as per Modigliani & Miller Dividend irrelevance model what affects

the value of firm?

investment policy

If due to a replacement capex decision, overhead alloca on to a

division is changing without any change in total overhead cost. This
reduc on in overhead alloca on to division should be considered as
no change in cash flow.

Cash Management Means :

all of these.

The variable growth model of equity valua on

requires stable phase growth rate to be less than the discount rate

XML ltd. carry raw material usually for 60 days, it receives credit from
supplier fir 20 days, manufacturing procedure needs 15 days, finished
products are kept 30 days and 30 days is the receivables collec on
period, compute the cash conversion cycle:
60 days

If a firm has earnings per share of Rs. 9. the rate of capitaliza on is

10%. internal rate of return is 13%. compute the market price per
share if payout it 0%
100

Which method is non discounted technique of capital budge ng?

ARR (Average Accounting Return)Which of the following ac ons by a financial manager creates
an agency problem?
Which of the following ac ons by a financial manager creates an
agency problem?
agreeing to expand the firm at the expense of stockholder value

Purchase of machinery is an example of cashflow? .

initial cash flow

cost equity capital is?

none of these.

Which form of business structure faces the greatest agency problems?

corporations,

Which of the method is based on discoun ng cash flow:

All of these

Zet Ltd. has 8% perpetual debt of Rs.1000000 and its corporate tax
rate is 25%. A similar firm with all equity funding has the valua on of
50 lacs. As per MM hypothesis with taxes, what will be the value of
Zet ltd.?
5250000

interest of Govt. securi es is know as?

risk-free rate.

Mutually exclusive projects are those:

selecting one automatically rejects the other.

the nominal risk free rate of interest is a func on of

the real risk-free rate and the rate of inflation.
When the machine is the single asset in the block then
deprecia on________ in terminal year?
will be charged.

Which of the following is not an assump on of EOQ?

material cost per unit is unstable and is not recognized.(only C)

effec ve rate is always higher than nominal rate if;

compounding is more than 1 in a year

the rate of exchange between future consump on and current

consump on is
Pure Rate of Interest

Which of the following depicts the credit that a customer receives

from suppliers as source of working capital finance?
Trade credit

Which of the following is not true for M&M dividend theory?

if a firm declares dividend and investor does not want that, he can reinvest the same to buy
firm stock

Future value in case of con nuous compounding can be found out by:
P * e^(rt)

Mr. Kapur wants to save Rs.4200 at the end of every month from his
salary. He came to know about the recurring deposit scheme of
Punjab Na onal bank. The bank is offering a scheme for 7 years with
an interest rate of 8.25% p.a. Calculate the amount of money that Mr.
Kapur would get on the maturity of the scheme PVAF(0.6875%,84) =
113.17, PVAF(8.25%,84) = 9439.15, PVAF(8.25%) = 8.99:
475325

Compute the interest yield on commercial paper if a firm sells 90-days

commercial paper @ face value of Rs. 100 for Rs. 95?
16.67%

Which of the statement is not true for the working capital:

in the lean period the working capital requirement is high.
When the market required rate of return for a par cular bond is much
less than its coupon rate, the bond selling is:
Premium

equal payments occurring in the beginning of certain years are known

as?
Annuities

release of working capital is an example of _____________

cashflows?
Terminal

Debtholders have the ______________ claims on the income and

assets of the firm?
Priority

The underlying assump on of the dividend growth model is that a

stock is worth
the present value of the future income that the stock is expected to generate

While calcula ng the weighted average cost of capital, market value

weights are preferred because
Book value weights are historical in nature.

In the formula, P3= Div/R-g, the dividend is for period?

period 3.

Financial managers primarily create firm value by?

investing in assets that generate cash in excess of their cost

inventory conversion period is the summa on of ?

raw material conversion period, work in progress conversion period and finished goods
conversion period

Cost of capital is lowest in case of?

Debt
A firm earned revenue of Rs. 500000 and its variable opera ng cost is
30% and fixed opera ng cost is 100000. If the firm has 8% debt of Rs.
500000 and its tax rate is 25%. Calculate the degree of opera ng
leverage:
1.4

The existence of ___________ cost leads to more than proportionate change in EPS for a
given change in EBIT
fixed operating

The effec ve cost of __________ capital is less than its normal cost?
Debt

The existence of __________ cost leads to more than propor onate

change in EBIT for a given change in sales?
Fixed opera ng

If a stock pays a constant annual dividend then the stock can be

valued using?
perpetuity present value formula.

Leverage is caused by existence of ____________ cost in the cost

structure of a firm?
Fixed

In calcula ons of opertaing cashflows, depricia on is added back to?

EBITDA

IRR means?
rate at which NPV is zero

Which of the following is not a component of the risk premium?

unsystematic market risk

the ___ the variance of returns, everything else remaining constant,

the ______ the dispersion of returns and _______ risk. ?
larger, greater, lower

Discon nuing technique is used to find out?

terminal value.
XML ltd. carry raw material usually for 60 days, it receives credit from
supplier fir 20 days, manufacturing procedure needs 15 days, finished
products are kept 30 days and 30 days is the receivables collec on
period, compute the opertaing cycle?
115 days.

As per Gordon model, if r<k and the dividend payout ra on increases ,

then the market price of share will?
Increase

When a firm purchase its own share from an investors, known as?
Share repurchase

How much weighted cost debt in a firms weighted average cost of

capital for 50% debt financing with a required rate if return of 12%
and a tax rate of 35%?
4.2%

___________ is the fund created to meet future liabili es?

sinking fund

XYZ ltd. has taken a term loan of Rs. 12 lakhs at an interest rate of 15%
p.a. If the tax rate applicable to the firm is 40%, cost of the term loan
is?
9%

Which one of these statements is correct?

the value of an investment by a firm depends on the size, the timing, and the risk of the
investments cash flow.

If a significant change is noted in the yield of a T-bill, the change is

most likely a ributes to?
a change in the expected rate of inflation.

Which of the following is TRUE for an corporate deposit?

the credit risk is low as it is between two firms.