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Fin622 Quiz No. 1 solved

Tuesday, November 02, 2010 Posted In Edit This
If you invest Rs.400 today in a savings account paying 8 percent interest per year, how much will you have in the

Rs.325
Rs.1,299
Rs.504
Rs.609

If the Net Present Values of two, mutually exclusive options are both greater than zero, which option should b

The one with the largest Net Present Value.
The one with the smallest Net Present Value.
Either one. Both are greater than the cost of capital.
None of the given options

Which one of the following statements describe "Shareholders’ wealth" in a firm?

The number of people employed in the firm
The book value of the firm's assets less the book value of its liabilities
The market price per share of the firm's common stock
The amount of salary paid to its employees

Virgo Airlines will pay Rs.4.00 dividend next year on its common stock, which is currently selling at Rs.100 per share. What is the market's required return on this investment if the dividend is expected to grow at 5% forever?


4 percent.
5 percent.
7 percent.
9 percent.

Which one of the following statements describes the relationship between Interest rates and bond prices?

Move in the same direction.
Move in opposite directions
Sometimes move in the same direction, sometimes in opposite directions
Have no relationship with each other (i.e., they are independent).

A firm can lower its breakeven level by doing which of the following actions?

Lowering direct cost
Increasing variable cost
Increasing variable cost
Lowering sales price

If an investor buys a non-zero coupon bond and holds it to maturity, then the rate of return she will receive depends on:


The bond's maturity value.
The price paid for the bond
The interest payments to be received.
All of the given options

Suppose you need the present value interest factor for 12 percent compounded quarterly for 10 years. If all you have is a PVIF table, you would use the ________ period row and the ________ percent rate column.

40, 12
20.12
40,3
20,6

If two projects offer the same, positive NPV, then which of the following would be a reasonable conclusion?
Select correct option:

The projects would have the same IRR.

The projects would have the same payback period.
The projects are mutually exclusive.
The projects would add the same amount to the value of the firm

19. Since preferred stock dividends are fixed, valuing preferred stock is roughly equivalent to valuing:
a. a zero growth common stock.
b. a positive growth common stock
c. a short-term bond
d. an option.


A company has fixed costs of $50,000 and variable costs per unit of output of $8.
If its sole product sells for $18, what is the break-even quantity of output?

Select correct option:
2,500
5,000
1,500
7,500

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