Financial Management
421. Capital Budgeting is a part of:
- Investment Decision
- Working Capital Management
- Marketing Management
- Capital Structure
Correct answer: (A)
Investment Decision
422. Cash Inflows from a project include:
- Tax Shield of Depreciation
- After-tax Operating Profits
- Raising of Funds
- Both (a) and (b)
Correct answer: (D)
Both (a) and (b)
423. In Capital Budgeting, Sunk cost is excluded because it is:
- of small amount
- not incremental
- not reversible
- All of the above
Correct answer: (B)
not incremental
424. In Certainty-equivalent approach, adjusted cash flows are discounted at:
- Accounting Rate of Return
- Internal Rate of Return
- Hurdle Rate
- Risk-free Rate
Correct answer: (D)
Risk-free Rate
425. Cost of Capital refers to:
- Flotation Cost
- Dividend
- Required Rate of Return
- None of the above
Correct answer: (C)
Required Rate of Return
426. Weighted Average Cost of Capital is generally denoted by:
- kA
- kw
- k0
- kc
Correct answer: (C)
k0
427. An implicit cost of increasing proportion of debt is:
- Tax should would not be available on new debt
- P.E. Ratio would increase
- Equity shareholders would demand higher return
- Rate of Return of the company would decrease
Correct answer: (C)
Equity shareholders would demand higher return
428. Minimum Rate of Return that a firm must earn in order to satisfy its investors, is also known as:
- Average Return on Investment
- Weighted Average Cost of Capital
- Net Profit Ratio
- Average Cost of borrowing
Correct answer: (B)
Weighted Average Cost of Capital
429. Cost of issuing new shares to the public is known as:
- Cost of Equity
- Cost of Capital
- Flotation Cost
- Marginal Cost of Capital
Correct answer: (C)
Flotation Cost
430. High degree of financial leverage means:
- High debt proportion
- Lower debt proportion
- Equal debt and equity
- No debt
Correct answer: (A)
High debt proportion