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Fin622 Quiz No. 1 solved

Tuesday, November 02, 2010 Posted In FinEdit This

If you invest Rs.400 today in a savings account paying 8 percentinterest per year, how much will you have in the

Rs.325Rs.1,299

Rs.504Rs.609

If the Net Present Values of two, mutually exclusive options are bothgreater than zero, which option should b

The one with the largest Net Present Value.

The one with the smallest Net Present Value.Either one. Both are greater than the cost of capital.None of the given options

Which one of the following statements describe "Shareholders wealth"in a firm?

The number of people employed in the firmThe book value of the firm's assets less the book value of its liabilities

The market price per share of the firm's common stockThe amount of salary paid to its employees

Virgo Airlines will pay Rs.4.00 dividend next year on its common stock,which is currently selling at Rs.100 per share. What is the market'srequired return on this investment if the dividend is expected to growat 5% forever?

4 percent.5 percent.7 percent.

9 percent.

Which one of the following statements describes the relationshipbetween Interest rates and bond prices?

Move in the same direction.Move in opposite directionsSometimes move in the same direction, sometimes in opposite

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directionsHave no relationship with each other (i.e., they are independent).

A firm can lower its breakeven level by doing which of the followingactions?

Lowering direct costIncreasing variable costIncreasing variable costLowering sales price

If an investor buys a non-zero coupon bond and holds it to maturity,then the rate of return she will receive depends on:

The bond's maturity value.The price paid for the bondThe interest payments to be received.All of the given options

Suppose you need the present value interest factor for 12 percentcompounded quarterly for 10 years. If all you have is a PVIF table, youwould use the ________ period row and the ________ percent ratecolumn.

40, 12

20.1240,320,6

If two projects offer the same, positive NPV, then which of thefollowing would be a reasonable conclusion?Select correct option:

The projects would have the same IRR.The projects would have the same payback period.

The projects are mutually exclusive.The projects would add the same amount to the value of thefirm

19. Since preferred stock dividends are fixed, valuing preferred stockis roughly equivalent to valuing:a. a zero growth common stock.

b. a positive growth common stock

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c. a short-term bondd. an option.

A company has fixed costs of $50,000 and variable costs per unit of

output of $8.If its sole product sells for $18, what is the break-even quantity ofoutput?

Select correct option:2,5005,0001,5007,500