Scribd Logo
Upload

Welcome to Scribd!

  • DF

    Uploaded by

    Farhan Ashraf
    13 views4 pages

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    13 views4 pages

    DF

    Uploaded by

    Farhan Ashraf

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 4
    Finance Fundamentals-MBA_ (KEY) Subject: Practice Questions ~CB Methods ad Fixed Income Secures 1. Conse our investments withthe following Sequence of eas flows ‘A Prog Proest D 0 $50,000 $30,000 -0,000" $1,000 1 “2n,000 “15,000 30,000 3300 2 204000 15,000 30,000 S030 3 300001000 30}000 “N45 Which of the following statements epurding the above projets false? 1, project A and Bate bath normal investment projects 1 project D may have thre IRR” © RRICHs ana ancng pee IRR of project C cannot be eacalated ~~ more than one ofthe above statment re alse 2. Which ofthe following statements ae tue? 1 Conf between wo mutalyexchsive projects occasionally occur, were the NPV meth ranks one projet higher but the IRR metho ranks the ote oe itn theory such cont sould be resolved in Favor ofthe projec with the higher postive IRR. Abas ug in cpt badging i tat projects NPV exceods its IRR then projet shouldbe scented [eP9O wot Ta) | Toaly Laake | only both are ue both re false ich ofthe following statements is NOT a disadvantage ofthe regular payback methos? Ignores cas flows beyond the payback period, ‘Does nat divectly account for the time vale of money. Does not provide any indication regarding a project igi risk. X Does not ake account of diferences in size among projects. Lacks an objective, market-dtermined benchmark for making decisions. ~ ee@ore @ore = Use he following information forthe next 2 questions. You ae evaluating the fllowing mutually exclusive prs The ot of opal are) 8 0% Year ProectX Projet 3 Grong, Groom) 1 “Sofa” “toera Pek, > emo somo 3 30,000 40,000 NPV + inom 000 ft 4. What theNPV ofeach pe? IRR x 2 2 soe sn6s0 ® 15.879 817244 © ing Staors oo Bie sae © Nonefthesor is reflesthe NPV conty 5. Which ofthe following statements is fle regarding the above projets? we fe mck ped rose ees fos 1 pr tegmbal l nase ute pagel CD f S Riinmorpeecz tree REMY eod it commend sae poe X f MetRintnect sre stenens ese 6. Which ofthe following statements i se? athe internal ate fetus that discount rat that equates the present vale of the cash outlows (or ets) with he preset vale ofthe cash nfiows. The NPV method's assumption tht eas lows ae reinvested atthe ens eapt is generally more ‘asonable than the IRR's assumption that cash ows ae reinvested atthe IRR. © Other things held constant, an increase inthe cost of capital wil reskin a desreas in projets IRREX Fan independent projects NPV is estan zo, then its IRR must be estan the WAC, © Morethat one ofthe above statement ae false 7. Maxis concerned dha the fllowing project has mulple IRR, Which ofthe following statements is ue? Year ou[ais[sze[=s CeshFlows [50 [100 [0 [-30 the project may have sree RRS @ one ofthe discount ates that resus in zero NPV (i IRR) is 4.47 © thoprjet has wo IRRS (0% and 1296) 4 —_sWooTtheabove statements ae eonet Use the following information to answer the next two questions: A dession has been made to purchase a picky trek Two models ae curently ver study, The esh fl data forthe two mols provided blow. The poi ito ‘Rplce a vehi heen fs ie with snsar mod. Model A Model B Ini oats to, 0 fomalnetashintows {30 300 fredusve it yeas Syeus rte eapal ue Fa 8. WhatistheNPVofesh mater? ode a: 4517 Mode: 47 AF g = ye riety ye Holts 9. What's the Equivalent Amity (EAA) ofeach noel? Model A: _ #126 Mosel: $196 — ( foto, Cftonce et) et 10, Kamal Computer Systems is considering the following cash fw data. scot of eafital for such project is 10%. ‘What’ the projets MIRR? Selec the eloes vale Year (9k ERCRED aaa Se a Se 130% 1,1 S026 \ —> Tis © 20% , 5 847> nee 1617 -! , none oftiesbove RR = fis (Optional Questions) Use the following information to answer the next 3 questions. Yoo are provided with the projected income statements with some addtional information for a projet with n economic if of 4 years ‘The projet required an intl investment of $15,000, and an ational investment of $2,000 the end of yea 2. ‘The salvage vale afterax is esimatd at $7,000, The working capital egurement i 10% of revenue bu has (0 be made at the beginning ofeach period. The working capita investment canbe recovered the end of year 4 Annual interest expense $1,000 The fim’s tax rate OMe and cost of apt of 12% What isthe ameune of et pean oft ars (NOPAT)inyear L202 andyears YoB0 2 What ae the fee ash flow othe fm (FCFF) in year0 ([6, 005) and yeur2_3.060__? What isthe prjeersNPV_ $3064 andre _14°26/» Which ofthe following statements is false? ‘A call provision gives bondholders the right to demand, o "al fo," repayment of bond. Sinking funds are deyjes used to force companies to retire Bonds on a scheduled basis prior to ‘heir maturity, © A zero coupon bond isa bond that pays no interest and provides compensation t investors inthe form of eapital appreciation from the purchase price. 44. Eur bonds ae issues hit are denominated in oe currency (eg, USD) but sol ina market where the domestic cureny is other than USD (eg, Ses Francs). © More than one a the above statements ae false Which ofthe folowing statement is false? a Bond finding occurs gn finn redeemsa callable ond ise typically sling at Stand ‘oink lipo Bnd indents low a compan to seguir bond fora sinking fan by ether pring bonds inthe market or acquiring bonds selected by alters) though acl a face vale Fang rates can bene sues fates destin 08 company ta thins rts ikl fall would want to isu sch bands, 4. —Ataching warrants os debt acts as an “equity kicker” or sweetener in financing and lowers he coupon rate onthe underlying host security. More than one ofthe above statements are false Under normal conditions, which of the fellowing would be most likely increase the coupon nie required to enable bond to be issued at par? @ Adding cal provision.“ “The rating agencies change th bons ating from Ba o Asa. Making the bon fist morgage bond rater tana debenture ‘Adding a sinking fond. x © Morethan one ofthe above wil increas the coupon ate required ona bond a2 "ap Copan as tng wih po of pt nd 1 ea eaig ray Terry hess Dam ua fa bd Pear ne en Ie Rome spn cp seaane ese oe 2 Se i ih 21 ae coer ec eee eee bur oes op on. ae 20-year, $% coupon bond. ysaleot = (a), YT Ber Rccmmeny desler

    You might also like