Strategic Financial Management Set 3
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This set of Strategic Financial Management Multiple Choice Questions & Answers (MCQs) focuses on Strategic Financial Management Set 3
Q1 | Evaluation of Capital Budgeting Proposals is based on Cash flows because:
- cash flows are easy to calculate
- cash flows are suggested by sebi
- cash is more important than profit
- cash flows are unable to prepared
Q2 | Which of the following is not included in incremental A flows?
- opportunity costs
- sunk costs
- change in working capital
- inflation effect
Q3 | Savings in respect of a cost is treated in capital budgeting as:
- an inflow
- an outflow
- nil
- as one
Q4 | Which of the following is not a risk factor in capital budgeting ?
- industry specific risk factors
- competition risk factors
- project specific risk factors
- interest risk factors
Q5 | NPV of a proposal, as calculated by RADR real CE Approach will be:
- same
- unequal
- zero
- equal
Q6 | In weighted average cost of capital, rising in interest rate leads to-
- increase in cost of debt
- increase the capital structure
- decrease in cost of debt
- decrease the capital structure
Q7 | National Ltd. Has 12,000 equity shares of Rs.100 each. Sale price is equity share Rs.115 per share; flotation cost Rs.5 per share.Expected dividend growth rate is 5% and expected dividend at the end of the financial year is Rs.11 per share, What is the cost of equity shares of National Ltd?
- 0.1133
- 0.1278
- 0.1475
- 0.15
Q8 | Black & White Ltd. Has a cost of equity of 11% and a pre-tax cost of debt of 8.5%. The firm's target Weighted average cost of capital is 9% and its tax rate is 35%. What is the firm's target debt-equity ratio?
- 0.6203
- 0.5756
- 0.5572
- 0.5113
Q9 | The term "capital structure" refers to:
- current assets& current liabilities
- long-term debt, preferred stock, and common stock equity
- total assets minus liabilities
- shareholde rs\ equity
Q10 | The manner in which an organization's assets are financed is referred to as its-
- capital structure
- financial structure
- asset structure
- owners structure
Q11 | In ……. Approach, the capital structure decision is relevant to the valuation of the firm.
- Net income
- miller and modigilani
- traditional
- net operating income
Q12 | ………… is defined as the length of time required to recover the initial cash outlay.
- Pay back period
- inventory conversion period
- discounted cash back
- budgeted period.
Q13 | The term capital structure refers to
- Long term debt, preferred stock and common stock equity
- Current asset and current liabilities
- Total asset minus liabilities
- Shareholder’s equity
Q14 | In walter model formula D stands for
- Dividend per share
- Direct dividend
- Dividend earning
- None of these
Q15 | Financing methods for merger and acquisition exclude:
- Cash
- Convertible bond
- Vendor placing
- Overdraft
Q16 | Convertible bonds are not :
- Straight bonds
- Two stage financial instrument
- Converted to ordinary shares
- Hybrid securities
Q17 | A ---------- lease is a way of providing finance
- Finance
- Commercial
- Economic
- None of these
Q18 | Economic value added is based on the -------?
- Profit
- Residual wealth
- Gross wealth
- None of these
Q19 | MVA stands for
- Maximum value added
- Market value added
- Minimum value added
- Most value added
Q20 | A firm that acquires another firm as part of its strategy to sell off assets, cut costs, andoperate the remaining assets more efficiently is engaging in __________.
- Strategic acquisition
- A financial acquisition
- Two tier tender offer
- Shark repellent
Q21 | The ways in which mergers and acquisitions (M&As) occur do not include:
- conglomerate takeover
- diversification
- vertical integration
- horizontal integration
Q22 | Which of the following capital budgeting methods has the value additive property?
- NPV
- IRR
- Payback period
- Discounted payback period
Q23 | How is economic value added (EVA) calculated?
- It is the difference between the market value of the firm and the book value of equity.
- It is the firm's net operating profit after tax (NOPAT) less a dollar cost of capital charge.
- It is the net income of the firm less a dollar cost that equals the weighted average cost of capital multiplied by the book value of liabilities and equities.
- None of the above are
Q24 | Retained earnings are
- an Indication of a company’s liquidity
- the same as cash in the bank
- not important when determining dividends
- the cumulative earnings of the company after dividends
Q25 | Economic value added provides a measure of
- how much value is added by the economy
- how much value is added by operations
- how much a business affects the economy
- how much wealth a company is creating compared to its cost of capital.