Financial Management

501. The Real Cashflows must be discounted to get the present value at a rate equal to:

  1. Money Discount Rate
  2. Inflation Rate
  3. Real Discount Rate
  4. Risk free rate of interest
Correct answer: (C)
Real Discount Rate

502. Risk in Capital budgeting is same as:

  1. Uncertainty of Cash flows
  2. Probability of Cash flows
  3. Certainty of Cash flows
  4. Variability of Cash flows
Correct answer: (D)
Variability of Cash flows

503. NPV of a proposal, as calculated by RADR real CE Approach will be:

  1. Same
  2. Unequal
  3. Both (a) and
  4. (d) None of (a) and (b)
Correct answer: (B)
Unequal

504. Cost of Capital for Bonds and Debentures is calculated on:

  1. Before Tax basis
  2. After Tax basis
  3. Risk-free Rate of Interest basis
  4. None of the above
Correct answer: (B)
After Tax basis

505. In order to calculate Weighted Average Cost of weights may be based on:

  1. Market Values
  2. Target Values
  3. Book Values
  4. All of the above
Correct answer: (D)
All of the above

506. In order to find out cost of equity capital under CAPM, which of the following is not required:

  1. Beta Factor
  2. Market Rate of Return
  3. Market Price of Equity Share
  4. Risk-free Rate of Interest
Correct answer: (C)
Market Price of Equity Share

507. Which of the following is not a generally accepted approach for Calculation of Cost of Equity?

  1. CAPM
  2. Dividend Discount Model
  3. Rate of Pref. Dividend Plus Risk
  4. Price-Earnings Ratio
Correct answer: (C)
Rate of Pref. Dividend Plus Risk

508. Operating Leverage is calculated as:

  1. Contribution ÷ EBIT
  2. EBIT÷PBT
  3. EBIT ÷Interest
  4. EBIT ÷Tax
Correct answer: (A)
Contribution ÷ EBIT

509. Relationship between change in sales and change m is measured by:

  1. Financial leverage
  2. Combined leverage
  3. Operating leverage
  4. None of the above
Correct answer: (B)
Combined leverage

510. Higher FL is related the use of:

  1. Higher Equity
  2. Higher Debt
  3. Lower Debt
  4. None of the above
Correct answer: (B)
Higher Debt
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