MCQOPTIONS
Saved Bookmarks
MCQOPTIONS
This section includes 88 Mcqs, each offering curated multiple-choice questions to sharpen your Financial Management/Financial Markets knowledge and support exam preparation. Choose a topic below to get started.
| 51. |
An increase in marginal cost of capital and the capital rationing are two arising complications of |
| A. | maximum capital budget |
| B. | greater capital budget |
| C. | optimal capital budget |
| D. | minimum capital budget |
| Answer» D. minimum capital budget | |
| 52. |
The cost which has occurred already and not affected by decisions is classified as |
| A. | sunk cost |
| B. | occurred cost |
| C. | weighted cost |
| D. | mean cost |
| Answer» B. occurred cost | |
| 53. |
An uncovered cost at the start of year is divided by full cash flow during recovery year then added in prior years to full recovery for calculating |
| A. | original period |
| B. | investment period |
| C. | payback period |
| D. | forecasted period |
| Answer» D. forecasted period | |
| 54. |
The economists consider the effects of the started project on other parts of company or on the environment of the company is called |
| A. | externalities |
| B. | foreign effects |
| C. | weighted effects |
| D. | opportunity effects |
| Answer» B. foreign effects | |
| 55. |
An investment outlay cash flow is $4000, operating cash flow is $1000 and the salvage cash flow is $5000 then the free cash flow would be |
| A. | 10000 |
| B. | 8000 |
| C. | zero |
| D. | 4000 |
| Answer» B. 8000 | |
| 56. |
The net investment in operating capital is subtracted from net operating profit after taxes to calculate |
| A. | relevant inflows |
| B. | free cash flow |
| C. | relevant outflows |
| D. | cash outlay |
| Answer» C. relevant outflows | |
| 57. |
The gross fixed asset expenditures is $6000 and the free cash flow is $8000 then the operating cash flows will be |
| A. | −$14000 |
| B. | 2000 |
| C. | 14000 |
| D. | −$2000 |
| Answer» C. 14000 | |
| 58. |
The cash inflows are the revenues of project and are represented by |
| A. | hurdle number |
| B. | relative number |
| C. | negative numbers |
| D. | positive numbers |
| Answer» E. | |
| 59. |
The free cash flow is $15000, the operating cash flow is $3000, investment outlay cash flow is $5000 then the salvage cash flow will be |
| A. | 17000 |
| B. | −$17000 |
| C. | 7000 |
| D. | −$7000 |
| Answer» D. −$7000 | |
| 60. |
The present value of future cash flows is $4150 and an initial cost is $1300 then the profitability index will be |
| A. | 0.0319 |
| B. | 3.19 |
| C. | 0.31 times |
| D. | 5450 |
| Answer» B. 3.19 | |
| 61. |
In capital budgeting, a technique which is based upon discounted cash flow is classified as |
| A. | net present value method |
| B. | net future value method |
| C. | net capital budgeting method |
| D. | net equity budgeting method |
| Answer» B. net future value method | |
| 62. |
An investment outlay cash flow is $2000, an operating cash flow is $1500 and the salvage cash flow is $3000 then the free cash flow would be |
| A. | 500 |
| B. | 2500 |
| C. | 0.065 |
| D. | 6500 |
| Answer» E. | |
| 63. |
A point where the profile of net present value crosses the horizontal axis at the plotted graph indicates the project |
| A. | costs |
| B. | cash flows |
| C. | internal rate of return |
| D. | external rate of return |
| Answer» D. external rate of return | |
| 64. |
The net present value, profitability index, payback and discounted payback are the methods to |
| A. | evaluate cash flow |
| B. | evaluate projects |
| C. | evaluate budgeting |
| D. | evaluate equity |
| Answer» C. evaluate budgeting | |
| 65. |
In capital budgeting, the term of bond which has great sensitivity to interest rates is |
| A. | long-term bonds |
| B. | short-term bonds |
| C. | internal term bonds |
| D. | external term bonds |
| Answer» B. short-term bonds | |
| 66. |
* The projects which are mutually exclusive but different on scale of production or time of completion than the |
| A. | external return method |
| B. | net present value of method |
| C. | net future value method |
| D. | internal return method |
| Answer» C. net future value method | |
| 67. |
A project which have one series of cash inflows and results in one or more cash outflows is classified as |
| A. | abnormal costs |
| B. | normal cash flows |
| C. | abnormal cash flow |
| D. | normal costs |
| Answer» C. abnormal cash flow | |
| 68. |
In cash flow analysis, the two projects are compared by using common life, is classified as |
| A. | transaction approach |
| B. | replacement chain approach |
| C. | common life approach |
| D. | both b and c |
| Answer» E. | |
| 69. |
The situation in which the new business reduces an existing business of the firm is classified as |
| A. | non-cannibalization effect |
| B. | cannibalization effect |
| C. | external effect |
| D. | internal effect |
| Answer» C. external effect | |
| 70. |
In alternative investments, the constant cash flow stream is equal to initial cash flow stream in the approach which is classified as |
| A. | greater annual annuity method |
| B. | equivalent annual annuity |
| C. | lesser annual annuity method |
| D. | zero annual annuity method |
| Answer» C. lesser annual annuity method | |
| 71. |
The sum of discounted cash flows is best defined as |
| A. | technical equity |
| B. | defined future value |
| C. | project net present value |
| D. | equity net present value |
| Answer» D. equity net present value | |
| 72. |
Other factors held constant, but the lesser project liquidity is because of |
| A. | shorter payback period |
| B. | greater payback period |
| C. | less project return |
| D. | greater project return |
| Answer» C. less project return | |
| 73. |
The required increasing in current assets and an increasing in current liabilities is subtracted to calculate |
| A. | change in net working capital |
| B. | change in current assets |
| C. | change in current liabilities |
| D. | change in depreciation |
| Answer» B. change in current assets | |
| 74. |
The cash flows that could be generated from an owned asset by the company but not use in project are classified as |
| A. | occurred cost |
| B. | mean cost |
| C. | opportunity costs |
| D. | weighted cost |
| Answer» D. weighted cost | |
| 75. |
The number of years forecasted to recover an original investment is classified as |
| A. | payback period |
| B. | forecasted period |
| C. | original period |
| D. | investment period |
| Answer» B. forecasted period | |
| 76. |
The set of projects or set of investments to maximize the firm value is classified as |
| A. | optimal capital budget |
| B. | minimum capital budget |
| C. | maximum capital budget |
| D. | greater capital budget |
| Answer» B. minimum capital budget | |
| 77. |
The real interest rate and the real cash flows do not include |
| A. | equity effects |
| B. | debt effects |
| C. | inflation effects |
| D. | opportunity effects |
| Answer» D. opportunity effects | |
| 78. |
The present value of future cash flows is divided by an initial cost of the project to calculate |
| A. | negative index |
| B. | exchange index |
| C. | project index |
| D. | profitability index |
| Answer» E. | |
| 79. |
An operating cash flows is $12000 and the gross fixed asset expenditure is $5000 then the free cash flow will be |
| A. | −$7000 |
| B. | 7000 |
| C. | 17000 |
| D. | −$17000 |
| Answer» C. 17000 | |
| 80. |
The free cash flow is $15000 and the net investment in operating capital is $9000 then the net operating profit after taxes will be |
| A. | 24000 |
| B. | 6000 |
| C. | −$6000 |
| D. | −$24000 |
| Answer» B. 6000 | |
| 81. |
In cash flow estimation, the depreciation is considered as |
| A. | cash charge |
| B. | noncash charge |
| C. | cash flow discounts |
| D. | net salvage discount |
| Answer» C. cash flow discounts | |
| 82. |
An analysis and estimation of cash flows include |
| A. | input data and key output |
| B. | depreciation schedule |
| C. | net salvage values |
| D. | all of the above |
| Answer» E. | |
| 83. |
The first step in calculation of net present value is to find out |
| A. | present value of equity |
| B. | future value of equity |
| C. | present value cash flow |
| D. | future value of cash flow |
| Answer» D. future value of cash flow | |
| 84. |
The relationship between Economic Value Added (EVA) and the Net Present Value (NPV) is considered as |
| A. | valued relationship |
| B. | economic relationship |
| C. | direct relationship |
| D. | inverse relationship |
| Answer» D. inverse relationship | |
| 85. |
In capital budgeting, the positive net present value results in |
| A. | negative economic value added |
| B. | positive economic value added |
| C. | zero economic value added |
| D. | percent economic value added |
| Answer» C. zero economic value added | |
| 86. |
An uncovered cost at start of year is $200, full cash flow during recovery year is $400 and prior years to full recovery is 3 then payback would be |
| A. | 5 years |
| B. | 3.5 years |
| C. | 4 years |
| D. | 4.5 years |
| Answer» C. 4 years | |
| 87. |
A project whose cash flows are more than the capital invested for rate of return then the net present value will be |
| A. | positive |
| B. | independent |
| C. | negative |
| D. | zero |
| Answer» B. independent | |
| 88. |
In the mutually exclusive projects, the project which is selected for comparison with others must have |
| A. | higher net present value |
| B. | lower net present value |
| C. | zero net present value |
| D. | all of the above |
| Answer» B. lower net present value | |