FIN622 Final Term 8 Solved Papers by Asad Munir

FIN622 Finalterm Papers….8 Papers Solved nearly · 99.99% sure…. · By Asad Munir… · FINALTERM EXAMINATION · Fall 2009 · FIN622- Corporate Finance (Session - 3)

Q1. ( Marks: 1 )

Which of the following is an expected rate of return on a bond if bought at its current market price and held to maturity?

1. Yield to maturity
2. Current yield
3. Coupon yield
4. Capital gains yield

Correct answer: Yield to maturity

Q2. ( Marks: 1 )

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

1. Lowering direct cost
2. Increasing variable cost
3. Increasing direct cost
4. Lowering sales price

Correct answer: Lowering direct cost

Q3. ( Marks: 1 )

Which one of the following statements applies to Dividend Growth Model?

1. It is difficult to understand and use
2. It is used for non-listed companies
3. It is used for debt securities also
4. It do not consider risk level of a security

Correct answer: It do not consider risk level of a security

Q4. ( Marks: 1 )

Which of the following refers to a stock issuance process where a company offers its shares to a limited number of investor?

1. Initial Public Offering
2. Private Placement
3. Direct Public Offering
4. Primary Offering

Correct answer: Private Placement

Q5. ( Marks: 1 )

Which of the following is the principal advantage of high debt financing?

1. Tax savings
2. Low Bankruptcy costs
3. Minimum financial risk
4. Low financial leverage

Correct answer: Tax savings

Q6. ( Marks: 1 )

Which of the following firms would have the highest financial leverage?

1. A firm having debt-to-equity ratio of 30:70
2. A firm having debt-to-equity ratio of 40:60
3. A firm having debt-to-equity ratio of 50:50
4. A firm having debt-to-equity ratio of 60:40

Correct answer: A firm having debt-to-equity ratio of 60:40

Q7. ( Marks: 1 )

In which of the following dividend policies, the amount of dividend is relatively fixed?

1. Constant payout ratio policy
2. Hybrid dividend policy
3. Residual dividend policy
4. Stable dividend policy

Correct answer: Stable dividend policy

In the stable dividend policy, management maintains a fixed dividend per share each year. In the constant payout ratio situation, management maintains a fixed percentage dividend payout ratio

Q8. ( Marks: 1 )

Which of the following serves as a starting point for preparing functional budgets of a firm?

1. Sales budget
2. Master budget
3. Production cost budget
4. Cash budget

Correct answer: Sales budget

Q9. ( Marks: 1 )

A company is holding cash as a buffer in case of an unexpected need with operations. This is an example of the ________ motive for holding cash.

1. Precautionary
2. Speculative
3. Transactions
4. Capital needs

Correct answer: Precautionary

Q10. ( Marks: 1 )

Which of the following is an "income based method" for share valuation of a target firm?

1. Replacement cost method
2. Break up value method
3. Dividend valuation method
4. Accumulated depreciation method

Correct answer: Dividend valuation method

Q11. ( Marks: 1 )

Which of the following is a re-structuring strategy in which employees buy a majority share in their own firm?

1. Employee Dividend Scheme
2. Employee Buyout
3. Employee Empowerment
4. Leverage Buyout

Correct answer: Employee Buyout

Q12. ( Marks: 1 )

All of the following could be the reasons for a subsidiary buyout EXCEPT:

1. The parent company is in financial distress
2. The parent company needs cash
3. The parent company prefers to sell the firm rather that liquidation
4. The parent company wants liquidation

Correct answer: The parent company wants liquidation

The existing parent company of the victim firm may wish to dispose of it. The parent company may be caught up in financial distress and is in acute need of cash and liquidity

Q13. ( Marks: 1 )

A firm has to pay $10,000 to an American company after three months. The firm enters into a contract with a foreign exchange dealer to buy $10,000 after three months at Rs.61/US$. This contract would be beneficial for the firm if:

1. After three months the exchange rate is Rs.60/US$
2. After three months the exchange rate is Rs.61/US$
3. After three months the exchange rate is Rs.62/US$
4. After three months the exchange rate is Rs.59/US$

Correct answer: After three months the exchange rate is Rs.62/US$

Q14. ( Marks: 1 )

A firm can fix effective interest rate on short-term borrowings by doing which of the following?

1. Buying a forward rate agreement
2. Selling a forward rate agreement
3. Borrowing local currency

Correct answer: Buying a forward rate agreement