Idea Solution:
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MGT201 Quiz 1 Solution and Discussion

What type of longterm 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:Longterm debt
Preferred stock
Common stock
None of the given options 
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 
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) 
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 
_______ 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 
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 
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 
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 
Which if the following refers to capital budgeting?
Select correct option:
Investment in longterm liabilities
Investment in fixed assets (Correct)
Investment in current assets
Investment in shortterm liabilities 
If Net Present Value technique is used, what is the minimum acceptance criterion for a project?
Select correct option:
NPV
NPV=0
NPV>0
NPV 
When a bond will sell at a discount?
Select correct option:
The coupon rate is greater than the current yield and the current yield is greater than yield to maturity
The coupon rate is greater than yield to maturity
The coupon rate is less than the current yield and the current yield is greater than the yield to maturity
The coupon rate is less than the current yield and the current yield is less than yield to maturity (Correct) 
The statement of cash flows reports a firm’s cash flows segregated into which of the following categorical order?
Select correct option:
Operating, investing, and financing
Investing, operating, and financing (Correct)
Financing, operating and investing
Financing, investing, and operating 
An annuity due is always worth ___ a comparable annuity.
Select correct option:
Less than
More than (Correct)
Equal to
Can not be found from the given information 
Which if the following refers to capital budgeting?
Select correct option:
Investment in longterm liabilities (Correct)
Investment in fixed assets
Investment in current assets
Investment in shortterm liabilities 
What is the present value of Rs. 3,500,000 to be paid at the end of 50 years if the correct risk adjusted interest rate is 18%?
Select correct option:
Rs.105,000
Rs.1,500,000
Rs.3975,000
Rs. 350,000