Professional Documents
Culture Documents
Poll 1 1 question No
What are the financial characteristics of doing business in corporate form? Ans. Multiple sources
of finance are available ( Single Choice)
Answer 1: YES
Answer 2: NO
Poll 2 1 question No
1. What are the financial characteristics of doing business in corporate form? Ans. Valuation
becomes easier? ( Single Choice)
Answer 1: YES
Answer 2: NO
Poll 3 1 question No
1. What are the financial characteristics of doing business in corporate form? Ans. Transparency
in financial reports? ( Single Choice)
Answer 1: YES
Answer 2: NO
Poll 4 1 question No
1. What are the financial characteristics of doing business in corporate form? Ans. Profits can be
as large as possible (with constraints) ( Single Choice)
Answer 1: YES
Answer 2: NO
Poll 5 1 question No
1. How can principal-agent relationship problems be minimized? Ans. Pay managers handsome
salary, perquisites, benefits ( Single Choice)
Answer 1: YES
Answer 2: NO
Poll 6 1 question No
1. How can principal-agent relationship problems be minimized? Ans. Shareholder activism should
be encouraged ( Single Choice)
Answer 1: YES
Answer 2: NO
1. How can principal-agent relationship problems be minimized? Ans. India should have laws akin
to Sarbanes-Oxley Act of USA ( Single Choice)
Answer 1: YES
Answer 2: NO
1. How can principal-agent relationship problems be minimized? Ans. Profits can be as large as
possible (with constraints) ( Single Choice)
Answer 1: YES
Answer 2: NO
1. Why book value does not equal market value? ( Single Choice)
Title Total Questions Anonymous
1. Why net operating income does not correspond to net operating cash earned, even if we ignore
non-cash expenses? ( Single Choice)
Poll 11 1 question No
1. 1. ARR has many defects. Is it very relevant for a modern finance manager? ( Single Choice)
Answer 1: Yes, if the project is of short duration, say one year or less.
1. The CEO of a large company attended a course on corporate finance. He expressed that all the
firm’s projects must have pay back periods of 5 years or less otherwise, the projects won’t be
approved. Give your advice, assuming he knows time value of money ( Single Choice)
Answer 1: Sequencing and quantum of cash flow must not be ignored as it has +ve /-ve tax
impacts affecting returns on investment
Answer 2: Every project has a gestation period and this cannot be ignored
1. Which one is more relevant to the finance manager; NPV or IRR? ( Single Choice)
Answer 1: NPV first and then IRR as he has to ultimately arrange fund at a cost lesser than
IRR
1. Under what circumstances CFO or FM should use IRR or NPV to evaluate investment? ( Single
Choice)
Answer 1: It is IRR when fund cost is a constraint and it is NPV when fund cost is not a
constraint
Answer 2: It is immaterial whether he uses IRR or NPV as long as the ARR is higher than
industry average.
1. If project is to be financed substantially by financial institutions, what should the lender consider
first NPV or IRR? ( Single Choice)
Answer 3: IRR
1 question No
Poll 20
1. The IRR for an irrigation project is 12%. If the opportunity cost of capital is 10%, then ( Single Choice)
Poll 21 1 question No
1. If two projects have similar investment costs, similar life and similar total cash inflow over the life, then;
( Single Choice)
Answer 2: IRR would be higher for the project whose cash inflow would be high towards the end of life
Answer 3: IRR would be lower for the project whose cash inflow would be high towards the beginning of
life
Poll 22 1 question No
1. A project whose acceptance does not prevent or require the acceptance of one or more alternative
projects is referred to as __________. ( Single Choice)
Poll 23 1 question No
1. Which of the following statements is not correct regarding IRR? ( Single Choice)
Answer 3: IRR is rarely used by firms because they know their cost of capital and use NPV instead
Poll 24 1 question No
1. At the end of a manufacturing project (with finite life), working capital alters NPV because ( Single
Choice)
Poll 25 1 question No
1. For a special purpose project with limited (finite) life, the discount factor to be chosen as ( Multiple
Choice)
Answer 2: Cost of equity if the project is funded through profit plough back