Top 550+ Solved Financial Management MCQ Questions Answer
Q. The net cash flows of the project and their present values are as followsYear 1 2 3 4 Net cash flow (Rs) 5100 5100 5100 7100 PVIF @12% 0.893 0.797 0.712 0.636 Present Value (Rs) 4554 4065 3631 4516 The initial investment in the project is Rs12500, What is the NPV of the project?
a. 4066
b. 4166
c. 4266
d. 4566
Q. Higher the risk involved in a firm, ------- is the cost of capital
a. High
b. Low
c. Medium
d. None of these
Q. The composition of a company’s capitalization is called
a. Capital Structure
b. Financial structure
c. Long term source
d. Short term source
Q. The entire items on the liability side of a balance sheet is called
a. Capital structure
b. Financial structure
c. Long term source
d. Short term source
Q. Net operating income approach was suggested by
a. Modigliani and Miller
b. Durand
c. Walter
d. None of these
Q. Overall cost of capital, according to ------ approach, decreases up to a certain point, remainsunchanged for moderate increase in debt thereafter, and increase beyond a certain point
a. Net income
b. Net operating income
c. Traditional
d. MM approach
Q. According to MM approach, two identical firms in all respects except their capital structurecan not have different market values or cost of capital because of-----
a. Leverage
b. Trading on equity
c. Arbitrage process
d. None of these
Q. If funds are required for productive purpose ------- finance is suitable
a. Debt
b. Equity
c. Retained earnings
d. None of these
Q. If funds are required for unproductive purpose or general development on permanent basis ------- finance is suitable
a. Debt
b. Equity
c. Bank overdraft
d. None of these
Q. According to ------ method it is assumed that each of the future cash flows isimmediately reinvested in another project at a certain rate of return until the termination of the project
a. NPV
b. IRR
c. Pay back method
d. Terminal value method
Q. When the cost of the project differ significantly which method of capital budgeting is used
a. NPV
b. IRR
c. Pay back method
d. Profitability index
Q. To judge the comparative risk of projects having same cost and different NPV whichmethod is used
a. Certainty equivalent method
b. Sensitivity technique
c. Standard deviation method
d. Coefficient of variation method
Q. Under ----- method more than one forecast of the future cash inflows ie. Optimistic, pessimistic and most likely are made
a. Certainty equivalent method
b. Sensitivity technique
c. Standard deviation method
d. Coefficient of variation method
Q. ------- is a graphical representation of the relationship between a present decision and futureevents, future decisions and their consequences.
a. Certainty equivalent method
b. Sensitivity technique
c. Standard deviation method
d. Decision tree analysis
Q. The return after the pay off period is not considered in case of
a. Pay back method
b. NPV
c. Present value index
d. IRR