MCQ Bank
Net Present Value (NPV) technique which is used to discounts the company’s future cash flows is actually a type of:
- A) Cash collection technique
- B) Stock evaluation technique
- C) Loan acquiring technique
- D) Capital budgeting technique
ABC Corporation has two shareholders; Mr. Aamir with 50 shares and Mr. Imran with 70 shares. Both want to be elected as one of the four directors but Mr. Imran doesn’t want Mr. Aamir to be director. How much votes would Mr. Aamir be able to cast as per cumulative voting procedure?
- A) 280
- B) 120
- C) 200
- D) 70
Mr. Aslam owns 100 shares of a company and there are four directors to be elected. How much votes Mr. Aslam would have as per cumulative voting procedure?
- A) 200 votes
- B) 300 votes
- C) 100 votes
- D) 400 votes
Which of the following capital budgeting technique ignores the concept of “Time Value of Money”?
- A) Pay back period
- B) PI
- C) NPV
- D) IRR
The projected cash flows from a project are:
Year 1: Rs. 100
Year 2: Rs. 300
Year 3: Rs. 400
Year 4: Rs. 800
The Project cost is Rs. 800. What would be the payback period for the project?
- A) 2.67 Years
- B) 2.00 Years
- C) 3.67 Years
- D) 3.00 Years
Which of the following equation is correct for calculating the operating cash flows?
- A) EBIT – Depreciation – Taxes
- B) EBIT + Depreciation + Taxes
- C) EBIT – Depreciation + Taxes
- D) EBIT + Depreciation – Taxes
Preferred stock is similar to debt as both:
I. frequently carry credit ratings.
II. can be callable.
III. receive a stated payment amount.
IV. are considered debt instruments.
- A) I, II, and III only
- B) I and III only
- C) II, III, and IV only
- D) II and IV only
If the dividend for a share is growing at a steady rate then which of the following formula(s) can be used to find the dividend in two periods?
- A) D2 = [ Do x ( 1 + g ) ] ( 1 + g )
- B) All of the given options
- C) D2 = Do x ( 1 + g )2
- D) D2 = D1 x (1 + g )
While evaluating an investment project, which of the following cash flows should be considered?
- A) Relevant cash flows
- B) Operating cash flows
- C) Incremental cash flows
- D) Decremental cash flows
Which one of the following is NOT considered under MACRS of deprecation?
- A) Salvage value
- B) Depreciable value
- C) Book value
- D) Historical cost value
Suppose market value exceeds book value by Rs. 250,000. What will be the after-tax proceeds if there is a tax rate of 34 percent ?
- A) Rs. 148,500
- B) Rs. 225,000
- C) Rs. 105,600
- D) Rs. 165,000
A Company has sold its asset for a price less than it book value, the company has:
- A) Gained capital gain
- B) Gained Tax Shelter
- C) All of the given options
- D) Incurred Tax Liability
Which of the following is the amount of time required for an investment to generate cash flows sufficient to recover its initial cost?
- A) Maturity Period
- B) Accounts Receivable period
- C) Yield to maturity
- D) Payback period
In which type of the market, previously issued securities are traded among investors?
- A) Tertiary Market
- B) Secondary Market
- C) None of the given options
- D) Primary Market
If there is zero depreciation, taxes and fixed cost of the project, the operating cash flows for the project would always be same as:
- A) Sales
- B) Future cash flows
- C) EBIT
- D) Net working capital
All of the following are the drawbacks of Average Accounting Return (AAR) EXCEPT:
- A) No objective base to compare with
- B) It focuses on net income and book value
- C) It focuses on cash flow and market value
- D) It ignores time value of money
An investment should be accepted if the Net Present Value (NPV) is __________ and rejected if it is ________.
- A) Negative; positive
- B) Negative; negative
- C) Positive; negative
- D) Positive; positive
Suppose you have just passed your Intermediate and now planning to get admission in some college for graduation. You have three choices of colleges A, B, and C. You bought the prospectuses for all these three colleges and finally got admission in College B. The cost incurred on the prospectuses of other two colleges A and C will be considered as:
- A) Fixed Cost
- B) Sunk Cost
- C) Opportunity Cost
- D) None of the given options
ABC Company has estimated average net income of Rs. 500,000 on the assets having average book value of Rs. 2,500,000 used in its newly planned commercial project. Determine the project’s AAR.
- A) 30%
- B) 20%
- C) 35%
- D) 25%
SNT Corporation has policy of paying a Rs. 6 per share dividend every year. If this policy is to continue indefinitely, what will be the value of a share of stock at a 15% required rate of return?
- A) Rs. 40
- B) Rs. 30
- C) Rs. 60
- D) Rs. 50