Mgt201 Current Spring 2011 Final Term VU Paper [July 2011] Virtual University of Pakistan
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Mgt201 Current Spring 2011 Final Term VU Paper [July 2011] Virtual University of Pakistan
Total ques 64
4 ques =3 marks
4ques =5 marks
Total mcqs =56
A statistical measure of the variability of a distribution around its mean is referred to as __________.
► A probability distribution
► The expected return
► The standard deviation
► Coefficient of variation
A well-diversified portfolio is defined as:
► One that is diversified over a large enough number of securities that the nonsystematic variance is essentially zero
► One that contains securities from at least three different industry sectors
► A portfolio whose factor beta equals 1.0
► A portfolio that is equally weighted
The amount of current assets that varies with seasonal requirements is referred to as __________ working capital.
► Permanent
► Net
► Temporary
► Gross
Which of the following term is used when the firm can independently control considerable assets with a very limited amount of equity?
► Joint venture
► Leveraged buyout (LBO)
► Spin-off
► Consolidation
In the WACC equation (rDxD + rExE + rPxP), xP represents which of the following?
► Weight or Fraction of Total Capital value raised from common stock
► Weight or Fraction of Total Capital value raised from bonds
► Weight or Fraction of Total Capital value raised from preferred stock
► Weight or Fraction of Total Capital value raised from retained earnings
Which of the following mathematical expressions depicts divestiture?
► 5-1=4
► 5-1=6
► 5+1=6
► None of the given options
Which of the following statement about portfolio statistics is CORRECT?
► A portfolio's expected return is a simple weighted average of expected returns of the individual securities comprising the portfolio. (100% Sure)
► A portfolio's standard deviation of return is a simple weighted average of individual security return standard deviations.
► The square root of a portfolio's standard deviation of return equals its variance.
► The square root of a portfolio's standard deviation of return equals its coefficient of variation.
Market risk is measured in terms of the ___________ of the market portfolio or index.
► Variance
► Covariance
► Standard deviation (100% Sure)
► Correlation coefficient
Which of the following represent all Risk –Return Combinations for the efficient portfolios in the capital market?
► Parachute graph
► CML straight line equation (100% Sure)
► Security market line
► All of the given options
Your firm has a philosophy that is analogous to the hedging (maturity matching) approach. Which of the following is the most appropriate form for financing a new capital investment in plant and equipment?
► 6-month bank notes
► Accounts payable
► Common stock equity (100% Sure)
► Trade credit
In the WACC equation (rDxD + rExE + rPxP), xD represents which of the following?
► Weight or Fraction of Total Capital value raised from bonds
► Weight or Fraction of Total Capital value raised from preferred stock
► Weight or Fraction of Total Capital value raised from common stock
► Weight or Fraction of Total Capital value raised from retained earnings
A car manufacturing firm buys steel from a steel mill. Both these entities combined together to form a new firm. It is referred to which of the following?
► Horizontal Merger
► Vertical Merger
► Congeneric Merger
► Conglomerate Merger
Find the Expected Return on the Market Portfolio given that the Expected Return on Stock is 17%, the Risk-Free Rate is 1.1%, and the Beta for Stock is 1.5.
► 11.7%
► 12.14%
► 13.23%
► 13.82%
Assume the nominal interest rates (annual) in the country of Freedonia and the United States are 6% and 12% respectively. What is the implied 90-day forward rate if the current spot rate is 5 Freedonian marks (FM) per U.S. dollar?
► 4.732
► 4.927
► 5.074
► 5.283
Mr. X is going to purchase the stock of ABC Company. Mr. X should purchase the stock on which date so that he can be entitled to receive the dividend, keeping in mind the ex-dividend date is December 7?
► December 6
► December 7
► December 8
► December 9
Which of the following is correct regarding the opportunity cost of capital for a project?
► The opportunity cost of capital is the return that investors give up by investing in the project rather than in securities of equivalent risk.
► Financial managers use the capital asset pricing model to estimate the opportunity cost of capital
► The company cost of capital is the expected rate of return demanded by investors in a company.
► All of the given options
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)
Assume a company had Rs.1 billion in free cash flow last year, and it is expected to grow that cash flow at 3% into perpetuity. Assuming a 9% cost of equity, what is the present value of the company?
► Rs.12.08 billion
► Rs.18.15 billion
► Rs.14.16 billion
► Rs.16.67 billion
Which of the following refers to a unique type of Japanese corporate organization based on a close partnership between government and businesses?
► Keiretsu
► Chaebols
► Lean and mean
► Options
Which of the following is a South Korea type business in that is a conglomerate with Monopoly power?
► Keiretsu
► Chaebols
► Lean and mean
► Options
Why do firms need to invest in net working capital? 3
What are the advantages and disadvantages of raising capital through
equity financing?5
What problems a firm can face if it faces a shortfall or surplus of
inventories.3
Compare aggressive working capital financing with conservative
working capital financing.?5
Total ques 64
4 ques =3 marks
4ques =5 marks
Total mcqs =56
A statistical measure of the variability of a distribution around its mean is referred to as __________.
► A probability distribution
► The expected return
► The standard deviation
► Coefficient of variation
A well-diversified portfolio is defined as:
► One that is diversified over a large enough number of securities that the nonsystematic variance is essentially zero
► One that contains securities from at least three different industry sectors
► A portfolio whose factor beta equals 1.0
► A portfolio that is equally weighted
The amount of current assets that varies with seasonal requirements is referred to as __________ working capital.
► Permanent
► Net
► Temporary
► Gross
Which of the following term is used when the firm can independently control considerable assets with a very limited amount of equity?
► Joint venture
► Leveraged buyout (LBO)
► Spin-off
► Consolidation
In the WACC equation (rDxD + rExE + rPxP), xP represents which of the following?
► Weight or Fraction of Total Capital value raised from common stock
► Weight or Fraction of Total Capital value raised from bonds
► Weight or Fraction of Total Capital value raised from preferred stock
► Weight or Fraction of Total Capital value raised from retained earnings
Which of the following mathematical expressions depicts divestiture?
► 5-1=4
► 5-1=6
► 5+1=6
► None of the given options
Which of the following statement about portfolio statistics is CORRECT?
► A portfolio's expected return is a simple weighted average of expected returns of the individual securities comprising the portfolio. (100% Sure)
► A portfolio's standard deviation of return is a simple weighted average of individual security return standard deviations.
► The square root of a portfolio's standard deviation of return equals its variance.
► The square root of a portfolio's standard deviation of return equals its coefficient of variation.
Market risk is measured in terms of the ___________ of the market portfolio or index.
► Variance
► Covariance
► Standard deviation (100% Sure)
► Correlation coefficient
Which of the following represent all Risk –Return Combinations for the efficient portfolios in the capital market?
► Parachute graph
► CML straight line equation (100% Sure)
► Security market line
► All of the given options
Your firm has a philosophy that is analogous to the hedging (maturity matching) approach. Which of the following is the most appropriate form for financing a new capital investment in plant and equipment?
► 6-month bank notes
► Accounts payable
► Common stock equity (100% Sure)
► Trade credit
In the WACC equation (rDxD + rExE + rPxP), xD represents which of the following?
► Weight or Fraction of Total Capital value raised from bonds
► Weight or Fraction of Total Capital value raised from preferred stock
► Weight or Fraction of Total Capital value raised from common stock
► Weight or Fraction of Total Capital value raised from retained earnings
A car manufacturing firm buys steel from a steel mill. Both these entities combined together to form a new firm. It is referred to which of the following?
► Horizontal Merger
► Vertical Merger
► Congeneric Merger
► Conglomerate Merger
Find the Expected Return on the Market Portfolio given that the Expected Return on Stock is 17%, the Risk-Free Rate is 1.1%, and the Beta for Stock is 1.5.
► 11.7%
► 12.14%
► 13.23%
► 13.82%
Assume the nominal interest rates (annual) in the country of Freedonia and the United States are 6% and 12% respectively. What is the implied 90-day forward rate if the current spot rate is 5 Freedonian marks (FM) per U.S. dollar?
► 4.732
► 4.927
► 5.074
► 5.283
Mr. X is going to purchase the stock of ABC Company. Mr. X should purchase the stock on which date so that he can be entitled to receive the dividend, keeping in mind the ex-dividend date is December 7?
► December 6
► December 7
► December 8
► December 9
Which of the following is correct regarding the opportunity cost of capital for a project?
► The opportunity cost of capital is the return that investors give up by investing in the project rather than in securities of equivalent risk.
► Financial managers use the capital asset pricing model to estimate the opportunity cost of capital
► The company cost of capital is the expected rate of return demanded by investors in a company.
► All of the given options
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)
Assume a company had Rs.1 billion in free cash flow last year, and it is expected to grow that cash flow at 3% into perpetuity. Assuming a 9% cost of equity, what is the present value of the company?
► Rs.12.08 billion
► Rs.18.15 billion
► Rs.14.16 billion
► Rs.16.67 billion
Which of the following refers to a unique type of Japanese corporate organization based on a close partnership between government and businesses?
► Keiretsu
► Chaebols
► Lean and mean
► Options
Which of the following is a South Korea type business in that is a conglomerate with Monopoly power?
► Keiretsu
► Chaebols
► Lean and mean
► Options
Why do firms need to invest in net working capital? 3
What are the advantages and disadvantages of raising capital through
equity financing?5
What problems a firm can face if it faces a shortfall or surplus of
inventories.3
Compare aggressive working capital financing with conservative
working capital financing.?5
