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List I List II
a. Net present value (i) Number of years required to recover the
original cash outlay invested in a project
b. Payback period (ii) It is the rate of return which equates the
present value of anticipated net cash
flows with the initial outlay
c. Internal rate of return (iii) It is found out by dividing the average
after-tax profit by the average
investment
d. Accounting rate of (iv) It is the difference between the present
return value of cash inflows and present value
of cash outflows
Codes:
(a) (b) (c) (d)
(1) (iv) (iii) (ii) (i)
(2) (iii) (i) (iv) (ii)
(3) (iii) (iv) (i) (ii)
(4) (iv) (i) (ii) (iii)
55. Match the following: (paper 3 2012)
(i) Net present value method (I) Inflow after interest and tax
(ii) Average rate of return (II) Discounted cash flow
(iii) Internal rate of return (III) Traditional method
(iv) Pay back method (IV) Decision based on cut-off rate
CODES:
(a) (b) (c) (d)
(A) (IV) (I) (II) (III)
(B) (IV) (III) (II) (I)
(C) (II) (I) (IV) (III)
(D) (I) (III) (IV) (II)
4. Which of the following project appraisal method is not based on time value of money?
(paper 3 dec2012)
(A) Payback method (B) Net present value method
(C) Value added method (D) All of the above
17. Match the items of List-I with the items of List-II (paper 3 july 2016)
List I List - II
(a) IRR (i) Process of analyzing potential fixed asset
investment
(b) NPV is equal to zero (ii) (Proportion of equity) x (Cost of
equity) + (Proportion of debt) x (Cost of
debts)
(c) Cost of capital (iii) Project is acceptable
(d) Capital budgeting (iv)NPV = Zero
Codes:
(a) (b) (c) (d)
(1) (iii) (ii) (iv) (i)
(2) (iv) (iii) (ii) (i)
(3) (iv) (i) (ii) (iii)
(4) (i) (ii) (iii) (iv)
17. The Internal Rate of Return (IRR) is determined where
(A) the Net Present Value is positive (B) the Net Present value is negative
(C) the Net Present value is Zero (D) None of the above
17. Which of the following method of incorporation of risk in the capital budgeting
decision framework is useful for situations in which decisions at one point of time also
affect the decisions of the firm at some later date ?
(A) Certainty Equivalent Approach (B) Probability Distribution approach
(C) Risk-adjusted Discount rate Approach (D) Decision-tree Approach
18. In the case of redeemable debentures issued at discount and to be redeemed at par,
approximate cost of debenture (before tax adjustment) will be equal to
(A)Rate of interest
(A) amount of interest divided by issue price
(B) amount of interest divided by par value
(C) [par value issue price]
amount of interest + tenure of debenture
(par value + issue price
2
19. While granting the term loan, if lending institution puts a condition to reduce the debt-
equity ratio by issuing additional equity share-capital or preference share capital, it is known
as:
(A) asset-related restrictive covenant (B) cash flow related restrictive covenant
(C) control-related restrictive covenant (D) liability related restrictive covenant
20. According to Lintners model of corporate dividend behaviour, the dividend for the year
t is dependent on :
I. earnings per share for the year t
II. dividend per share for the year t-1
III. adjustment rate
IV. target pay-out ratio
V. market price share
Select the correct code:
(A)I, II and III are correct (B) II, III, IV and V are correct
(C)I, II, III and IV are correct (D) I, II, IV and V are correct
16. State the price of the share for the year t, if the rate of growth of the firm is 10%. EPS and
DPS for the year t+1, are Rs.3 and Rs.2 respectively and the investors required rate of return
is 20%
(1) Rs.30 (2)Rs.20 (3)Rs.25 (4)Rs.10
16. If raw materials are in store for 2 months, processing time 2 months, finished goods remain
in store for 15 days, debtors are allowed 60 days credit and credit received from suppliers of raw
material is one month, the operating cycle period is:
(1) 7 months (2) 6 months (3)6 months (4) 5 months
17. Which of the following is not general disclosure requirement under Account Standard-14 ?
(1) Name and nature of Business (2) Description and number of shares issued
(3) Accounting method followed (4) Particulars of scheme sanctioned
18. Under the Modified Accelerated Cost Recovery System (MACRS) an asset in the 5 year
property class would typically be depreciated over how many years?
(1) 4 years (2) 5 years (3) 6 years (4) 7 years
19. According to the concept of financial signaling, management behaviour results in new debt
issues being regarded as --------------- news by investors.
(1) Non-Event (2) Bad (3) Risk Neutral (4) Good
17. An employee borrowed a 3 year loan of Rs 10,000 at 9% from his employer to buy a
motorcycle. If employer requires three equal end-of-year repayments, then the annual
installment will be __________
(1) Rs 3633 (2) Rs 3951 (3) Rs 3333 (4) Rs 4233
18. Match the items of List I with the items of List II:
List I List II
a. M.M Hypothesis (i) The cost of debt and cost of equity are assumed to
without taxes be independent to the capital structure
b. Net operating income (ii) In the absence of taxes firms market value and the
approach cost of capital remain invariant to the capital
structures changes
c. M.M Hypothesis under (iii) The cost of equity is assumed to increase
corporate taxes linearly with leverage
d. Net income approach (iv) The value of the firm will increase with debt
due to the deductibility of interest charges for tax
computations and the value of the levered firm will
be higher than the unlevered firm
Codes:
(a) (b) (c) (d)
(1) (ii) (iii) (iv) (i)
(2) (ii) (i) (iv) (iii)
(3) (i) (ii) (iii) (iv)
(4) (iii) (iv) (i) (ii)
19.Explicit Resale Price Valuation method pre-supposes that an investor keeps the share only
for few years and eventually sells the shares. The value of the share, therefore, depends
upon which of the following?
(I): The stream of dividends expected during investors ownership
(II): The price expected to be realized whenever investors sells the share
Codes:
(1) (I) is true, but (II) is false
(2) (I) is false, but (I) is true
(3) Both (I) and (II) are true
(4) Both (I) and (II) are false
Paper 3
5. The factors affecting to P/E multiple are (2012)
(A) Dividend pay-out ratio and required return
(B) Required return and expected growth rate
(C) Dividend pay-out ratio and expect growth rate
(D) Dividend pay-out ratio, required return and expected growth rate.
29. Incase where the investment can be made in stages and is dependent on the future
outcomes, the capital budgeting technique that can be adopted will be
(A) Cost-Leadership strategy (B) Differentiation strategy
(C) Decision-tree analysis (D) Scenario analysis
37.The optimal pay-out ratio for growth firm is nil and declining firm is 100%is established
by
(A) Gordon model (B) Walter model (C) Both (A) and (B) (D) None of the above
52. Financial Risk arise from
(A) R& D and operations stages of value chain
(B) GNP growth rate and competitive environment
(C) Volatility of interest rates, currency rates, commodities prices and stock prices
(D) Changes in laws and regulations
44. The model that applies to Economic Order Quantity for Inventory Management, was
proposed to be applied to Cash Management by
(A) Miller and Orr (B) William J Baumol (C) William sharpe (D) David Durand
68. Match the following :
(a) Hary Markowitz (i) Dividend Theory
(b) David Durand (ii) CAPM
(c) Dow (iii) Capital Structure
(d) M.J.Gordon (iv) Technical Analysis
CODES:
(a) (b) (c) (d)
(A) (4) (3) (2) (1)
(B) (2) (3) (4) (1)
(C) (2) (1) (3) (4)
(D) (3) (2) (4) (1)
Rs
Salaries & Wages expenses 7000
Profit on sale of land 25000
Loss on sale of building 13000
Net loss as per P & L a/c 3200
Depreciation on machinery 16000
Amortization of goodwill 8000
Stationary expenses 5000