Reference no: EM132601625

Question 1. If you have Birr1000 and you plan to save it for 4 years with an interest rate of 10%, what is the future value of your savings?

A. Birr 1464.00

B. Birr 1000.00

C. Birr 1331.00

D. Cannot be determined.

Question 2. While evaluating capital investment proposals, time value of money is used in which of the following techniques,

A. Payback method

B. Accounting rate of return

C. Net present value

D. None of the above

Question 3. Time value of money is an important finance concept because:

A. It takes risk into account

B. It takes time into account

C. It takes compound interest into account

D. All of the above.

Question 4. One The traditional approach towards the valuation of a company assumes that:

A. The overall capitalization rate holds constant with changes in financial leverage.

B. There is an optimum capital structure.

C. Total risk is not altered by changes in the capital structure.

D. Markets are perfect.

E. None

Question 5. The pay back technique is especially useful during times

A. When the value of money is turbulent

B. When there is no inflation

C. When the economy is growing at a steady rate coupled with minimal inflation.

D. None of the above

Question 6. A capital budgeting technique which does not require the computation of cost of capital for decision making purposes is,

A. Net Present Value method

B. Internal Rate of Return method

C. Modified Internal Rate of Return method

D. Pay back

Question 7. One difference between a financial lease and operating lease is that:

A. There is often a call option in a financial lease.

B. There is often an option to buy in an operating lease.

C. An operating lease is often cancellable by the lessee.

D. A financial lease is often cancellable by the lessee