Classical

Financial Management - Financial Management Objective Questions

46:  

Which method is based on this assumption that when an investor makes an investment of his savings in a company that he will get an amount equal to prevalent market rate of return?

A.

Dividend Method

B.

Debt Equity Method

C.

Earning Method

D.

Profit Method

 
 

Option: A

Explanation :


47:  

Which of the following statements is correct?

A.

If the NPV of a project is greater than 0, its PI will equal 0.

B.

If the IRR of a project is 0%, its NPV, using a discount rate, k, greater than 0, will be 0.

C.

If the PI of a project is less than 1, its NPV should be less than 0.

D.

If the IRR of a project is greater than the discount rate, k, its PI will be less than 1 and its NPV will be greater than 0.

 
 

Option: C

Explanation :


48:  

Dividends are the __________ of a company distributed amongst members in proportion to their shares

A.

Divisible Profits

B.

Assets with Cash and Bank

C.

Reserve

D.

Undivisible Profits

 
 

Option: A

Explanation :


49:  

Assume that a firm has accurately calculated the net cash flows relating to an investment proposal. If the net present value of this proposal is greater than zero and the firm is not under the constraint of capital rationing, then the firm should

A.

calculate the IRR of this investment to be certain that the IRR is greater than the cost of capital.

B.

compare the profitability index of the investment to those of other possible investments.

C.

calculate the payback period to make certain that the initial cash outlay can be recovered within an appropriate period of time.

D.

accept the proposal, since the acceptance of value-creating investments should increase shareholder wealth.

 
 

Option: D

Explanation :


50:  

The Present values of total cash inflows should be compared with Present value of

A.

Income

B.

Cash Outflows

C.

Investment

D.

Cash Inflows

 
 

Option: B

Explanation :




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