MGT201 Midterm Past Paper Spring 2010 Session 5

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JOIN FB GROUP FOR VU HELP · MIDTERM EXAMINATION · Spring 2010 · MGT201- Financial Management (Session - 5) · Time: 60 min Marks: 44

Q1. statements is correct for a sole proprietorship? (1 marks)

1. The sole proprietor has limited liability
2. The sole proprietor can easily dispose of their ownership position relative to a shareholder in a corporation
3. The sole proprietorship can be created more quickly than a corporation
4. The owner of a sole proprietorship faces double taxation unlike the partners in a partnership

Correct answer: The sole proprietorship can be created more quickly than a corporation

Q2. market refers to the market for relatively long-term financial instruments? (1 marks)

1. Secondary market
2. Primary market
3. Money market
4. Capital market

Correct answer: Capital market

Q3. Felton Farm Supplies, Inc., has an 8 percent return on total assets of Rs.300,000 and a net profit margin of 5 percent. What are its sales? (1 marks)

1. 750,0Rs.3, 750,000
2. Rs.48Rs.480, 000
3. Rs.30Rs.300, 000
4. Rs.1, Rs.1, 500,000

Correct answer: Rs.30Rs.300, 000

Q4. An investment proposal should be judged in whether or not it provides: (1 marks)

1. A return equal to the return require by the investor
2. A return more than required by investor
3. A return less than required by investor
4. A return equal to or more than required by investor

Correct answer: A return equal to or more than required by investor

Q5. technique through which discount rate equates the present value of the future net cash flows from an investment project with the project’s initial cash outflow is known as: (1 marks)

1. Payback period
2. Internal rate of return
3. Net present value
4. Profitability index

Correct answer: Internal rate of return

Q6. technique that is NOT considered as discounted cash flow method is: (1 marks)

1. Payback period
2. Internal rate of return
3. Net present value
4. Profitability index

Correct answer: Payback period

Q7. Why net present value is the most important criteria for selecting the project in capital budgeting? (1 marks)

1. Because it has a direct link with the shareholders dividends maximization
2. Because it has direct link with shareholders wealth maximization
3. Because it helps in quick judgment regarding the investment in real assets
4. Because we have a simple formula to calculate the cash flows

Correct answer: Because it has direct link with shareholders wealth maximization

Q8. You are selecting a project from a mix of projects, what would be your first selection in descending order to give yourself the best chance to add most to the firm value, when operating under a single-period capital-rationing constraint? (1 marks)

1. Profitability index (PI)