7 ro CAoiie Net Present Value of a project have been estimated as follows: Discount Iate(%) Net Present Value (8.000) 20 25 25 +15 Using the above data, determine the best approximation of the project's internal rate of retum b. 21.09% 23.13% 23.25%. 23.31% 0.22.67% earns st NSmillion and it will generate cash profit as follows: Year 1-N3.2 million Year 2- N3,250,000 Year 3 - N3,300,000 Year 4+ N3,350,000 Ifthe company cost of capital is 18%, determine the project's ‘Accounting rate of return 2 30% b.31% 32% «33% ©. 23% 7 The first important step involved in capital budgeting process is—-------s*rr0"-"""" "a identifying possible alternative to the project being evaluated b. Identifying possible investment projects ¢. Project selection —_d. project monitoring and control €. a &b A project has a cost of N53,500 and its expected net eash inflows are 11 ,$00 per annum for ” Gyears. If the cos: of capital is 5%, the project's Net Present Value (NPY) is a. N78.221.46 b. N81,087.46 c. N5837046 d.N4,870.46 ¢. None of Above $5. One of the limitation of traditional method of evaluating ARR is a. it very easy to understand b. it very easy to compute C. it consider total profits of a fect throughout its operating life d. it does not recognise time value of money concep 7A company is considering 4 project with the following cash flows Year CashFlow 0 —-+N45,000 “ 1 N16,500> 2 —_NI9,800 3. .N24,750 4 —-N28,875 Determine the prcject Payback Period given that the company cost of capital is 20% Scanned with CamScanner19° century c.dyears dd 24years developed in the ear orship and self financing on d. survival value of outflow Net present value a. Dycars b. 3yeurs nis regarded as ‘he primary objective of a finn At wher the features of the business firm were sole propriet a, wealth maximization b, Value maximization ©. Profit maxims is the difference between present value of inflows and preset Accounting rate of return 100,000 which has a [ite of 2 —8 a. Payback period b. Interal rate of return € 9,TA} Ltd is considering investing in u project costing stairs but, the probability years. The project future cashflows are not ee given below YEAR ONE TPRORABITY—~«[YEARTWO PROBABILITY (ee et —+— = 50,500 Tos [60.000 o4 0,000 Tos 70,000 of | Required Calculate te expes ef valve ofthe NPV « 1%6 and teasay bill rate ef revum is ATMA NAI.HOU > Se8.0H0 lace 10... ts the rate of return that equate present value of wffones with non 4. Payback period b tater of return €. Accounting re of rturn & ate Retor enter he ates cepted under 11. For a single project to be IRR must be 4. equal to the company cov company coxt ef capital lower than company cost of ex AIA company is considering a project with the ftlowang eah Bovey offrensm bb equal ta the company Year CashFlow 0 -N4S,000 1 Nt6.S00 2 19, 800° 3) N24,750 4 N28,875 Determine the project Net Present Value eve $b NIO, 747 © Nio 746 : ato, 23. A company is considering a proyect with the f Year — CashFlow 0 -NSS,000 116,500 Scanned with CamScanner2 N19,300 324,750 4 N28,375 Determine the project Profitability Index given thatthe company cost of capita is 20% Setceem tt b:023 6.1.23 124 M4Tie cost of capital consists ofthe following elements EXCEPT ‘aaa da Ma. Rael for business risk b, Premium for volatility. Premium for fin : Tate Of the following is an exam itional method except ‘ . iple of traditior * Payback period b.Imemal rate of retum c. Accounting rate of retum d. ARR ee Py onside i ing cash flows Nee Cosh tons 88 8 Project with the following, -N45,000 16,600 N19,000 : 24,6000 - 4 28,000 Determine the project Profitabil wnee ity Index given that the company cost of capital is 20% tl? 002 8109 atts 7- The conflic: between capltal decision budgeting criterion is al ved in favour of " igeting criterion is always resolved in & Payback: period b. Internal ae of eres oe present value d. Profitability Index capital structure is made up of N1,000,000 equity share and N600,000 10% debentore Tire company degree of operating leverage is: <1.03° b.154 138 4.1.33 wien Ple incurred # fixed cost of N150,000 in producing 120,000 units of empty erates for the manufacturer of Thumbs-Up, a new brand of soft drinks, It sella erate for N15 but incufs a variable cost of N10 on a erate. The company's eapital structure is made up of 1,000,000 equity share and N600,000 10% debenture. The company degree of financial leverage is: 2.133, 154° 11S “L135 20, AdenijiPilc incurred a fixed cost of N150,000 in producing 120,000 units of empty crates ae ‘man sfacturer of Thumbs-Up, a new brand of soft drinks. It sell a crate for N15 but incurs a variable cost of N10 on a crate. The company's capital structure is made up of 1N1,000,000 equity share and N600,000 10% debenture. The company degree of combine leverage is: ie als4 b144 0135 4.258 21. Johnson ple has an issue 16% N1, 000 imedeemable Debenture currently selling at 'NI,020., Determine the cost of debt if the corporate tax rate is 35%. 2.16% b. 19% 6.10% =. 14% 22. One of the following statements is not true about cost of capital; Scanned with CamScannera. Cost of funds raised by finns. b. Discount rate of returns for discounting a project's cash flows, — ¢. Minimum rave of retum expected by the provider of a company funds, d. Maximum rate of return expected by the provider of a company funds |_Dsetriraculte Limited has in issue 12% 81 nominal value irredeemable preference shares. | The current market price of the preference shares is 81.60. Calculate the cost of preference shares. 0. 7.5% b.10.5% ¢. 13.33% — d. 15.33% 24, IC Ltd has in issye"2,000,000 ordinary share of N1.00 each with a current market value of N10.60 per share. Ordinary dividend of N1.S6 million was recently paid and dividend annual growth rate is 12%. Determine the cost of equity: a. 21% b. 20% c.22% d. 23% 25. One of the probability methods of measuring risk is: a. sensitivity analysis b. Certainty equivalent factor method ¢. Risk adjusted method . Coefficient of variation . 26. question: A $5-year old civil servant will retire at age 60 and expects to live to age 75. ‘Assuming a 10% rate of return, calculate the amount he must have available at age 60 to receive $310,000 annually from retirement until death. a. $317,725.00 b.N76,061.00 . 661,446.00 d. N86,487.00 27. What interest rate compounded quarterly will make N5,000 to accumulate 10N20,000 for A years: 0. 9% b.36% 24% = d.37% Find the present value of N7.S00promised to be paid in Syears. Interest is compounding continuously at 20%:a. N2,759 b. N6,500 ©. 7,900 d.N5,800 -29. What will be the total amount receivable from an investment of N800,000 made for 4 and half years at 12% compounded annual interest? a,N4;332,205 b.N1,258,815¢.N1,258,816 —_d.N896,000 0, Project Initial Outlay PV of Net Cash flows Asokoro 800,000 ¥900,000 Wuse 500,000 650,000 Bwari 100,000 -150,000 Kuje 300,000 400,000 ‘Assuming the projects are divisible but budgeted funds are limited to 4500,000, which of the rojects should be elected of Asokoro and Wuse projects well as Bwari and Kuje projects are ive? mutually os some wose b.Keujeand 40% Wus e+ Bwarkand s0% asokere & " Kuje and 25% Asokore tion about Coca kola. Ltd wing inform: 31. Given the following Book Value Market Value After Tax Cost anna (OLN Scanned with CamScanner| Long-term debt 3,000 2,800 12.0 Preference shares 102 150 95 Ordinary shares 1,108 2,500 10.0 : 2 4.210 5.450 ‘What is the appropriate after-tax weighted average cost of capital for the firm? a 4 90% ——_b.14.26% 11.01% 14.12% A medium sized firm engaged in commercial agriculture incurs M200,000 fixeg snusly in producing 10,000 kg of cereals in Adamawa State for sale to a Lagos, food Processing firm at N500 per kg. Variable cost is 200 per kg. The agricune! ‘Grm’s capital structure comprises 10% preference shares worth M1 million and 1s4 debentures worth 500,000 apart from ordinary shares worth MImillion. What is, firm's depee of operating leverage? a. 1.03 b. 1.07 ells 40.71 folabi Helen invests N10, 000 at the end of each year from 2004 to 2018 inclusive. H ; . low much will she have accumulated at the end of 2021, if the annual compoundifig rate i, 13%: a. N404, 174.64 b.N404, 175.00 c.N658, 996.08 —d. N583, 182.38 33-Amotekun Ple has a fixed cost of N600,000.00 producing 480,000 Bottles of it t ,000,00 producing 480,000 Bottles of Alomo Bitters It sells a bottle fer N60 but in a variable cost of N40 on a bottle. The capital structure of th company is made up of N4million equity share and N2.4million 10% debenture. Calculate th Degree of Financial Leverage a. 1.02 6.1.03 ©. 1.04 4.1.05 34-Téverage may be defined as what? a. A proportional change in profit due to proportional changes in sales b. A proportional chang in sales due to proportional changes in profit c. A proportional change in profit due | proportional changes in expenses 4. A proportional change in expenses due to proportion: changes in profit \_35An important actor influencing business risk is? a. Financial Leverage b. Operating Leverage c. Increase Leveraged. Combined Leverage 36. In a favorable economic condition, financial leverage can lead to what? ‘a, Decrease the earnings available to the ordinary sharcholdersb. Increase the earnings availab to the ordinary shareholders ¢. Leave the earnings of the ordinary shareholders unchanged 1 ‘Suppress the earnings available to the ordinary shareholders 37, The advantages of financial leverage includes the following except wides protection for providers fixed interest capital b. Can increase the eamin, litors might not be able to recover their money in full a. It pro available to ordinary shareholders c. Credi ‘measure of financial risk 38/The degree of financial leverage of a particulareamingsbefore interest and tax level ‘measured as? , a. Proportionate ‘change in profit before interest ‘and tax to the proportionate change in earniny rtionate change in earnings per share relative to the proportionate change i per shareb. Propo! 8 f ° ‘ profits before interest and tax ¢. 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