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FINALTERM EXAMINATION
SPRING 2007
ACC501 - BUSINESS FINANCE (Session - 3 )
Marks: 60
Time: 150min
StudentID/LoginID: ______________________________
Student Name: ______________________________
Center Name/Code: ______________________________
Exam Date: Wednesday, July 11, 2007
Please read the following instructions carefully before attempting any question:
• All questions are compulsory.
• This exam consists of 10 Multiple Choice Questions (MCQ’s), 5 True/False Questions, 3 Short Questions and 3 Numerical Questions.
• Question No. 1-10 are MCQs carrying 1 Mark each, Question No. 11-15 are True/False Questions carrying 1 Mark each, Question No.16-18 are short questions carrying 5 Marks each and Question No. 19-21 are numerical questions carrying 10 Marks each.
• For each MCQ, read the choices available carefully and select the choice which you consider is the correct one.
• You are required to show all the working of short questions as well as Numerical questions.
• The use of calculator and financial tables is allowed.
• The use of mobile phones in exam center is strictly prohibited.
• A clock has been given in the exam software. Software will automatically be closed after 150 minutes.
• Remember do not spend too much time on any one MCQ. Since all MCQ’s carry equal marks, it is important to manage your time and responses to test questions effectively.
• This Examination is closed book, closed notes and closed neighbours.
• Failure to comply with the supervisor’s directions will result in your test being cancelled. Please comply with supervisor’s directions to avoid any unpleasant event.
For Teacher's use only
Question 1 2 3 4 5 6 7 8 9 10 Total
Marks
Question 11 12 13 14 15 16 17 18 19 20
Marks
Question 21
Marks
Question No: 1 ( Marks: 1 ) - Please choose one
The process of planning and managing a firm’s long-term investments is called :
►
Planning Process
►
Capital Structure
►
Capital Budgeting
►
Managing Process
Question No: 2 ( Marks: 1 ) - Please choose one
Return on Equity (ROE) = _________ x Total Assets Turnover x Equity Multiplier
►
Profit Margin
►
Total Sales
►
Net Income
►
Total Equity
Question No: 3 ( Marks: 1 ) - Please choose one
If a bank loans out Rs. 10,000 for 90 days at 8% simple interest, the Present Value (PV) will be :
►
Rs. 9,105
►
Rs. 9,807
►
Rs. 10,325
►
Rs. 10,765
Question No: 4 ( Marks: 1 ) - Please choose one
The ____________ is the rate where NPV (Net Present Value) equals to zero.
►
WACC (Weighted Average Cost of Capital)
►
IRR (Internal Rate of Return)
►
MIRR (Modified Internal Rate of Return)
►
AAR (Average Accounting Return)
Question No: 5 ( Marks: 1 ) - Please choose one
______________ is adopted to permit minority participation.
►
Cumulative Voting
►
Straight Voting
►
Proxy Voting
►
Staggering
Question No: 6 ( Marks: 1 ) - Please choose one
Which one of the following statements projects future years’ operations in a summarized format ?
►
Income Statement
►
Cash Flow Statement
►
Pro Forma Financial Statement
►
None of the given options
Question No: 7 ( Marks: 1 ) - Please choose one
The direct and indirect costs associated with going bankrupt or experiencing financial distress, are known as :
►
Direct Bankruptcy Costs
►
Indirect Bankruptcy Costs
►
Financial Distress Costs
►
All of the given options
Question No: 8 ( Marks: 1 ) - Please choose one
Suppose you bought 1,500 shares of a corporation at Rs. 25 each. After a year, you received Rs. 3,000 (Rs. 2 per share) in dividends. The dividend yield will be :
►
5.00 %
►
8.00%
►
10.00%
►
12.00%
Question No: 9 ( Marks: 1 ) - Please choose one
You earn a 7% real return. If the inflation rate is 5 percent, what is your nominal return ?
►
8.96 %
►
9.05 %
►
11.65 %
►
12.35%
Question No: 10 ( Marks: 1 ) - Please choose one
The projected cash flows from a project are :
Years Cash flows
1 Rs. 100
2 Rs. 300
3 Rs. 600
4 Rs. 800
The project costs Rs. 1,000. What would be the payback period for the project ?
►
2.00 Years
►
2.67 Years
►
3.00 Years
►
3.67 Years
Question No: 11 ( Marks: 1 ) - Please choose one
Sole Proprietorship is a business created as a distinct legal entity owned by one or more individuals or entities.
►
True
►
False
Question No: 12 ( Marks: 1 ) - Please choose one
The term discounting is associated with Future Value concept whereas the term compounding is associated with Present Value concept.
►
True
►
False
Question No: 13 ( Marks: 1 ) - Please choose one
Constant Growth Stock is a share of common stock in a company with a constant rate of dividend.
►
True
►
False
Question No: 14 ( Marks: 1 ) - Please choose one
Portfolio is the group of assets (stocks and bonds) held by an investor.
►
True
►
False
Question No: 15 ( Marks: 1 ) - Please choose one
The difference between bank cash and book cash, representing the net effect of cheques in the process of clearing is called float.
►
True
►
False
Question No: 16 ( Marks: 5 )
Following are given cash inflows of a project. Assume that all cash flows are received at the end of the period.
Period Cash Flows
1 Rs.10,000
2 Rs.15,000
3 Rs.20,000
4 Rs.30,000
5 Rs.35,000
Calculate the future value of cash flows stream at the end of year 5 with a compound annual interest rate of 10%.
Question No: 17 ( Marks: 5 )
Write down the statements for the followings:
a. NPV (Net Present Value) Rule
b. IRR (Internal Rate of Return) Rule
c. Payback Rule
d. PI (Profitability Index) Rule
e. AAR (Average Accounting Return) Rule
Question No: 18 ( Marks: 5 )
What do M&M Proposition I and Proposition II state ?
Question No: 19 ( Marks: 10 )
Mr. Jamil has Rs. 70,000 that he can deposit in savings accounts of any of three banks A, B or C for a three years period. Bank A compounds interest on annual basis; Bank B compounds interest semi-annually (twice each year); and Bank C compounds interest quarterly (four times each year). All three banks have a stated annual interest rate of 12%.
1. How much Mr. Jamil will have in his account after three years if he deposits his money in Bank A ?
2. How much He will have in his account after three years if he deposits his money in Bank B ?
3. How much He will have in his account after three years if he deposits his money in Bank C ?
4. On the basis of your findings in above parts, describe which bank should Mr. Jamil deal with and why ?
Question No: 20 ( Marks: 10 )
SNT Company presently paid a dividend of Rs.1.5 per share and has a share price of Rs.25. The dividends are expected to grow @ 15% forever. SNT Company has Rs.100 million in equity and Rs.75 million in debt in its total capital. The tax rate for the firm is 35% and the Cost of debt is 12%. Calculate the Weighted Average Cost of Capital (WACC) for SNT Company?
Question No: 21 ( Marks: 10 )
Magi Inc. specializes in toys and receives all income from sales.
Quarters * 1 2 3 4 1 (next year)
Sales (Rs.) 500,000 600,000 650,000 800,000 550,000
* Each quarter consists of 3 months (90 days)
• Accounts Receivable:
o Beginning receivables = Rs. 250,000
o Average Collection Period = 30 days
• Accounts Payable:
o Purchases = 50 % of next quarter’s sales
o Beginning payables = Rs. 125,000
o Accounts Payable Period is 45 days
• Other expenses:
o Wages, taxes and other expenses are 25% of sales
o Interest and dividend payments are Rs. 50,000
o A major capital expenditure of Rs. 200,000 is expected in the second quarter
You are just required to calculate the Cash Collections (Receipts) and Cash Disbursements (Payments) for four Quarters.
http://www.ysapak.com/YSAforum/index.php/topic,4105.new.html#new
SPRING 2007
ACC501 - BUSINESS FINANCE (Session - 3 )
Marks: 60
Time: 150min
StudentID/LoginID: ______________________________
Student Name: ______________________________
Center Name/Code: ______________________________
Exam Date: Wednesday, July 11, 2007
Please read the following instructions carefully before attempting any question:
• All questions are compulsory.
• This exam consists of 10 Multiple Choice Questions (MCQ’s), 5 True/False Questions, 3 Short Questions and 3 Numerical Questions.
• Question No. 1-10 are MCQs carrying 1 Mark each, Question No. 11-15 are True/False Questions carrying 1 Mark each, Question No.16-18 are short questions carrying 5 Marks each and Question No. 19-21 are numerical questions carrying 10 Marks each.
• For each MCQ, read the choices available carefully and select the choice which you consider is the correct one.
• You are required to show all the working of short questions as well as Numerical questions.
• The use of calculator and financial tables is allowed.
• The use of mobile phones in exam center is strictly prohibited.
• A clock has been given in the exam software. Software will automatically be closed after 150 minutes.
• Remember do not spend too much time on any one MCQ. Since all MCQ’s carry equal marks, it is important to manage your time and responses to test questions effectively.
• This Examination is closed book, closed notes and closed neighbours.
• Failure to comply with the supervisor’s directions will result in your test being cancelled. Please comply with supervisor’s directions to avoid any unpleasant event.
For Teacher's use only
Question 1 2 3 4 5 6 7 8 9 10 Total
Marks
Question 11 12 13 14 15 16 17 18 19 20
Marks
Question 21
Marks
Question No: 1 ( Marks: 1 ) - Please choose one
The process of planning and managing a firm’s long-term investments is called :
►
Planning Process
►
Capital Structure
►
Capital Budgeting
►
Managing Process
Question No: 2 ( Marks: 1 ) - Please choose one
Return on Equity (ROE) = _________ x Total Assets Turnover x Equity Multiplier
►
Profit Margin
►
Total Sales
►
Net Income
►
Total Equity
Question No: 3 ( Marks: 1 ) - Please choose one
If a bank loans out Rs. 10,000 for 90 days at 8% simple interest, the Present Value (PV) will be :
►
Rs. 9,105
►
Rs. 9,807
►
Rs. 10,325
►
Rs. 10,765
Question No: 4 ( Marks: 1 ) - Please choose one
The ____________ is the rate where NPV (Net Present Value) equals to zero.
►
WACC (Weighted Average Cost of Capital)
►
IRR (Internal Rate of Return)
►
MIRR (Modified Internal Rate of Return)
►
AAR (Average Accounting Return)
Question No: 5 ( Marks: 1 ) - Please choose one
______________ is adopted to permit minority participation.
►
Cumulative Voting
►
Straight Voting
►
Proxy Voting
►
Staggering
Question No: 6 ( Marks: 1 ) - Please choose one
Which one of the following statements projects future years’ operations in a summarized format ?
►
Income Statement
►
Cash Flow Statement
►
Pro Forma Financial Statement
►
None of the given options
Question No: 7 ( Marks: 1 ) - Please choose one
The direct and indirect costs associated with going bankrupt or experiencing financial distress, are known as :
►
Direct Bankruptcy Costs
►
Indirect Bankruptcy Costs
►
Financial Distress Costs
►
All of the given options
Question No: 8 ( Marks: 1 ) - Please choose one
Suppose you bought 1,500 shares of a corporation at Rs. 25 each. After a year, you received Rs. 3,000 (Rs. 2 per share) in dividends. The dividend yield will be :
►
5.00 %
►
8.00%
►
10.00%
►
12.00%
Question No: 9 ( Marks: 1 ) - Please choose one
You earn a 7% real return. If the inflation rate is 5 percent, what is your nominal return ?
►
8.96 %
►
9.05 %
►
11.65 %
►
12.35%
Question No: 10 ( Marks: 1 ) - Please choose one
The projected cash flows from a project are :
Years Cash flows
1 Rs. 100
2 Rs. 300
3 Rs. 600
4 Rs. 800
The project costs Rs. 1,000. What would be the payback period for the project ?
►
2.00 Years
►
2.67 Years
►
3.00 Years
►
3.67 Years
Question No: 11 ( Marks: 1 ) - Please choose one
Sole Proprietorship is a business created as a distinct legal entity owned by one or more individuals or entities.
►
True
►
False
Question No: 12 ( Marks: 1 ) - Please choose one
The term discounting is associated with Future Value concept whereas the term compounding is associated with Present Value concept.
►
True
►
False
Question No: 13 ( Marks: 1 ) - Please choose one
Constant Growth Stock is a share of common stock in a company with a constant rate of dividend.
►
True
►
False
Question No: 14 ( Marks: 1 ) - Please choose one
Portfolio is the group of assets (stocks and bonds) held by an investor.
►
True
►
False
Question No: 15 ( Marks: 1 ) - Please choose one
The difference between bank cash and book cash, representing the net effect of cheques in the process of clearing is called float.
►
True
►
False
Question No: 16 ( Marks: 5 )
Following are given cash inflows of a project. Assume that all cash flows are received at the end of the period.
Period Cash Flows
1 Rs.10,000
2 Rs.15,000
3 Rs.20,000
4 Rs.30,000
5 Rs.35,000
Calculate the future value of cash flows stream at the end of year 5 with a compound annual interest rate of 10%.
Question No: 17 ( Marks: 5 )
Write down the statements for the followings:
a. NPV (Net Present Value) Rule
b. IRR (Internal Rate of Return) Rule
c. Payback Rule
d. PI (Profitability Index) Rule
e. AAR (Average Accounting Return) Rule
Question No: 18 ( Marks: 5 )
What do M&M Proposition I and Proposition II state ?
Question No: 19 ( Marks: 10 )
Mr. Jamil has Rs. 70,000 that he can deposit in savings accounts of any of three banks A, B or C for a three years period. Bank A compounds interest on annual basis; Bank B compounds interest semi-annually (twice each year); and Bank C compounds interest quarterly (four times each year). All three banks have a stated annual interest rate of 12%.
1. How much Mr. Jamil will have in his account after three years if he deposits his money in Bank A ?
2. How much He will have in his account after three years if he deposits his money in Bank B ?
3. How much He will have in his account after three years if he deposits his money in Bank C ?
4. On the basis of your findings in above parts, describe which bank should Mr. Jamil deal with and why ?
Question No: 20 ( Marks: 10 )
SNT Company presently paid a dividend of Rs.1.5 per share and has a share price of Rs.25. The dividends are expected to grow @ 15% forever. SNT Company has Rs.100 million in equity and Rs.75 million in debt in its total capital. The tax rate for the firm is 35% and the Cost of debt is 12%. Calculate the Weighted Average Cost of Capital (WACC) for SNT Company?
Question No: 21 ( Marks: 10 )
Magi Inc. specializes in toys and receives all income from sales.
Quarters * 1 2 3 4 1 (next year)
Sales (Rs.) 500,000 600,000 650,000 800,000 550,000
* Each quarter consists of 3 months (90 days)
• Accounts Receivable:
o Beginning receivables = Rs. 250,000
o Average Collection Period = 30 days
• Accounts Payable:
o Purchases = 50 % of next quarter’s sales
o Beginning payables = Rs. 125,000
o Accounts Payable Period is 45 days
• Other expenses:
o Wages, taxes and other expenses are 25% of sales
o Interest and dividend payments are Rs. 50,000
o A major capital expenditure of Rs. 200,000 is expected in the second quarter
You are just required to calculate the Cash Collections (Receipts) and Cash Disbursements (Payments) for four Quarters.
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