differentiate stable dividend policy and the constant dividend policy? 5 marks
what are gear and un gear beta describe the difference? 3
Break-even analysis and sensitive analysis.
Q suppose we have two stocks i.e. stock A and stock B.stock A has beta of 1.5 and stock B has a beta of 0.75.The expected rate of return on average stock is 13% and the risk free rate of return is 7%.By how much does the required rate on the riskier stock exceeds the required return on the less risky stock. (5)
Q Why weighted average cost of capital of a levered firm is lesser than that of an Un-levered firm? Explain briefly? (3)
yeh 2 subjective quiez hain
Q 1.Why the weighted average cost of capital of levered firm is lesser than the un-levered firm? Briefly describe. Marks 3
Q 2.What is the difference between systematic and unsystematic risk? Marks 3
Q 3.Compare and contrast the Stable Dividend per share policy and Constant dividend payout policy. Marks 5
Q 4.How does the probability analysis evaluate the financial feasibility of a project? Marks 5
Q: In 2 years you are to receive $10,000. If the interest rate were to suddenly decrease, the present value of that future amount to you would __________.
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| Correct Answer: | rise |
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As the interest rate falls, this increases the value today. Thus, the PV of $10,000 when rates fall from 8% to 6% will increase from $8,573 to $8,900 for example.
Question No: 29 (Marks: 3)
How stable dividend policy could increase the marketability of a firm's shares?
Stable dividend per share: look favorably by investors and implies low risk firm. it increases the marketability of firm's share. Cash flow can be planned as dividend amount can be ascertained with accuracy (aid in financial planning)
Question No: 30 (Marks: 3)
Differentiate between the single period capital rationing and multi-period capital rationing.
Single period capital rationing
It is a situation where the company has limited amounts of funds in one investment period only. After that period, the company can access funds from various sources, e.g. issuing shares, borrowing from banks or issuing bonds.
Multi-period capital rationing.
When capital is in limited availability in more than one period and selection of projects cannot be made by ranking projects according to PI, this situation is known as multi-period capital rationing.
Question No: 31 (Marks: 5)
In the year ending January 2008, Wal-Mart paid out Rs.1,326 million as debt interest. How much more tax would Wal-Mart have paid if the firm had been entirely financed by equity? What would be the present value of Wal-Mart's interest tax shield if the company planned to keep its borrowing permanently at the 2008 level? Assume an interest rate of 8% and a corporate tax rate of 35%.
More tax in case of entirely finance by equity
1326 million *35/100 =464 million
Present value of interest = 1326 million /1 .08
=1218.75 million
Question No: 32 ( Marks: 5 )
Suppose you are a capital budgeting manager of a company. For current year you have a total capital budget of Rs.6,000,000. Following are given the projects available for investment:
| Projects | Initial Investment (millions) | Annual Cash flows (millions) | Project Life (years) | Discount Rates |
| A | 3 | 1 | 5 | 10% |
| B | 3 | 1.5 | 3 | 8% |
| C | 3 | 1 | 6 | 12% |
Requirement:-
Which project(s) should be selected for investment with in the given budget?
On Thu, May 19, 2011 at 10:29 PM, Sohail Tariq <mc080204328@vu.edu.pk> wrote:plz ja --Dear fellows koi hai jis ne FIN622 ka paper attempt kia ho. Pls share it
--![Image]()
Sohail Tariq
MBA (Finance)
LAHORE
plz kasi ka 402 cost accounting ka current paper ho gaha ho to send karo plzzzzzzzzzz
--
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