Question No: 1
If sales revenue was Rs. 100,000, accounts receivable decreased by Rs. 4,000, and inventory increased by Rs. 3,000, cash received from customers would be:
a)Rs. 107,000
b)Rs. 104,000
c)Rs. 101,000
d)Rs. 93,000
Question No 2:
Kamran just won a lottery and want to put some money away so that he will have Rs. 75,000 for his child s school education 18 years from now. He can earn 7.5 percent compounded annually. How much does he need to invest today?
Rs. 15,763
Rs. 17,271
Rs. 18,980
Rs. 20,404
Question No 3:
What amount a borrower would pay at the end of second year with a 4-year, 12%,interest-only loan of Rs. 3,000?
Rs. 360
Rs. 2,000
Rs. 3,000
Rs. 3,360
Question No 4:
Which of the following short-term rating by PACRA denotes an inadequate
capacity to ensure timely repayment?
A
B
C
D
Question No: 5
Which one of the following statements is INCORRECT regarding zero coupon bonds?
a)Zero coupon bonds pay no interest at all.
b)Zero coupon bonds are offered at a price that is much lower than its stated value.
c)The issuer of a zero coupon bond deducts interest every year because interest is actually paid every year.
d)The issuer of a zero coupon bond deducts interest every year even though interest is not actually paid every year.
Question No 6:
A project whose acceptance prevents the acceptance of one or more alternative projects is referred to as:
A mutually exclusive project
An independent project
A dependent project
A contingent project
Question No: 7
Mr. A, as a financial consultant, has prepared a feasibility report of a project for XYZ Company that the company is planning to undertake. He has suggested that the project is feasible. The consultancy fee paid to Mr. A will be considered as:
Sunk cost
Opportunity cost
Both sunk cost and opportunity cost
Neither sunk cost nor opportunity cost
Question No: 8
Which one of the following is TRUE about the difference between debt and common stock?
Debt is ownership but equity is not
Creditors have voting power while stockholders do not
Interest payments are promised while dividend payments are not
Both stockholders and bondholders have voting privileges
Question No: 9
Which one of the following typically applies to preferred stock but not to common stock?
Dividend yield
Cumulative dividends
Voting rights
Tax deductible dividends
Question No: 10
Which of the following statement is INCORRECT regarding Average Accounting Return?
AAR is a rate that makes the NPV equal to zero
AAR is a measure of accounting profit relative to book value
An investment is acceptable if its AAR is greater than a benchmark AAR
None of the given options
Question No: 11
According to 2nd M&M proposition, cost of equity does NOT depend upon which of the following ?
The required return of firm s assets
The firm s cost of debt
The firm s stockholders
The firm s debt-equity ratio
Question No: 12
Which of the following terms refer to the difference between the current assets and the current liabilities ?
Net difference
Net working capital
Current ratio
Net available capital
Question No: 13
What will be the risk premium for a stock that has an expected return rate of 15%
and a risk-free rate of 9% ?
6 %
9 %
15 %
24 %
Question No: 14
The MC Inc. purchased a share of common stock exactly one year ago for Rs. 45.During the past year the common stock paid an annual dividend of Rs. 2.40. The firm sold the stock today for Rs. 80. What is the rate of return the firm has
earned?
5.3%
194.2%
83.11%
94.2%
Question No: 15
Market value exceeds book value by Rs. 150,000. What will be the after-tax
proceeds if there is a tax rate of 35 percent ?
Rs. 97,500
Rs. 105,600
Rs. 115,000
Rs. 150,000
Question No: 16
The cost of common equity for a firm is:
The required rate of return on the company's stock
The yield to maturity on the bond
The risk-free rate
The market risk premium
Question No: 17
The book value of a system is Rs. 30,220 at the end of year 4 of its life. What will
be the total after-tax cash flow from sale if we sell this system for Rs. 15,000 at
this time? (Tax rate is 35%)
Rs. 15,000
Rs. 15,220
Rs. 20,327
Rs. 45,220
Question No: 18
Four years ago, Mr. Ajmal purchased a car for Rs. 300,000. Now he wants to sell his car. Based on historical averages, his car worth 25% of the purchase price and he sells his car at this price. What would be his tax liability if the depreciation schedule shows a book value of Rs. 27,250 for the car ? (Tax rate is 35%)
Rs. 14,875.75
Rs. 16,712.50
Rs. 25,000.00
Rs. 62,500.25
Question No: 19
Miss Nadia purchased a car for Rs. 500,000. Based on historical averages, this car
is worth 30% of the purchase price now and it is being sold at this price. What is
the car s market value ?
Rs. 51,875
Rs. 112,500
Rs. 150,000
Rs. 350,000
Question No: 20
Leverage is considered beneficial when company s EBIT is relatively
_____________.
High
Low
Zero
None of the given options
1.b
1.b
Sales revenue (100,000) + account receivable (4,000) = 104,000 received from the customers
1.b
Sales revenue (100,000) + account receivable (4,000) = 104,000 received from the customers
12. b
2. d
PV = FV / (1+r) n
= 75,000 / (1+ 0.075) ^ 18
= 20,404
To answer these questions, we need to analyze the given information and apply relevant formulas or concepts. Here's how you can approach each question:
Question No 1: To calculate cash received from customers, we need to subtract the decrease in accounts receivable from sales revenue. The formula is: Cash Received = Sales Revenue - Decrease in Accounts Receivable. So, for this question, you need to subtract Rs. 4,000 from Rs. 100,000 to get the answer.
Question No 2: To calculate the amount Kamran needs to invest today, we can use the formula for future value of a present amount: Future Value = Present Value * (1 + Interest Rate)^Number of Periods. In this case, the future value is given as Rs. 75,000, the interest rate is 7.5%, and the number of periods is 18 years. You need to solve for the present value.
Question No 3: To calculate the amount a borrower would pay at the end of the second year with an interest-only loan, we need to calculate the interest for two years and add it to the principal amount of Rs. 3,000. The interest is calculated using the formula: Interest = Principal * Interest Rate * Number of Periods. In this case, the interest rate is 12% and the number of periods is 2 years.
Question No 4: To determine which short-term rating by PACRA denotes an inadequate capacity to ensure timely repayment, you need to refer to the rating scale provided by PACRA and identify the rating that indicates inadequate repayment capacity.
Question No 5: To determine which statement is incorrect regarding zero coupon bonds, you need to evaluate each statement and identify the one that does not align with the characteristics of zero coupon bonds.
Question No 6: To identify the type of project that prevents the acceptance of one or more alternative projects, you need to understand the different project classifications and select the appropriate option.
Question No 7: To determine the nature of the consultancy fee paid to Mr. A for the feasibility report, you need to understand the concept of sunk cost and opportunity cost and analyze the given information.
Question No 8: To identify the difference between debt and common stock, you need to consider the characteristics of each and select the option that accurately describes the difference.
Question No 9: To determine which characteristic typically applies to preferred stock but not to common stock, you need to compare the features and preferences of each type of stock.
Question No 10: To identify the correct statement regarding Average Accounting Return (AAR), you need to understand the concept of AAR and assess each option.
Question No 11: To determine the factor that does not affect the cost of equity according to the 2nd M&M proposition, you need to understand the factors that influence the cost of equity and select the factor that is not relevant.
Question No 12: To determine the term that refers to the difference between current assets and current liabilities, you need to understand the concept of working capital and select the appropriate option.
Question No 13: To calculate the risk premium for a stock with an expected return rate and a risk-free rate, you need to subtract the risk-free rate from the expected return rate.
Question No 14: To calculate the rate of return on a stock based on the purchase price, dividend, and selling price, you need to use the formula: Rate of Return = (Dividend + (Selling Price - Purchase Price)) / Purchase Price.
Question No 15: To calculate the after-tax proceeds when market value exceeds book value and a tax rate is given, you need to multiply the difference by (1 - Tax Rate).
Question No 16: To determine the cost of common equity for a firm, you need to understand the factors that influence the cost of common equity and select the option that represents the required rate of return on the company's stock.
Question No 17: To calculate the total after-tax cash flow from selling a system at a given price when the book value and tax rate are provided, you need to subtract the book value from the selling price and multiply the difference by (1 - Tax Rate).
Question No 18: To calculate the tax liability when selling a car at a certain price based on the historical averages and depreciation schedule, you need to subtract the book value from the selling price and multiply the difference by the tax rate.
Question No 19: To calculate the market value of a car based on the purchase price and historical averages, you need to multiply the purchase price by the percentage provided.
Question No 20: To determine when leverage is considered beneficial for a company, you need to consider the relationship between EBIT (Earnings Before Interest and Taxes) and the company's financial structure.
By following these steps, you can calculate the answers to the given questions.