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MGT201 current paper (May 2010) Today Paper(26-05-2010) MIDTERM EXAMINATIONSpring 2010MGT201- Financial Management (Session - 5)Time: 60 minMarks: 44 Question No: 1 ( Marks: 1 ) - Please choose one Which of the following statements is correct for a sole proprietorship? ► The sole proprietor has limited liability ► The sole proprietor can easily dispose of their ownership position relative to a shareholder in acorporation ► The sole proprietorship can be created more quickly than a corporation ► The owner of a sole proprietorship faces double taxation unlike the partners in a partnership Question No: 2 ( Marks: 1 ) - Please choose one Which of the following market refers to the market for relatively long-term financial instruments? ► Secondary market ► Primary market ► Money market ► Capital market Question No: 3 ( Marks: 1 ) - Please choose one Felton Farm Supplies, Inc., has an 8 percent return on total assets of Rs.300,000 and a net profit margin of 5 percent. What are its sales? ► 750,0Rs.3, 750,000 ► Rs.48Rs.480, 000 ► Rs.30Rs.300, 000 ► Rs.1, Rs.1, 500,000 Question No: 4 ( Marks: 1 ) - Please choose one An investment proposal should be judged in whether or not it provides: ► A return equal to the return require by the investor ► A return more than required by investor ► A return less than required by investor ► A return equal to or more than required by investor Question No: 5 ( Marks: 1 ) - Please choose one A capital budgeting technique through which discount rate equates the present value of the future net cashflows from an investment project with the project’s initial cash outflow is known as: ► Payback period ► Internal rate of return ► Net present value ► Profitability index Question No: 6 ( Marks: 1 ) - Please choose one A capital budgeting technique that is NOT considered as discounted cash flow method is: ► Payback period ► Internal rate of return ► Net present value ► Profitability index Question No: 7 ( Marks: 1 ) - Please choose one Why net present value is the most important criteria for selecting the project in capital budgeting? ► Because it has a direct link with the shareholders dividends maximization ► Because it has direct link with shareholders wealth maximization ► Because it helps in quick judgment regarding the investment in real assets ► Because we have a simple formula to calculate the cash flows Question No: 8 ( Marks: 1 ) - Please choose one You are selecting a project from a mix of projects, what would be your first selection in descending order to give yourself the best chance to add most to the firm value, when operating under a single-period capital-rationing constraint? ► Profitability index (PI) ► Net present value (NPV) ► Internal rate of return (IRR) ► Payback period (PBP) Question No: 9 ( Marks: 1 ) - Please choose one Bond is a type of Direct Claim Security whose value is NOT secured by __________. ► Tangible assets ► Intangible assets ► Fixed assets ► Real assets Question No: 10 ( Marks: 1 ) - Please choose one If a 7% coupon bond is trading for Rs. 975 it has a current yield of _________ percent. ► 7.00 ► 6.53 ► 8.53 ► 7.18 Question No: 11 ( Marks: 1 ) - Please choose one Which of the following is designated by the individual investor's optimal portfolio? ► The point of tangency with the opportunity set and the capital allocation line ► The point of highest reward to variability ratio in the opportunity set ► The point of tangency with the indifference curve and the capital allocation line ► The point of the highest reward to variability ratio in the indifference curve Question No: 12 ( Marks: 1 ) - Please choose one Assume that the expected returns of the portfolios are the same but their standard deviations are given inthe options given below, which of the option represent the most risky portfolio according to standarddeviation? ► 1.5% ► 2.0% ► 3.0% ► 4.0% Question No: 13 ( Marks: 1 ) - Please choose one Which of the following is a drawback of percentage of sales method? ► It is a rough approximation ► There is change in fixed asset during the forecasted period ► Lumpy assets are not taken into account ► All of the given options Question No: 14 ( Marks: 1 ) - Please choose one Which of the following need to be excluded while we calculate the incremental cash flows? ► Depreciation ► Sunk cost ► Opportunity cost ► Non-cash item Question No: 15 ( Marks: 1 ) - Please choose one Which of the following is NOT an example of a financial intermediary? ► Wisconsin S&L, a savings and loan association ► Strong Capital Appreciation, a mutual fund ► Microsoft Corporation, a software firm ► College Credit, a credit union Question No: 16 ( Marks: 1 ) - Please choose one An 8% coupon Treasury note pays interest on May 30 and November 30 and is traded for settlement onAugust 15. What is the accrued interest on Rs. 100,000 face value of this note? ► Rs. 491.80 ► Rs. 800.00 ► Rs. 983.61 ► Rs. 1,661.20 Question No: 17 ( Marks: 1 ) - Please choose one A preferred stock will pay a dividend of Rs. 3.50 in the upcoming year, and every year thereafter, i.e.,dividends are not expected to grow. You require a return of 11% on this stock. Use the constant growthmodel to calculate the intrinsic value of this preferred stock. ► Rs. 0.39 ► Rs. 0.56 ► Rs. 31.82 ► Rs. 56.25 Question No: 18 ( Marks: 1 ) - Please choose one Information that goes into __________ can be used to prepare __________. ► A forecast balance sheet; a forecast income statement ► Forecast financial statements; a cash budget ► Cash budget; forecast financial statements ► A forecast income statement; a cash budget Question No: 19 ( Marks: 1 ) - Please choose one What is the present value of Rs.8,000 to be paid at the end of three years if the interest rate is 11%compounded annually? ► Rs.5,850 ► Rs.4,872 ► Rs.6,725 ► Rs.1,842 Question No: 20 ( Marks: 1 ) - Please choose one “Do not compare apples with oranges” is the concept in: ► Discounting and Net present value ► Risk & return ► Insurance management ► Time value of money Question No: 21 ( Marks: 1 ) - Please choose one Which of the following is NOT the interest rate used for discounting calculation? ► Benchmark interest rate ► Effective interest rate
