ACC501 Quiz 3 Jan 2026

Question:

Which of the following term refers to the difference between the present value of cash inflows and the present value of cash outflows?

1. Average Accounting Return (AAR)
2. Internal Rate of Return (IRR)
3. Profitability Index (PI)
4. Net Present Value (NPV)

Correct answer: Net Present Value (NPV)

Copied: 1/6/2026, 5:18:49 PM

Question:

The total market value of a company’s stocks is calculated as Rs. 250 million and the total market value of the company’s debt are calculated as Rs. 150 million. What percent of the firm’s financing is equity ?

1. 62.50%
2. 33.33%
3. 50.00%
4. 85.00%

Correct answer: 62.50%

Copied: 1/6/2026, 5:19:06 PM

Question:

Which one of the following formulas can be used to calculate Operating Cash Flow (OCF) under tax shield

approach?

1. OCF = (sales – cost) x (1 + tax rate) + (depreciation x tax rate)
2. OCF = (sales + cost) x (1 – tax rate) + (depreciation x tax rate)
3. OCF = (sales – cost) x (1 – tax rate) + (depreciation x tax rate)
4. OCF = (sales – cost) x (1 – tax rate) – (depreciation x tax rate)

Correct answer: OCF = (sales – cost) x (1 – tax rate) + (depreciation x tax rate)

Copied: 1/6/2026, 5:19:22 PM

Question:

A project having non-conventional cash flows is actually a characteristics of:

A. AAR

B. IRR

C. PI D. NPV Copied: 1/6/2026, 5:19:57 PM

Question:

A firm’s equity is worth 4 million and its debt is worth 2 million. What is the percentage of firm’s financing that is equity ?

1. 67%
2. 33%
3. 40%
4. 20%

Copied: 1/6/2026, 5:20:36 PM

Question:

Preferred stock is similar to debt as both: I. frequently carry credit ratings. II. can be callable. III. receive a stated payment amount. IV. are considered debt instruments.

A. I and III only

B. I, II, and III only

C. II, III, and IV only D. II and IV only Copied: 1/6/2026, 5:20:54 PM

Question:

Which of the following represents the linear relation between Net Present Value (NPV) and Profitability Index (PI)?

1. If Profitability Index > 1, NPV is Zero (0)
2. If Profitability Index < 1, NPV is Positive (+)
3. If Profitability Index > 1, NPV is Negative (-)
4. If Profitability Index > 1, NPV is Positive (+)

Correct answer: If Profitability Index > 1, NPV is Positive (+)

Copied: 1/6/2026, 5:21:21 PM