Virtual University ACC501 MCQs

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Question No: 13 ( Marks: 1 ) - Please choose one

Constant Growth Stock is a share of common stock in a company with a constant rate of dividend. ► True ► False

Question No: 14 ( Marks: 1 ) - Please choose one

Portfolio is the group of assets (stocks and bonds) held by an investor. ► True ► False

Question No: 15 ( Marks: 1 ) - Please choose one

The difference between bank cash and book cash, representing the net effect of cheques in the process of clearing is called float. ► True ► False

Question No: 16 ( Marks: 5 )

Following are given cash inflows of a project. Assume that all cash flows are received at the end of the period. Period Cash Flows 1 Rs.10,000 2 Rs.15,000 3 Rs.20,000 4 Rs.30,000 5 Rs.35,000 Calculate the future value of cash flows stream at the end of year 5 with a compound annual interest rate of 10%.

Question No: 17 ( Marks: 5 )

Write down the statements for the followings: a. NPV (Net Present Value) Rule b. IRR (Internal Rate of Return) Rule c. Payback Rule d. PI (Profitability Index) Rule e. AAR (Average Accounting Return) Rule

Question No: 18 ( Marks: 5 )

What do M&M Proposition I and Proposition II state ?

Question No: 19 ( Marks: 10 )

Mr. Jamil has Rs. 70,000 that he can deposit in savings accounts of any of three banks A, B or C for a three years period. Bank A compounds interest on annual basis; Bank B compounds interest semi-annually (twice each year); and Bank C compounds interest quarterly (four times each year). All three banks have a stated annual interest rate of 12%. 1. How much Mr. Jamil will have in his account after three years if he deposits his money in Bank A ? 2. How much He will have in his account after three years if he deposits his money in Bank B ? 3. How much He will have in his account after three years if he deposits his money in Bank C ? 4. On the basis of your findings in above parts, describe which bank should Mr. Jamil deal with and why ?

Question No: 20 ( Marks: 10 )

SNT Company presently paid a dividend of Rs.1.5 per share and has a share price of Rs.25. The dividends are expected to grow @ 15% forever. SNT Company has Rs.100 million in equity and Rs.75 million in debt in its total capital. The tax rate for the firm is 35% and the Cost of debt is 12%. Calculate the Weighted Average Cost of Capital (WACC) for SNT Company?

Question No: 21 ( Marks: 10 )

Magi Inc. specializes in toys and receives all income from sales. Quarters * 1 2 3 4 1 (next year) Sales (Rs.) 500,000 600,000 650,000 800,000 550,000 * Each quarter consists of 3 months (90 days) · Accounts Receivable: o Beginning receivables = Rs. 250,000 o Average Collection Period = 30 days · Accounts Payable: o Purchases = 50 % of next quarter’s sales o Beginning payables = Rs. 125,000 o Accounts Payable Period is 45 days · Other expenses: o Wages, taxes and other expenses are 25% of sales o Interest and dividend payments are Rs. 50,000 o A major capital expenditure of Rs. 200,000 is expected in the second quarter You are just required to calculate the Cash Collections (Receipts) and Cash Disbursements (Payments) for four Quarters.

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