Reference no: EM132575705

Problem 1:- The present value of Rs 20,000 to be received after five years from now assuming 6% time preference for money is :

a) 14,940

b) 16,776

c) 12,551

d) 11,500

Problem 2:- Operating cycle can be delayed by:

a) Increase in WIP period

b) Decrease in raw material storage period.

c) Decrease in credit payment period.

d) Both (a) and (c) above

Problem 3:- Given the following information about Nile ltd. The market price of its share using the Walter`s model is Rs. ___________ Equity capitalisation rate (Ke)= 16% , Earnings per share (E) = Rs 13, Dividend paid out ratio = 25% , Assume return on investment is 14%.

a) 73.6

b) 56.45

c) 80.3

d) 71.22

Problem 4:- Which of the following is a factor influencing the credit policy of a firm?

a) Cash credit limit

b) Average payment period

c) Collection effort

d) Outstanding creditors

Problem 5:- Axis ltd. is issuing 15% debentures (face value Rs 60). The net amount realized per debenture is Rs 54, and they are redeemable at par after 6 years. At a corporate tax rate of 40%, what is the cost of debt?

a) 16.54%

b) 17.54%

c) 11.23%

d) 14.74%

Problem 6:- If the required rate of return in Excel Ltd.`s shares is 16%, risk free rate of return is 8%, and the rate of return on market portfolio is 11%, what is the `beta` of the stock?

a) 1.67

b) 2.67

c) 0.38

d) 2.87

Problem 7:- The market value of equity and debt is Rs 10,00,000 and Rs 5,00,000 respectively. The cost of equity is 18% and that of debt is 13%. If the tax rate is 35%, the weighted average cost of funds taking market value as weighted is :

a) 13%

b) 13.82%

c) 14%

d) 14.62%

Problem 8:- If the net present value for a project is negative, then :

a) IRR=Cost of Capital

b) IRR> Cost of Capital

c) BCR >1

d) IRR< Cost of Capital

Problem 9:- If the degree of operating leverage of a company is increased by 30% while the degree of financial leverage is decreased by 20%. What will be the change in the degree of total leverage?

a) 2% increase

b) 3% increase

c) 4% increase

d) 2% decrease

Problem 10:- A firm`s present market price of the share is Rs 40 and its EPS is Rs 12. The firm is planning to declare 45% of this as dividends. If the firm reinvests its retained earnings at the rate of 14%, the cost of its equity according to Gordon dividend capitalization model is:

a) 20%

b) 21.20%

c) 22%

d) 26.20%