MGT201 Quiz 1 Solution and Discussion
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Which of the following is a capital budgeting technique that is NOT considered as discounted cash flow method?
Select correct option:Payback period (Correct)
Internal rate of return
Net present value
Profitability index -
The value of a bond is directly derived from which of the following?
Select correct option:Cash flows
Coupon receipts (Correct)
Par recovery at maturity
All of the given options -
The value of a bond is directly derived from which of the following?
Select correct option:Cash flows
Coupon receipts (Correct)
Par recovery at maturity
All of the given options -
A technique that tells us the number of years required to recover our initial cash investment based on the project’s expected cash flows is:
Select correct option:
Pay back period (Correct)
Internal rate of return
Net present value
Profitability index -
Which of the following is NOT an example of a financial intermediary?
Select correct option:
Wisconsin S&L, a savings and loan association
Strong Capital Appreciation, a mutual fund
Microsoft Corporation, a software firm (Correct)
College Credit, a credit union -
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) -
When bonds are issued, under which of the following category the value of the bond appears?
Select correct option:
Equity
Fixed assets
Short term loan
Long term loan (Correct) -
An investment proposal should be judged in whether or not it provides:
Select correct option:
A return equal to the return require by the investor
A return more than required by investor (Correct)
A return less than required by investor
A return equal to or more than required by investor -
Which of the following is a major disadvantage of the corporate form of organization?
Select correct option:
Double taxation of dividends (Correct)
Inability of the firm to raise large sums of additional capital
Limited liability of shareholders
Limited life of the corporate form -
Which of the following is NOT an example of hybrid equity
Select correct option:
Convertible Bonds
Convertible Debenture
Common shares (Correct)
Preferred shares -
Which of the following is/are the component(s) of working capital management?
Select correct option:
Current assets (Correct)
Fixed assets
Fixed assets and long-term liabilities
Current assets and current liabilities -
Which of the following statements (in general) is correct?
Select correct option:
A low receivables turnover is desirable
The lower the total debt-to-equity ratio, the lower the financial risk for a firm (Correct)
An increase in net profit margin with no change in sales or assets means a weaker ROI
The higher the tax rate for a firm, the lower the interest coverage ratio -
What should be the focal point of financial management in a firm?
Select correct option:
The number and types of products or services provided by the firm
The minimization of the amount of taxes paid by the firm
The creation of value for shareholders
The dollars profits earned by the firm -
With continuous compounding at 8 percent for 20 years, what is the approximate future value of a Rs. 20,000 initial investment?
Select correct option:
Rs.52,000
Rs.93,219 (Correct)
Rs.99,061
Rs.915,240 -
Who or what is a person or institution designated by a bond issuer as the official representative of the bondholders?
Select correct option:
Indenture
Debenture
Bond
Bond trustee (Correct) -
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