Finance Management & Corporate Finance Quiz Set 2

1. If a company's earnings per share is Rs. 20 and it has a share price of Rs. 600, what is the P/E ratio?

Correct! Wrong!

2. Making gifts of money, goods, or time to help non-profit organizations, groups or individuals is:

Correct! Wrong!

3. The term _____ can be used in a broad sense to describe all the policies, procedures, relationships, and systems in place to oversee the successful and legal operation of the enterprise?

Correct! Wrong!

4. A profitability index (PI) of .92 for a project means that __________?

Correct! Wrong!

5. The Dada Corporation is considering an investment that will cost Rs. 80,000 and have a useful life of 4 years. During the first 2 years, the net incremental after-tax cash flows are Rs. 25,000 per year and for the last two years they are Rs. 20,000 per year. What is the payback period for this investment?

Correct! Wrong!

6. Zaheer Restaurants, Inc. has estimated that a proposed project's 8-year net cash benefit will be Rs. 4,000 per year for years 1 through 8, with an additional terminal benefit of Rs. 8,000 at the end of the eighth year. Assuming that these cash inflows satisfy exactly Zaheer required rate of return of 8 percent, the project's initial cash outflow is closest to which of the following four possible answers?

Correct! Wrong!

7. Which of the following statements is incorrect regarding a normal project?

Correct! Wrong!

8. Assume that a firm has accurately calculated the net cash flows relating to two mutually exclusive investment proposals. If the net present value of both proposals exceed zero and the firm is not under the constraint of capital rationing, then the firm should __________?

Correct! Wrong!

9. A project whose acceptance does not prevent or require the acceptance of one or more alternative projects is referred to as __________?

Correct! Wrong!

10. When operating under a single-period capital-rationing constraint, you may first want to try selecting projects by descending order of their __________ in order to give yourself the best chance to select the mix of projects that adds most to firm value?

Correct! Wrong!

11. Which of the following statements is correct regarding the internal rate of return (IRR) method?

Correct! Wrong!

12. Which of the following is not a potential for a ranking problem between two mutually exclusive projects?

Correct! Wrong!

13. A project whose acceptance precludes the acceptance of one or more alternative projects is referred to as __________?

Correct! Wrong!

14. Two mutually exclusive projects are being considered. Neither project will be repeated again in the future after their current lives are complete. There exists a potential problem though the expected life of the first project is one year and the expected life of the second project is three years. This has caused the NPV and IRR methods to suggest different project preferences. What technique can be used to help make a better decision in this scenario?

Correct! Wrong!

15. High P/E ratios tend to indicate that a company will _______?

Correct! Wrong!

16. _________ is equal to (common shareholders' equity/common shares outstanding)?

Correct! Wrong!

17. The _______ is defined as the present value of all cash proceeds to the investor in the stock?

Correct! Wrong!

18. Historically, P/E ratios have tended to be _________?

Correct! Wrong!

19. All of the following influence capital budgeting cash flows EXCEPT:

Correct! Wrong!

20. A capital investment is one that:

Correct! Wrong!

Finance Management & Corporate Finance Quiz Set 2
Below 12 is not good, 13-16 need some improvement, 16+ excellent

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