vu fin622 Final Term - Quiz No.14
vu fin622 Corporate Finance Quiz
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Question 2: Which of the following is a proposition of Miller and Modigliani theory of Capital structure?
Value of a firm is independent of its capital structure
Value of a firm is independent of its level of debt
Value of a firm is dependent of its cost of capital
Value of a firm is independent on its level of equity finances
Question 3: What will be the effect of reduction in the cost of capital on the accounting breakeven level of revenues?
It raises the break-even level.
It reduces the break-even level.
It has no effect on the break-even level.
This cannot be determined without knowing the length of the investment horizon.
Question 4: A competing firm has made a hostile offer for your corporation. You have invited a second firm to make a friendly counter-bid to thwart the unwelcome hostile offer from the original bidding firm. The second firm is known as a (an) __________.
White knight
Entrenchment firm
Pure-play firm
Counter-offer firm
Question 5: A Levered firm has a lower weighted average cost of capital as compare to an Un-levered firm because of:
Interest tax shield
Low level of financial risk
Low level of business risk
Low level of systematic risk
Question 6: Which of the following statement is CORRECT regarding residual dividend policy?
Shareholders are paid dividend from capital
Dividend are paid after meeting all the financial needs of the firm
The management sets a fixed payout ratio
Shareholders are paid fixed dividend every year
Question 7: If two projects are independent, that means that __________.
Selection of one precludes selection of the other.
You should analyze the projects independently.
Both Selection of one precludes selection of the other. and You should analyze the projects independently.
None of the given options
Question 9: Which of the following is a major limitation of an income based method of share valuation?
Future growth assumptions
Estimation of future cash flows
Future cash flow valuation
Future cash flow discounting
Question 10: Suppose you wish to set aside Rs.2,000 at the beginning of each of the next 10 years (the first Rs.2,000 deposit would be made now) in an account paying 12 percent compounded annually. Approximately how much will you accumulate at the end of 10 years?
Rs.22,863
Rs.35,097
Rs.39,310
Rs.25,151
