Financial Management - Study Mode

[#356] Process in which managers of company identify projects to add value is classified as
Correct Answer

(A) capital budgeting

Explanation

Solution: Process in which managers of company identify projects to add value is classified as capital budgeting. Capital budgeting is the process a business undertakes to evaluate potential major projects or investments.

[#357] A discount rate which equals to present value of TV to project cost present value is classified as
Correct Answer

(B) modified internal rate of return

Explanation

Solution: A discount rate which equals to present value of TV to project cost present value is classified as modified internal rate of return. The internal rate of return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.

[#358] An uncovered cost at start of year is Rs 300, full cash flow during recovery year is Rs 650 and prior years to full recovery is 4 then payback would be
Correct Answer

(D) 4.46 years

Explanation

Solution: Upto 4 years full cost recovered, only left portion is Rs 300 Cash flow during current year = Rs 650 So 300 recovered with in period of 300/650 = 0.4615 Than payback would be = 4 + 0.4615 = 4.46 years

[#359] If coupon rate is less than going rate of interest then bond will be sold
Correct Answer

(B) more than its par value

Explanation

Solution: If coupon rate is less than going rate of interest then bond will be sold more than its par value. Most bonds have fixed coupon rates, meaning that no matter what the national interest rate may be and regardless of marker fluctuation the annual coupon payments remain static.

[#360] Type of provision which allows an orderly retirement of an issued bond which is classified as
Correct Answer

(D) sinking fund provision

Explanation

Solution: Type of provision which allows an orderly retirement of an issued bond which is classified as sinking fund provision. A sinking fund is a fund established by an economic entity by setting aside revenue over a period of time to fund a future capital expense, or repayment of a long-term debt.