Financial Management Set 5
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This set of Financial Management Multiple Choice Questions & Answers (MCQs) focuses on Financial Management Set 5
Q1 | Profitability Index, when applied to Divisible Projects, impliedly assumes that:
- Project cannot be taken in parts
- NPV is linearly proportionate to part of the project taken up
- NPV is additive in nature
- Both (b) and (c)
Q2 | If there is no inflation during a period, then the Money Cashflow would be equal to:
- Present Value
- Real Cash flow
- Real Cash flow + Present Value
- Real Cash flow - Present Value
Q3 | The Real Cashflows must be discounted to get the present value at a rate equal to:
- Money Discount Rate
- Inflation Rate
- Real Discount Rate
- Risk free rate of interest
Q4 | Real rate of return is equal to:
- Nominal Rate × Inflation Rate
- Nominal Rate ÷ Inflation Rate
- Nominal Rate - Inflation Rate
- Nominal Rate + Inflation Rate
Q5 | If the Real rate of return is 10% and Inflation s Money Discount Rate is:
- 14.4%
- 2.5%
- 25%
- 14%
Q6 | If the Money Discount Rate is 19% and Inflation Rate is 12%, then the Real DiscountRate is:
- 7%
- 5%
- 5.70%
- 6.25%
Q7 | Money Discount Rate if equal to:
- (1 + Inflation Rate) (1 + Real Rate)-1
- (1 + Inflation Rate) 4- (1 + Real Rate)-1
- (1 + Real Rate) 4- (1 + Inflation Rate)-1
- (1 + Real Rate) + (1 + Inflation Rate)-1
Q8 | Real Discount Rate is equal to:
- (1 + Inf. Rate) (1 + Money D Rate)-1
- (1 + Money D Rate) + (1 + Inf. Rate)-1
- (1 + Money D Rate) 4- (1 + Inf. Rate)-1
- (1 + Money D Rate) - (1 + Inf. Rate)-1
Q9 | Two mutually exclusive projects with different economic lives can be compared on thebasis of
- Internal Rate of Return
- Profitability Index
- Net Present Value
- Equivalent Annuity Value
Q10 | Risk in Capital budgeting implies that the decision-maker knows___________of thecash flows.
- Variability
- Probability
- Certainty
- None of the above
Q11 | In Certainty-equivalent approach, adjusted cash flows are discounted at:
- Accounting Rate of Return
- Internal Rate of Return
- Hurdle Rate
- Risk-free Rate
Q12 | Risk in Capital budgeting is same as:
- Uncertainty of Cash flows
- Probability of Cash flows
- Certainty of Cash flows
- Variability of Cash flows
Q13 | Which of the following is a risk factor in capital budgeting?
- Industry specific risk factors
- Competition risk factors
- Project specific risk factors
- All of the above
Q14 | In Risk-Adjusted Discount Rate method, the normal rate of discount is:
- Increased
- Decreased
- Unchanged
- None of the above
Q15 | In Risk-Adjusted Discount Rate method, which one is adjusted?
- Cash flows
- Life of the proposal
- Rate of discount
- Salvage value
Q16 | NPV of a proposal, as calculated by RADR real CE Approach will be:
- Same
- Unequal
- Both (a) and (b)
- None of (a) and (b)
Q17 | Risk of a Capital budgeting can be incorporated
- Adjusting the Cash flows
- Adjusting the Discount Rate
- Adjusting the life
- All of the above
Q18 | Which element of the basic NPV equation is adjusted by the RADR?
- Denominator
- Numerator
- Both
- None
Q19 | Cost of Capital refers to:
- Flotation Cost
- Dividend
- Required Rate of Return
- None of the above.
Q20 | Which of the following sources of funds has an Implicit Cost of Capital?
- Equity Share Capital
- Preference Share Capital
- Debentures
- Retained earnings
Q21 | Which of the following has the highest cost of capital?
- Equity shares
- Loans
- Bonds
- Preference shares
Q22 | Cost of Capital for Government securities is also known as:
- Risk-free Rate of Interest
- Maximum Rate of Return
- Rate of Interest on Fixed Deposits
- None of the above
Q23 | Cost of Capital for Bonds and Debentures is calculated on:
- Before Tax basis
- After Tax basis
- Risk-free Rate of Interest basis
- None of the above.
Q24 | Weighted Average Cost of Capital is generally denoted by:
- kA
- kw
- k0
- kc
Q25 | Which of the following cost of capital require tax adjustment?
- Cost of Equity Shares
- Cost of Preference Shares
- Cost of Debentures
- Cost of Retained Earnings.