Financial management

31. Tax-rate is relevant and important for calculation of specific cost of capital of:

Equity Share Capital
Preference Share Capital
Debentures
Both A and B

Detailed SolutionTax-rate is relevant and important for calculation of specific cost of capital of:

32. If future return on common stock is 14% and rate on T-bonds is 5% then current market risk premium will be

19.00%
9.00%
Rs 9
Rs 19

Detailed SolutionIf future return on common stock is 14% and rate on T-bonds is 5% then current market risk premium will be

33. Reinvestment risk of bonds is higher on

short maturity bonds
high maturity bonds
high premium bonds
high inflated bonds

Detailed SolutionReinvestment risk of bonds is higher on

34. Preferred dividend is Rs 50 and required rate of return is 2.5% then value of preferred stock would be

Rs 20.00
Rs 125.00
Rs 2,000.00
Rs 52.50

Detailed SolutionPreferred dividend is Rs 50 and required rate of return is 2.5% then value of preferred stock would be

35. Which of the following is not an objective of cash management?

Maximization of cash balance
Minimization of cash balance
Optimization of cash balance
Zero cash balance

Detailed SolutionWhich of the following is not an objective of cash management?

36. In financial planning, a higher strike price leads to call option

price is higher
rate is lower
price is lower
rate is higher

Detailed SolutionIn financial planning, a higher strike price leads to call option

37. Situation in which firm limits expenditures on capital is classified as

optimal rationing
capital rationing
marginal rationing
transaction rationing

Detailed SolutionSituation in which firm limits expenditures on capital is classified as

38. Present value of future cash flows is Rs 2000 and an initial cost is Rs 1100 then profitability index will be

55.00%
1.82
0.55
1.82%

Detailed SolutionPresent value of future cash flows is Rs 2000 and an initial cost is Rs 1100 then profitability index will be

39. Type of cost which is used to raise common equity by reinvesting internal earnings is classified as

cost of mortgage
cost of common equity
cost of stocks
cost of reserve assets

Detailed SolutionType of cost which is used to raise common equity by reinvesting internal earnings is classified as

40. 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

Detailed SolutionProfitability Index, when applied to Divisible Projects, impliedly assumes that:

Page 1Page 2Page 3Page 4Page 5
Test 1Test 2Test 3Test 4Test 5Test 6Test 7Test 8Test 9Test 10Test 11Test 12Test 13Test 14Test 15Test 16Test 17Test 18Test 19Test 20Test 21Test 22Test 23