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intermediate financial management
Taxmans Fundamentals Of Financial Management 14th Edition R.P. Rustagi - Solutions
What do you mean by mutually exclusive projects? How do they differ from accept-reject projects?
What is capital budgeting? Why is it significant for a firm?[B.Com. (H), D.U., 2018]
What are the important steps in capital budgeting?
Write short notes on :(a) Opportunity cost with reference to a capital budgeting situation.(b) Conventional cash flows.(c) Allocated Overheads.(d) Sunk Cost
In Capital Budgeting, Sunk cost is excluded because it is :(a) of small amount,(b) not incremental,(c) not reversible,(d) All of the above.
A proposal is not a Capital Budgeting proposal if it :(a) is related to Fixed Assets,(b) brings long-term benefits,(c) brings short-term benefits only,(d) has very large investment.
Which of the following is not included in incremental cash flows ?(a) Opportunity Costs,(b) Sunk Costs,(c) Change in Working Capital,(d) Inflation effect.
Evaluation of Capital Budgeting Proposals is based on Cash Flows because :(a) Cash Flows are easy to calculate,(b) Cash Flows are suggested by SEBI,(c) Cash is more important than profit,(d) None of the above.
Which of the following is not applied in capital budgeting?(a) Cash flows be calculated in incremental terms,(b) All costs and benefits are measured on cash basis,(c) All accrued costs and revenues be incorporated,(d) All benefits are measured on after-tax basis.
Which of the following is not true for capital budgeting ?(a) Sunk costs are ignored,(b) Opportunity costs are excluded,(c) Incremental cash flows are considered,(d) Relevant cash flows are considered.
Depreciation is incorporated in cash flows because it :(a) Is unavoidable cost,(b) Is a cash flow,(c) Reduces Tax liability,(d) Involves an outflow.
Which of the following is not followed in capital budgeting?(a) Cash flows Principle,(b) Interest Exclusion Principle,(c) Accrual Principle,(d) Post-tax Principle.
Which of the following is not true with reference to capital budgeting ?(a) Capital budgeting is related to asset replacement decisions,(b) Cost of capital is equal to minimum required rate of return,(c) Existing investment in a project is not treated as sunk cost,(d) Timing of cash flows is
Cash Inflows from a project include :(a) Tax Shield of Depreciation,(b) After-tax Operating Profits,(c) Raising of Funds,(d) Both (a) and (b).
Which of the following does not effect cash flows from a proposal :(a) Salvage Value,(b) Depreciation Amount,(c) Tax Rate Change,(d) Method of Project Financing.
Capital Budgeting Decisions are based on :(a) Incremental Profit,(b) Incremental Cash Flows,(c) Incremental Assets,(d) Incremental Capital.
Which of the following is not a relevant cost in Capital Budgeting ?(a) Sunk Cost,(b) Opportunity Cost,(c) Allocated Overheads,(d) Both (a) and (c) above.
A sound Capital Budgeting technique is based on :(a) Cash Flows,(b) Accounting Profit,(c) Interest Rate on Borrowings,(d) Last Dividend Paid.
Which of the following is not a capital budgeting decision?(a) Expansion Programme,(b) Merger,(c) Replacement of an Asset,(d) Inventory Level.
Which of the following is not incorporated in Capital Budgeting ?(a) Tax-Effect,(b) Time Value of Money,(c) Required Rate of Return,(d) Rate of Cash Discount.
Capital Budgeting Decisions are :(a) Reversible,(b) Irreversible.(c) Unimportant,(d) All of the above.
Which of the following is not used in Capital Budgeting ?(a) Time Value of Money,(b) Sensitivity Analysis,(c) Net Assets Method,(d) Cash Flows.
Capital Budgeting deals with :(a) Long-term Decisions,(b) Short-term Decisions,(c) Both (a) and (b),(d) Neither (a) nor (b).
Capital Budgeting is a part of :(a) Investment Decision,(b) Working Capital Management,(c) Marketing Management,(d) Capital Structure.
True or False Cash flows and accounting profits are different.
True or False Allocated overhead costs are not relevant for capital budgeting.
True or False The opportunity cost of an input is always considered, in capital budgeting.
True or False Sunk cost is a relevant cost in capital budgeting.
True or False Cash flows are the appropriate measure of costs and benefits from an investment proposal.
True or False Future expected profits from an investments are taken as returns from the investment for capital budgeting.
True or False Correct capital budgeting decisions can be taken by comparing the cost with future benefits.
True or False Capital budgeting and capital rationing are alternative to each other.
True or False In mutually exclusive decision situation, the firm can accept all feasible proposals.
True or False An expansion decision is not a capital budgeting decision.
True or False There is a time element involved in capital budgeting.
True or False Capital budgeting decisions do not affect the future profitability of the firm.
True or False Capital budgeting decisions are reversible in nature.
True or False Capital budgeting decisions are long term decisions.
True or False Investment decisions and capital budgeting are same.
‘A rupee of today is not equal to the rupee of tomorrow’.Explain.P2.1 What is the present value of cash flows of 750 per year for ever (a) at an interest rate of 8% and (b) at an interest rate of 10%?P2.2 Find out present value of the following :(a) 1,500 receivables in 7 years at a
“TVM does not exist in the absence of inflation.” Do you agree? Give reasons.
Why is the consideration of time important in financial decision making? How can time be adjusted?[B. Com. (H.), D.U., 2011, 2015]
What effect would a decrease in interest rate or an increase in holding period of a deposit have on its future value? Why?
“Potential analyst should take into account the time value of money”. Explain with suitable examples.[B. Com. (H.), D.U., 2014]
“Incorporation of time value of money helps financial manager is taking better decisions”. Illustrate.
“Cash flows occurring at different point of time are not comparable”. Explain the reason and how can they be made comparable. [B. Com. (H.), D.U., 2013]
Explain how the discounting and compounding techniques help in sinking funds creation and capital recovery.
Explain the discounting technique of adjusting for time value of money.
What is the relevance of time value of money in financial decision making? [B. Com. (H.), D.U., 2017, 2018]
“Individuals do have a time preference for money”. State the reason for such preference.
What is meant by the phrase “present value of a future amount”? How are the present values and future values calculated?
Write short notes on :(a) Effective rate of interest.(b) Present value of an Annuity Due.(c) Present value of a Growing Annuity.
Future Value of One Rupee invested today is :(a) More than One Rupee(b) Equal to One Rupee(c) Equal to Present Value(d) Less than One Rupee.
Present Value of a Rupee receivable after one year is :(a) More than One Rupee(b) Less than One Rupee(c) Equal to One Rupee(d) Equal to Future Value.
Present Value can be calculated with the help of formula :(a) (1 + r)n(b) 1/(1 + r)n(c) (1 + r)n/1(d) None of the above.
Which of the following is the highest value?(a) Present Value of 1,000 receivable after one year(b) Total Value of 1,000 deposited in Savings Bank A/c for one year(c) 1,001(d) 1,000 deposited in Fixed Deposit @ 5.50% for one year.
A student deposits some amount daily to accumulate 5,000 to pay his tuition fees after one year. Which of the following compounding methods of interest should be opted by him :(a) Compounded Quarterly(b) Compounded Daily(c) Compounded Half-yearly(d) Compounded Annually.
If a student is awarded scholarship receivable over next 12 months, what calculation he should use to find out the worth of scholarship today?(a) Present Value of an Amount(b) Future Value of an Amount(c) Present Value of an Annuity(d) Future Value of an Annuity
Concept of Future Value and Present Value are :(a) Proportionately related(b) Inversely related(c) Directly related(d) Not related
Future Value of an annuity is :(a) Equal to Annuity Amount(b) Less than Annuity Amount(c) More than total of Annuity Amount(d) None of the above.
In a Loan Repayment Schedule, the interest amount paid each period :(a) Remained Constant(b) Increases(c) Decreases(d) None of the above.
If Time is ‘n’, Rate of Interest is ‘k’ then (1 + k)n may be called :(a) Present Value Factor(b) Compound Value Factor(c) Compound Value Annuity Factor(d) None of the above.
If n = 1 and Rate of interest > zero, which of the following interest factor is equal to one :(a) Present Value Factor(b) Compound Value Factor(c) Present Value Annuity Factor(d) None of the above.
An investor wants to increase the Present Value. The rate of discount applied for should be :(a) Increased(b) Decreased(c) Any of (a) and (b)(d) None of the above.
Which of the following is called an annuity :(a) Lump Sum after few years(b) A Series of Equal and Regular Amounts(c) A Series of Unequal Amounts(d) A Series of Equal and Irregular Amounts.
Time Value of Money is an important concept in finance because it takes into account :(a) Risk(b) Time(c) Compound Interest(d) All of the above.
If the Interest Rate is greater than zero, which of the following series you would prefer to receive :Year 1 Year 2 Year 3 Year 4(a) 500 400 300 200(b) 200 300 400 500(c) 350 350 350 350(d) Any of the above as all are equal in total amount.
Future Value and Present Value, both are based on :(a) Number of Time periods(b) Interest Rate(c) Both (a) and (b)(d) None of the above.
A series of Constant Cash flows occurring at regular intervals forever is known as :(a) Growing Annuity(b) Perpetuity(c) Growing Perpetuity(d) Annuity
Effective Interest Rate is a factor of :(a) Compounding Frequency(b) Basic Rate of Interest(c) Both (a) and (b)(d) None of the above.
‘Rule of 72’ is a short-cut method to estimate the :(a) Present Values(b) Compounding Effect(c) Both (a) & (b)(d) None of the above.
Future cash flows are converted to present values, so that these can be :(a) Aggregated(b) Compared(c) Used in Decision-making(d) All of the above.
Present Value of a future cash flow would decrease if :(a) Discount Rate is reduced(b) Discount Rate is increased(c) Time Period is decreased(d) All of the above.
Equal annual amounts occurring in the beginning of certain years are known as :(a) Annuity(b) Perpetuity(c) Annuity Due(d) Deferred Payments.
Equal Annual Cash Flows occurring at the end of each year for certain period are known as :(a) Annuity(b) Perpetuity(c) Annuity Due(d) Deferred Payments.
The adjustment for time value of money is made through :(a) Interest Rate(b) Inflation Rate(c) Growth Rate(d) None of the above.
Discounting technique is used to find out :(a) Terminal Value(b) Compounded Value(c) Present Value(d) Future Value.
True or False Rate of interest and time period, both are required to find out the present/future value.
True or False “A bird in hand is worth two in the bush” correctly presents the concept of time value of money.
True or False The number of cashflows in a perpetuity is known.
True or False An annuity is an infinite series of cash flows.
True or False Implicit rate of interest can be found with the help of compounding technique.
True or False PVF(r,n) and PVAF(r,n) are same.
True or False The discounting techniques help in finding out the future value of a present amount.
True or False Present values and future values can be calculated only with the help of relevant mathematical tables.
True or False The present value of a future amount remains same irrespective of the time of occurrence.
True or False Cash flows occurring at different point of time are comparable in absolute terms.
True or False Compounding and discounting techniques are same.
True or False Time value of money is invariably considered in financial decision making.
True or False Interest factor helps in incorporating the time value of money in financial analysis.
True or False Investors do not have preference for present money
True or False Money has no time value
Discuss the main decisions which are taken in financial management.
Profit maximisation is a better criterion than wealth maximisation. Do you agree? Explain[B.Com. (H), D.U., 2017]
What do you mean by financial management? How is it different from financial accounting?[B.Com. (H), D.U., 2015]
Why is it inappropriate to seek profit maximization as the goal of financial decision making? How would you justify the adoption of wealth maximization as an apt substitute for it? [B.Com. (H), D.U., 2015]
“Wealth Maximization is a better criterion than profit maximization.” Do you agree ? Explain.[B.Com. (H), D.U., 2011, 2016]
Financial Accounting and Financial Management are complementary in nature. Do you agree? Explain.[B.Com. (H), D.U., 2009]
What are the basic financial decisions? How do they involve risk-return trade off? [B.Com. (H), D.U., 2008]
Explain the concept of ‘profit maximization’ and ‘wealth maximization’. Which of these is better operational guide for finance manager? [B.Com. (H), D.U., 2007]
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