MGT201 Quiz 1 Solution and Discussion
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Which if the following refers to capital budgeting?
Select correct option:
Investment in long-term liabilities
Investment in fixed assets (Correct)
Investment in current assets
Investment in short-term liabilities -
Which of the following is FALSE about Perpetuity?
Select correct option:
It is a series of cash flows
Cash flows occur for a specific time period
Its cash flows are identical (Correct)
None of the given options -
What is the present value of Rs.8,000 to be paid at the end of three years if interest rate is 11%?
Select correct option:Rs.6,015
Rs.4,872
Rs.6,725
Rs.1,842
6:59 PM -
The logic behind _______ is that instead of looking at net cash flows you look at cash inflows and outflows separately for each point in time.
Select correct option:IRR
MIRR (Correct)
PV
NPV -
_______ is equal to (common shareholders’ equity/common shares outstanding).
Select correct option:Book value per share
Liquidation value per share (Correct)
Market value per share
None of the above -
Discounted cash flow methods provide a more objective basis for evaluating and selecting an investment project. These methods take into account:
Select correct option:Magnitude of expected cash flows
Timing of expected cash flows
Both timing and magnitude of cash flows
None of the given options -
Discounted cash flow methods provide a more objective basis for evaluating and selecting an investment project. These methods take into account:
Select correct option:Magnitude of expected cash flows
Timing of expected cash flows
Both timing and magnitude of cash flows
None of the given options -
Which of the following allows to graphically depicting the timing of the cash flows as well as their nature as either inflows or outflows?
Select correct option:Cash flow diagram
Cash budget
Cash flow statement
None of the given options (Correct) -
Which of the following is/are the characteristic(s) of Perpetuity?
Select correct option:It is an annuity
It has no definite end (Correct)
It is a constant stream of identical cash flows
All of the given options -
What type of long-term financing most likely has the following features: 1) it has an infinite life, 2) it pays dividends, and 3) its cash flows are expected to be a constant annuity stream?
Select correct option:Long-term debt
Preferred stock
Common stock
None of the given options -
What is the most important criteria in capital budgeting?
Select correct option:Return on investment
Profitability index (Correct)
Net present value
Pay back period -
What is the additional amount a borrower must pay to lender to compensate for assuming the risk associated with non-payment?
Select correct option:Default risk premium
Sovereign Risk Premium (Correct)
Market risk premium
Maturity risk premium -
What is the present value of Rs.1,000 to be paid at the end of 5 years if the correct risk adjusted interest rate is 8%?
Select correct option:Rs.714
Rs.1,462
Rs.322.69
Rs.401.98 -
______ are also known as Spontaneous Financing.
Select correct option:Current liabilities
Current assets (Correct)
Fixed assets
Long-term liabilities -
MGT201 vuzs.info Question # 15 of 15 ( Start time: 11:11:06 PM ) Total M - 1
Effective interest rate is different from nominal rate of interest because:
Select correct option:Nominal interest rate ignores compounding
Nominal interest rate includes frequency of compounding (Correct)
Periodic interest rate ignores the effect of inflation
All of the given options -
Which of the following document/s is/are used to prepare a financial plan?