Fin622 Mid Term Current Paper (Dec 2010)
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Fin622 Mid Term Current Paper (Dec 2010)
Question No: 1 ( Marks: 1 ) - Please choose one
Which of the following statements is TRUE regarding Profitability Index?
► It ignores time value of money
► It ignores future cash flows
► It ignores the scale of investment
► It ignores return on investment
Question No: 2 ( Marks: 1 ) - Please choose one
The employment of fixed costs associated with the actual production of goods or services is known as:
► Financial leverage
► Volume discounting
► Operating leverage
► Covariance
Question No: 3 ( Marks: 1 ) - Please choose one
Which of the following statements is CORRECT regarding the fundamental analysis?
► Fundamental analysts use only Economic indicators to evaluate a stock
► Fundamental analysts use only financial information to evaluate a company's stocks
► Fundamental analysts use financial and non-financial information to evaluate a company's stocks
► Fundamental analysts use only non-financial information to evaluate a company's stocks
Question No: 4 ( Marks: 1 ) - Please choose one
ABC Corporation declared 10% dividend on its shares. A person purchased some shares of this corporation after the dividend was announced. If he is entitled to receive the declared dividend, his shares would be categorized as which of the following?
► Ex-Dividend
► Cum-Dividend
► Stock- Dividend
► Cash Dividend
Question No: 5 ( Marks: 1 ) - Please choose one
Which of the following firms would have the highest financial leverage?
► A firm having debt-to-equity ratio of 30:70
► A firm having debt-to-equity ratio of 40:60
► A firm having debt-to-equity ratio of 50:50
► A firm having debt-to-equity ratio of 60:40
Question No: 6 ( Marks: 1 ) - Please choose one
Which of the following types of bonds pays no annual interest to the holder, but is sold at discount below the par value?
► An original maturity bond
► A floating rate bond
► A fixed maturity date bond
► A zero coupon bond
Question No: 7 ( Marks: 1 ) - Please choose one
What will be the effect of reduction in the cost of capital on the accounting break-even level of revenues?
► It raises the break-even level
► It reduces the break-even level.
► It has no effect on the break-even level.
► This cannot be determined without knowing the length of the investment horizon.
Question No: 8 ( Marks: 1 ) - Please choose one
Which of the following risks increases as the debt level of a business increases?
► Financial risk
► Operating risk
► Business risk
► Investment risk
Quiz no.9
Which of the following is a transaction of a primary financial market?
► Initial Public Offering
► Buying Mutual Funds Certificates
► Selling old shares
► Buying Bonds issued in previous years
Question No: 10 (Marks: 1) - Please choose one
A firm had an interest expense of Rs.400,000 on its outstanding debt during the financial year 2006-2007. If the firm marginal tax rate is 40%, what was the total tax savings of the firm during the period 2006-2007?
► Rs.150, 000
► Rs.160, 000
► Rs.170, 000
► Rs.180, 000
Question No: 11 (Marks: 1) - Please choose one
Which of the following are the primary sources of capital to the firm?
► Net income, Retained earnings and Bank loans
► Bonds, Preferred stock and Common stock
► Operating profits, extraordinary gains and Dividends
► Amortization cash flow, Net income and Retained earnings
Question No: 12 (Marks: 1) - Please choose one
Which one of the following costs should be ignored while evaluating the financial viability of a project?
► Initial cost
► Equipment cost
► Cost of capital
► Sunk cost
Fin622 Mid Term Current Paper (Dec 2010)
Q 1.Why the weighted average cost of capital of levered firm is lesser than the un-levered firm? Briefly describe. Marks 3
Q 2.What is the difference between systematic and unsystematic risk? Marks 3
Q 3.Compare and contrast the Stable Dividend per share policy and Constant dividend payout policy. Marks 5
Q 4.How does the probability analysis evaluate the financial feasibility of a project? Marks 5
(note; the answers of MCQ's are in bold form)
Which of the following statements is TRUE regarding Profitability Index?
► It ignores time value of money
► It ignores future cash flows
► It ignores the scale of investment
► It ignores return on investment
Question No: 2 ( Marks: 1 ) - Please choose one
The employment of fixed costs associated with the actual production of goods or services is known as:
► Financial leverage
► Volume discounting
► Operating leverage
► Covariance
Question No: 3 ( Marks: 1 ) - Please choose one
Which of the following statements is CORRECT regarding the fundamental analysis?
► Fundamental analysts use only Economic indicators to evaluate a stock
► Fundamental analysts use only financial information to evaluate a company's stocks
► Fundamental analysts use financial and non-financial information to evaluate a company's stocks
► Fundamental analysts use only non-financial information to evaluate a company's stocks
Question No: 4 ( Marks: 1 ) - Please choose one
ABC Corporation declared 10% dividend on its shares. A person purchased some shares of this corporation after the dividend was announced. If he is entitled to receive the declared dividend, his shares would be categorized as which of the following?
► Ex-Dividend
► Cum-Dividend
► Stock- Dividend
► Cash Dividend
Question No: 5 ( Marks: 1 ) - Please choose one
Which of the following firms would have the highest financial leverage?
► A firm having debt-to-equity ratio of 30:70
► A firm having debt-to-equity ratio of 40:60
► A firm having debt-to-equity ratio of 50:50
► A firm having debt-to-equity ratio of 60:40
Question No: 6 ( Marks: 1 ) - Please choose one
Which of the following types of bonds pays no annual interest to the holder, but is sold at discount below the par value?
► An original maturity bond
► A floating rate bond
► A fixed maturity date bond
► A zero coupon bond
Question No: 7 ( Marks: 1 ) - Please choose one
What will be the effect of reduction in the cost of capital on the accounting break-even level of revenues?
► It raises the break-even level
► It reduces the break-even level.
► It has no effect on the break-even level.
► This cannot be determined without knowing the length of the investment horizon.
Question No: 8 ( Marks: 1 ) - Please choose one
Which of the following risks increases as the debt level of a business increases?
► Financial risk
► Operating risk
► Business risk
► Investment risk
Quiz no.9
Which of the following is a transaction of a primary financial market?
► Initial Public Offering
► Buying Mutual Funds Certificates
► Selling old shares
► Buying Bonds issued in previous years
Question No: 10 (Marks: 1) - Please choose one
A firm had an interest expense of Rs.400,000 on its outstanding debt during the financial year 2006-2007. If the firm marginal tax rate is 40%, what was the total tax savings of the firm during the period 2006-2007?
► Rs.150, 000
► Rs.160, 000
► Rs.170, 000
► Rs.180, 000
Question No: 11 (Marks: 1) - Please choose one
Which of the following are the primary sources of capital to the firm?
► Net income, Retained earnings and Bank loans
► Bonds, Preferred stock and Common stock
► Operating profits, extraordinary gains and Dividends
► Amortization cash flow, Net income and Retained earnings
Question No: 12 (Marks: 1) - Please choose one
Which one of the following costs should be ignored while evaluating the financial viability of a project?
► Initial cost
► Equipment cost
► Cost of capital
► Sunk cost
Fin622 Mid Term Current Paper (Dec 2010)
Q 1.Why the weighted average cost of capital of levered firm is lesser than the un-levered firm? Briefly describe. Marks 3
Q 2.What is the difference between systematic and unsystematic risk? Marks 3
Q 3.Compare and contrast the Stable Dividend per share policy and Constant dividend payout policy. Marks 5
Q 4.How does the probability analysis evaluate the financial feasibility of a project? Marks 5
(note; the answers of MCQ's are in bold form)
Another Paper:
total quiz=32
MCQs =28
2 question =3 numbers
2 question = 5 number
Q suppose we have two stocks i.e. stock A and stock B.stock A has beta of 1.5 and stock B has a beta of 0.75.The expected rate of return on average stock is 13% and the risk free rate of return is 7%.By how much does the required rate on the riskier stock exceeds the required return on the less risky stock. (5)
Q Why weighted average cost of capital of a levered firm is lesser than that of an Un-levered firm? Explain briefly? (3)
Another Paper:
Total Question: 32
MCQs: 28 each of 1 mark
Descriptive: 4
Question # 28 (3 marks)
soft capital rationing and hard capital rationing
Question # 29 (3 marks)
wacc is lesser of levered firm than un-levered firm? why?
Question # 30 (5 marks)
have to find Variance of the require rate return
Question # 31 (5 marks)
pure play
Another:
FIN622 -- Fall 2010 Papers (Latest)
MCQs = 28
Subjective Questions = 4
65% MCQs and Subjective from old papers.
1) Systemic and unsystematic risk(3 M)
2) Capital ratio for investment (5)
3) Levered and un levered for firm (3)
4) Dividend policy and types.(5)
MCQs =28
2 question =3 numbers
2 question = 5 number
Q suppose we have two stocks i.e. stock A and stock B.stock A has beta of 1.5 and stock B has a beta of 0.75.The expected rate of return on average stock is 13% and the risk free rate of return is 7%.By how much does the required rate on the riskier stock exceeds the required return on the less risky stock. (5)
Q Why weighted average cost of capital of a levered firm is lesser than that of an Un-levered firm? Explain briefly? (3)
Another Paper:
Total Question: 32
MCQs: 28 each of 1 mark
Descriptive: 4
Question # 28 (3 marks)
soft capital rationing and hard capital rationing
Question # 29 (3 marks)
wacc is lesser of levered firm than un-levered firm? why?
Question # 30 (5 marks)
have to find Variance of the require rate return
Question # 31 (5 marks)
pure play
Another:
FIN622 -- Fall 2010 Papers (Latest)
MCQs = 28
Subjective Questions = 4
65% MCQs and Subjective from old papers.
1) Systemic and unsystematic risk(3 M)
2) Capital ratio for investment (5)
3) Levered and un levered for firm (3)
4) Dividend policy and types.(5)
Another:
MCQs = 28
Subjective Questions = 4
1) Difference b/w simple payback period and discount period?
2) Difference b/w economic break even point and accounting break even point.
3) Equity and capital of firm?
Another
why market value of cost of debt and equity used in WACC instead of book value? Determinate market value of cost of debt and equity? (5)
What is the influence of inflation on the rate of return in CAPM?
Face Value = 1020, time period = 15 years, after 1 year bond value increases to 1050. Coupon payment = Rs.80
Calculate rate of return of bond?
Subjective Questions = 4
1) Difference b/w simple payback period and discount period?
2) Difference b/w economic break even point and accounting break even point.
3) Equity and capital of firm?
Another
why market value of cost of debt and equity used in WACC instead of book value? Determinate market value of cost of debt and equity? (5)
What is the influence of inflation on the rate of return in CAPM?
Face Value = 1020, time period = 15 years, after 1 year bond value increases to 1050. Coupon payment = Rs.80
Calculate rate of return of bond?
Another Paper:
A public limited Company had sales of Rs.2 million this year. The marketing manager expects sales to grow at a 10 percent compound annual rate over the next 10 years. On this basis, which of the following is the closest amount of sales in 10 years?
Suppose you invest Rs.400,000 in treasury bills and Rs.600,000 in the market portfolio. What is the return on your portfolio if bills yield 6% and the expected return on the market is 14%? What does the return on this portfolio imply for the expected return on individual stocks with betas of 0.6?
Stocks A and B has the following historical returns:
Year StockA,s Returns (rA) StockB,s Returns (rB)
2003 -18.00% -14.50%
2004 33 21.8
2005 15 30.5
2006 -0.5 -7.6
2007 27 26.3
Assume that a person held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year from 2003 to 2007? What would have been the average return on the portfolio during this period?
Does the value of firm increase when it increases its proportion of debt financing?
How high market interest rates leads to capital rationing? Explain briefly.
Suppose you invest Rs.400,000 in treasury bills and Rs.600,000 in the market portfolio. What is the return on your portfolio if bills yield 6% and the expected return on the market is 14%? What does the return on this portfolio imply for the expected return on individual stocks with betas of 0.6?
Stocks A and B has the following historical returns:
Year StockA,s Returns (rA) StockB,s Returns (rB)
2003 -18.00% -14.50%
2004 33 21.8
2005 15 30.5
2006 -0.5 -7.6
2007 27 26.3
Assume that a person held a portfolio consisting of 50% of Stock A and 50% of Stock B. What would have been the realized rate of return on the portfolio in each year from 2003 to 2007? What would have been the average return on the portfolio during this period?
Does the value of firm increase when it increases its proportion of debt financing?
How high market interest rates leads to capital rationing? Explain briefly.
