after meeting the expansion needs is based on ____ theory/policy?

  • Signaling Theory 

  • Residual payout policy 

  • Stable Dividend policy 

  • Constant pay-out policy

3. Brexit, Greece Crises, Chinese Crises, Sub-Prime Crises are the examples of which of the following?

  • Systematic Risk 

  • Unsystematic Risk

  • Total Risk 

  • Specific Risk

4. The cash flows forecasted at the end of projection period for capital budgeting decisions are known as___?

  • Initial Cash Flows

  • Operating Cash Flows

  • Terminal Cash Flows

  • Regular Cash Flows

5. The underlying assumption in IRR method is that all the intermittent cashflows are reinvested at. 

  • Cut-off rate

  • required rate of return

  • cost of capital

  • IRR

6. If the credit period is increased for the customers of the company, operating cycle will___

  • reduce

  • increase

  • remain same

  • unaffected

7. Calculate the expected return with the help of following data: p=.3 r=30%, p=.4 r= 16%, p=.3 r=8%

  • 17.8

  • 18

  • 5.8

  • 7.35

8. Cost of preference share is ___

  • Preference Dividend Rate

  • Pref Dividend/Pref. share market price

  • Both of the above

  • None of the above

9. The internal rate of return generated by an fixed income investment, if held till maturity is known as

  • Current Yield

  • YTM

  • Yield Curve

  • Coupon rate

10. Current year dividend of Sun Ltd is Rs 5 per share. Expected growth rate is 8% and market capitalization rate is 10%. Calculate the intrinsic value of stock?

  • 5.4

  • 67.5

  • 54

  • 270

11. Market interest rate is 9%. A bond with 10% coupon will sell ____ parvalue?

  • Above

  • Below

  • at

  • None of the above

12. Which of the following is the spontaneous source of financing the working capital requirements?

  • Commercial Paper 

  • Accounts Payable 

  • Bank Finance 

  • All of the above

13. Which of the following is ultimate objective of financial management?

  • Profit maximization

  • Shareholder's wealth maximization

  • Leverage  Minimization

  • Funding maximization

14. Sheela needs Rs 500000 at the end of 5 years. How much amount she should invest right now @ 10%. Present Value of 1 Rs at 10% for 5 years is .6209

  • 100000

  • 155225

  • 310450

  • 400000

15. In case of capital budgeting decisions, the projects in which choice of one automatically excludes the another are known as ___ ?

  • Dependent Projects 

  • Independent Projects 

  • Mutually Exclusive Projects 

  • Mutually Inclusive Projects

16. For a firm, weight of equity & debt is 0.6 & 0.4 respectively and cost of equity is 15%, Cost of debt is 9%, tax rate is 30%. Calculate the WACC for the firm?

  • 0.126

  • 0.1152

  • 0.12

  • 0.084

17. Moon Ltd invests Rs 800000 in a paper manufacturing plant This is expected to generate Rs 150000 every year for next seven years. Cost of capital for the project is 10%. PVAF for 7 years at 10% is 5.3349. Calculate the NPV of the project?

  • 800000

  • 800235

  • 235

  • -235

18. Growth of the company can be expected to be higher when ______ is high?

  • pay-out ratio 

  • distribution ratio 

  • dividend rate 

  • retention ratio

19. Ifbusiness risk of a company goes up than price of stock will.____ ?

  • decrease

  • increase

  • remain same

  • fluctuate

20. Which of the following instrument is riskiest?

  • Shares

  • Preference Shares

  • Debentures

  • Fixed Deposit

21. As per Bird in hand theory, high dividend pay-out is. _____ to low  pay-out?

  • Preferred

  • not preferred

  • irrelevant for investor

  • None of the above

22. 1/ 10,30 credit term means?

  • 1% discount

  • 0.1% discount

  • 1% discount for payment within 10 days

  • 0.1% discount for payment within 30 days

 

23. Which of the following AAA debentures will have highest price if YTM is___?

  • 0.07                                             

  • 0.08

  • 0.075

  • 0.085

24. Increased financial leverage gives rise to ____ volatile EPS?

  • more

  • less

  • non

  • None of the above

25. Calculate the standard deviation with the help of following data: p=.3 r=30%, p=.4 r= l6%, p=.3 r=8%

  • 74.76

  • 24.92

  • 4.21

  • 8.64

26. Cost of debt is. ____ ?

  • Coupon rate 

  • YTM (I-tax rate) 

  • YTM

  • YTM/Bond Price

27. Discounted payback period is considered an improvement over payback period because it considers. ____ ?

  • All cash-flows

  • Time Value of Money

  • Easy to understand

  • All of the above

28. If credit sales is 100000, credit period is 30 days, calculate the average receivables?

  • 8219

  • 8333

  • 3333

  • 3288

29. The risk which can be reduced by diversification is known as ____ ?

  • Systematic Risk 

  • Unsystematic Risk 

  • Total Risk 

  • Market Risk

30. A stock's average return in last 3 years were 12% and Standard deviation is 8%. Calculate the coefficient of variation?

  • 1.5

  • 0.33

  • 0.67

  • 9.6


 

1.A company replaces an old machinery with salvage value of Rs 100000 replaced by a machinery costing Rs 500000. The relevant cash flows for evaluation of this project is ___ ?

  • 100000

  • 500000

  • 400000

  • 600000

2. In India, dividend is ____ in the hands of investors?

  • Taxable

  • not-taxable

  • Heavily taxable

  • None of the above

4. Which of the following evaluation techniques for long-term investment decisions doesn't consider the time value of money?

  • NPV

  • IRR

  • Pay-Back Period

  • Profitability Index

6. As per liquidity premium theory, interest rates on long term bonds will be ____ than short term bonds?

  • Lower

  • Same

  • Higher

  • Fluctuating

7. Increase in the frequency of compounding results into_______ maturity value.

  • Higher 

  • Lower 

  • Same

  • Fluctuating

8. If the cost of capital of a project goes up then NPV will

  • decrease

  • increase

  • remain same

  • fluctuate

9. Shyam deposits Rs 5000 every year for next 3 years at 6% semiannual compounding . Calculate the future value if investment? Future value annuity factor at 3% for 3years and 6 years is 3.0909 & 6.4684 respectively and at 6% for 3years and 6 years is3.1836 & 6.9753 respectively.

  • 15454.5

  • 16171

  • 15918

  • 17438.25

12. As per :MM proposition without taxes, value of firm is ____ by changing the capital structure?

  • affected

  • not affected

  • increases 

  • decreases

13. Which of the following method is considered the best evaluation techniques for Long-term investment decisions?

  • NPV

  • IRR

  • Pay-Back Period

  • Profitability Index

14. If proportion of debt is increased in capital structure, overall cost of capital will ____?

  • Decrease

  • increase

  • remain same

  • fluctuate

15. The risk which can be reduced by diversification is known as_____ ?

  • Systematic Risk 

  • Unsystematic Risk 

  • Total Risk 

  • Market Risk

18. In ABC classification of inventory, maximum attention has to be paid on _____ items?

  • A category 

  • B category 

  • C category 

  • All of them

20. Dividend declared at 12% means that this % age will be applied on _____ ?

  • Issue Price

  • Market Price 

  • Face Value 

  • Profits

21. When interest rates on long term bonds are higher than short term bonds, yield curve will be. ____ ?

  • upward slopping 

  • downward slopping 

  • flat

  • none of the above

23. Sheela needs Rs 100000 at the end of each year in the next 5 years. How much amount she should invest now @ 10%. Present Value of annuity factor at 10% for 5 years is 3.7908

  • 131898.28

  • 500000

  • 100000

  • 379080

24. The cashflows invested in a project at t=O period is known as_________.

  • Initial Cash Flows

  • Operating Cash Flows

  • Terminal Cash Flows

  • Regular Cash Flows

25. If growth rate of expected earnings goes up than price of stock will_____ .

  • decrease

  • increase

  • remain same

  • fluctuate

26. Incase of share buy-back, number of outstanding share will_____.

  • reduce

  • increase

  • remain same

  • unaffected

27. A stock's average return in last 3 years were 12% and Standard deviation is 8%. Calculate the coefficient of variation?

  • 1.5

  • 0.33

  • 0.67

  • 9.6

28. _____ method tells the period in which original investment in a project will be recovered.

  • NPV

  • IRR

  • Pay-Back Period

  • Profitability Index

29. After the 2 for 1 share split number of shares will_____?

  • remain same

  • reduce

  • be half

  • double

30. If credit sales is 100000, credit period is 30 days, calculate the average receivables?

  • 8219

  • 8333

  • 3333

  • 3288



 

 

 

Q1.Inwhich of the following form of business, income is taxed separately from its owners

  • Sole Proprietorship

  • Partnership 

  • Corporation

  • All of the above

2. The Share Capital of a company is Rs I 0 Cr divided in I 0 Lac number of shares. Calculate the face value of share

  • Rs 100

  • Rs 1000 

  • Rs O

  • Rs l

3. Which of the following is an operating item?

  • Interest paid 

  • salary paid 

  • dividend received 

  • share capital issued

4. Proceeds on the sale of fixed assets will be shown in which part of the cash flow statement, if indirect method is followed.

  • Operating Cash Flow 

  • Financing Cash Flow 

  • Investing Cash Flow 

  • None of the above

  • 5.wich of the following statement shows the Net Profit/Loss earned by a business entity?

  • Income Statement 

  • Balance  Sheet 

  • Trial Balance

  • Cash Flow Statement

6. A credit sale of goods to Mohan should be credited to

  • Sales accowit 

  • Mohan accowit 

  • Goods accowit

  • Purchase accowit

7. Both assets and owner 's equity would be increased by

  • capital brought in

  • Purchase of an asset on credit.

  • Payment of creditors.

  • Proprietors drawings

 

8.There was a fire in M Ltd Godown.It resulted into loss of Rs 5 Cr goods. However, the insurance company accepted the claim of Rs 4.5 Cr only. This will result in in equity by Rs

  • Increase, 4.5 Cr

  • Decrease, 0.5 Cr 

  • Increase, 0.5 Cr 

  • Decrease, 5 Cr

9.A business has paid the rent for the period Jan-March 2016 in Jwie'2016, in which year financial statements this rent expenses will be recorded?

  • 2015

  • 2016

  • 2017

  • All of the above

10.Inwhich of the following firm structure liability of owners is unilimited

  • Sole   Proprietorship 

  • Ltd Liability Partnership 

  • Pvt. Ltd Company 

  • Public Ltd Company

11.While preparing cash flow statements, the repayments of a loan during the year should be included wider the heading of.

  • Operating Cash Flow 

  • Financing Cash Flow 

  • Investing Cash Flow 

  • None of the above

12.Inwhich of the following books, taransactions are first time recorded?

  • Ledger 

  • Accounting Equation 

  • Trial Balance

  • Journal

13. The balance of cash account indicates _ _

  • Net income for the period 

  • Net loss for the period 

  • Net cash on hand

  • Net worth of the business

14. Every accounting transaction must at least affect ______ account?

  • One 

  • Two

  • Three 

  • Four

15. On 1st April 2017 P Ltd sells 100000 shares of Dabur India Ltd to Q Ltd at Rs 400 per share (Market price on that day) with an agreement to repurchase the same at Rs 4 12 per share on 31st Dec 2017. How the transaction should be presented in financial statements of P Ltd

  • Sale of Investment 

  • Sale of Shares 

  • Borrowings 

  • Investment

16. Advance from Customers is an example of ?

  • Asset

  • Liability 

  • income

  • Expense

17. Which of the following self-generated intangible asset can be recorded in books of account

  • Goodwill

  • Technical Know-How 

  • Software

  • All of the Above

18. Inwhich of the following statement, final balances of all the account are prepared in the form of a list

  • Ledger 

  • Accounting Equation 

  • Trial Balance

  • Journal

19. Wages paid to workers must be debited to account

  • Wages

  • Machinery 

  • Factory Expenses 

  • Office Expenses

20. Which of the following can be categorized as discretionary Expense

  • Purchase

  • Salary

  • Repair & Maintenance

  • R&D Expense

 

21.Higher Debt-Equity ratio indicates

• High Operating Risk

• Low Operating Risk 

• High Financial Risk

• Low Financial Risk

22.When a Liability is increased, it is recorded on the

  • Credit Side

  • Debit Side

  • Left Hand Side

  • Any of the above

23 Ram's account in the accounts  payable ledger has a Rs.2000 beginning balance. After a transaction for Rs.500 is posted from the purchases journal, the balance in Ram's account is __

  • 1500 Credit

  • 1500 Debit

  • 2500 Credit

  • 2500 Debit

24.Which of the following measure will be used for calculation of Inventory Turnover Ratio 

 

  • Net Sales

  • Credit Sales

  • Cost of Goods Sold

  • Cos of Sales

25. Credit sales for the year is Rs I 00000 and closing debtors are Rs I 0000. Calculate the collection period of the firm?

  • 10 days

  • 36.5 days

  • 27.39 days

  • None of the above

26. Loss on the sale of Fixed Assets will be shown in which part of the cash flow statement, if indirect method is followed?

  • Operating Cash Flow

  • Financing Cash Flow 

  • Investing Cash Flow 

  • None of the above

27. Which of the following can be categorized as Revenue

  • Sale of goods

  • Sale of Old Furniture 

  • Dividend Received 

  • All of the above

28. Inwhich of the following firm structure compliance cost is maximum

  • Sole Proprietorship 

  • Ltd Liability Partnership 

  • Pvt. Ltd Company 

  • Public Ltd Company

29. In order to reflect the efficiency in debtor's management, Debtor turnover ratio should be. ?

  • increased

  • Decreased

  • Kept Constant

  • None of the above

30. Purchase of machinery against issue of shares will be shown in which part of the cash flow statement?

  • Operating Cash Flow 

  • Financing Cash Flow 

  • Investing Cash Flow 

  • None of the above



 

1. Which of the following is an example of unsystematic risk

  • Political Uncertainty

  • Increased Steel Prices

  • Global Economic Crises

  • Interest Rates Fluctuations

4. Cost of equity is a ways equal to or ____ than WACC

Higher

 

5. What will be the price of bond with face value Rs  1000 carrying a coupon of I 0% maturing in 3 years at I 0% premium on par value? Present value factor and PVAF at 10% for 3 years is .7513 and 2.4869 respectively .

  • 826.43

  • 1348.69

  • 1075.12

  • 1000

 

7. If the annual rent expense goes up, the operating leverage will ___ and will give rise to more than proportionate change In ____ ?

  • 0.33

  • 1.5

  • 0.67

  • 9.6

8. A tight working capital policy will lead to

  • Low debtors

  • Low inventory

  • All of the above

  • low inventory carrying cost

10. Stream of equal cashflows at regular interval starting at the beginning of the period is know as?

  • 0Annuity Due

  • Annuity

  • Lumpsum Cash Flows

  • Conventional Cash Flows

11. Arun buys an stock at Rs 20 & sells at Rs 25 after 10months. During this period, he receives a dividend of Rs 5 on his investments. Calculate the Holding Period Return?

  • 0.25

  • 0.5

  • 0.4

  • 0.2

12. For accepting the project IRR has to be compared with ____ ?

  • required rate of return

  • Cut off rate

  • cost of capital

  • All of the above

14. Increased financial leverage gives rise to ____ volatile EPS?

  • more

  • less

  • None of the above 

  • none

16. Proportion of profit distributed among shareholders is known as _____ ?

  • Pay-out ratio

  • Dividend capitalization rate

  • Dividend rate

  • Retention ratio

17. The risk which can be reduced by diversification is known as___

  • Systematic Risk 

  • Total Risk 

  • Unsystematic Risk 

  • Market  Risk

18. If growth rate of expected earnings goes up than price of stock will ?

  • remain same

  • decrease

  • 0fluctuate 

  • Increase

20. If the credit period is increased by the suppliers of the company, cash conversion cycle will _____ ?

  • increase

  • remain same

  • reduce

  • unaffected


 

4. If proportion of debt is increased in capital structure, overall cost of capital will ____ ?

  • increase

  • remain same 

  • decrease 

  • fluctuate

5. When a proportion of reserves is distributed among shareholders as shares, it is known as.___ ?

  • Both I &2

  • Bonus Shares

  • Dividend

  • Stock Dividend

8. If the annual rent expense goes up, the operating leverage will in___ ?

  • increase, EPS 

  • decrease, EPS 

  • decrease, EBIT

  • increase, EBIT

9. Which of the following is not the function of investment banking?

  • Working Capital Management

  • Private Equity advisory

  • New Issue management

  • Venture Capital Fund Advisory

11. What will be the price of bond with face value Rs I 000 carrying a coupon of I 0% maturing in 3 years at I 0% premium on par value? Present value factor and PVAF at 10% for 3 years is .7513 and 2.4869 respectively

  • 826.43

  • 1348.69

  • 1000

  • 1075.12

 

13. If growth rate of expected earnings goes up than price of stock will

  • decrease

  • remain same

  • increase 

  • fluctuate

15. In how much time Rs  10 lacs can be approximately doubled, if invested at 8% compounded annually?

  • 10 years

  • 12 years

  • 9 years

  • 8 years

18. If the face value of a bond is 100 and its redemption value is 110, bond is maturing at____?

  • 10%premium 

  • None of the above 

  • at  par

  • 10% discount

19. Which of the following is an example of unsystematic risk?

  • Increased Steel Prices

Interest Rates Fluctuations

  • Political Uncertainty

  • Global Economic Crises

22. Proportion of profit distributed among shareholders is known as ?

  • Pay-out ratio

  • Dividend capitalization rate

  • Dividend rate

  • Retention ratio

24. The cash flows forecasted during the projection period for capital budgeting decisions are known as_?

  • Terminal Cash Flows

  • Regular Cash Flows

  • Operating Cash Flows

  • Initial Cash Flows