FIN622 Final Term Past Papers by VUBuddy

FINALTERM EXAMINATION · Fall 2010 · FIN622- Corporate Finance (Session - 3) · Solved & Attempt By Hafiz Salman Majeed

Q1. ( Marks: 1 )

Which of the following statements is TRUE regarding Balance Sheet of a firm?

1. It reports how much of the firm’s earnings were retained in the business rather than paid out in dividends.
2. It reports the impact of a firm’s operating, investing, and financing activities on cash flows over an accounting period.
3. It shows the firm’s financial position at a specific point in time.
4. It summarizes the firm’s revenues and expenses over an accounting period

Correct answer: It shows the firm’s financial position at a specific point in time.

Q2. ( Marks: 1 )

Which of the following statements is CORRECT regarding the fundamental analysis?

1. Fundamental analysts use only Economic indicators to evaluate a stock
2. Fundamental analysts use only financial information to evaluate a company’s stocks
3. Fundamental analysts use financial and non-financial information to evaluate a company’s stocks
4. Fundamental analysts use only non-financial information to evaluate a company’s stocks

Correct answer: Fundamental analysts use financial and non-financial information to evaluate a company’s stocks

Reference:

Q3. (Marks: 1)

If you want to earn 8 percent, approximately how much should you pay for a security which matures in one year at Rs. 1,000?

1. Rs. 1,080
2. Rs. 940
3. Rs. 920
4. Rs. 926

Correct answer: Rs. 926

Reference:

PV = FV/(1+i)

Q4. (Marks: 1)

Which of the following is determined by variance of an investment's returns?

1. Volatility of the rates of return.
2. Probability of a negative return.
3. Historic return over long periods.
4. Average value of the investment.

Reference:

Q8. Question No: 5

(Marks: 1)

Which of the following statements applies to Security Market Line (SML)?

1. Security Market Line (SML) shows the relationship between expected rate of return and required rate of return of a security.
2. Security Market Line (SML) shows the relationship between Beta and market value of a security.
3. Security Market Line (SML) shows the relationship between required rate of return and beta coefficient of a security.
4. Security Market Line (SML) shows the relationship between Market value and face value of a security.

Correct answer: Security Market Line (SML) shows the relationship between required rate of return and beta coefficient of a security.

Q6. (Marks: 1)

ABC Company will pay a dividend of Rs.2.40 per share at the end of this year. Its dividend yield is 8%. At what price is the stock selling?

1. 40
2. 35
3. 30
4. 25

Correct answer: 30

Reference:

Price per share = Annual dividends per share / dividend yield

= 2.40/ 0.08 = 30

Q7. ( Marks: 1 )

Which of the following risks is independent of capital structure of a firm?

1. Financial risk
2. Systematic risk
3. Business risk
4. Total risk

Q8. ( Marks: 1 )

Which of the following is tax deductible?

1. Dividend on preferred shares
2. Dividend on common stocks
3. Coupon payments on bonds
4. Capital gain on common stocks

Q9. ( Marks: 1 )

You are considering buying common stock in Grow On, Inc. The firm yesterday paid a dividend of $7.80. You have projected that dividends will grow at a rate of 9.0% per year indefinitely. If you want an annual return of 24.0%, what is the most you should pay for the stock now?

1. $52.00
2. $56.68
3. $32.50
4. $35.43