Multiple Choice Question on STRATEGIC FINANCIAL MANAGEMENT

- A Ltd. has an EPS of ₹3 last year and it paid out 60% of its earnings as dividends that year. This growth rate in earnings and dividends in the long term is expected to be 6%. If the required rate of return on equity for Ashrin Ltd. is 14%. Calculate the P/E ratio of A Ltd.
- 7.50
- 7.65
- 7.85
**7.95**

- The current spot rate for the US$ is ₹50. The expected inflation rate is 6 per cent in India and 2.5 per cent in the US. What will be the expected spot rate of the US$ a year hence?
**₹51.71**- ₹50.71
- ₹57.01
- ₹52.71

- DEF Ltd. placed ₹52 Crores in overnight call with a foreign bank for a day in overnight call. The call ruled at 5.65% p.a. What is the amount it would receive from the foreign bank the next day?
- ₹52,00,70,493
**₹52,00,80,493**- ₹52,00,80,593
- ₹52,00,80,693

- The rates available in the Kolkata market are: ₹/$ Spot 46.75/78; £/$ 0.5285/86. If an Indian Importer requires pounds, calculate the rate quoted to him?
**(A) ₹88.51/£**- (B) ₹85.51/£
- (C) ₹86.51/£
- (D) ₹87.51/£

- A Ltd., an export customer who relied on the inter bank rate of ₹/$ 46.50/10 requested his banker to purchase a bill for USD 80,000. Calculate the rate to be quoted to A Ltd., if the banker wants a margin of 0.08%.
- (A) ₹45.45
- (B) ₹44.44
**(C) ₹46.46**- (D) ₹47.47

- ……………………..estimate the difference between the required rate of return and the growth rate.
- Retention ratio

- Leverage ratio

- Payout Ratio

**Dividend yield ratio**

- Two Firms P Ltd and M Ltd are similar in all respects expect that M Ltd uses ₹10,00,000 debt in its capital structure. If the corporate tax rate for these firms is 40%, Calculate the value of M Ltd exceeds that of P Ltd?
- (A
**) ₹4,00,000** - (B) ₹4,40,000
- (C) ₹4,04,000
- (D) ₹4,00,400

- (A

- Annual Cost Saving ₹4,00,000; Useful life 4 years; Cost of the Project ₹11,42,000. The Payback period would be-
- 2 years 8 months

**2 years 11 months**

- 3 years

- 1 year 10 months

- There are 4 investments

X | Y | Z | U | |

The standard deviation is | 37,947 | 44,497 | 42,163 | 41,997 |

Expected Net Present Value(₹) | 90,000 | 1,06,000 | 1,00,000 | 90,000 |

- Which investment has the highest risk?
- X

- Y

- X

**U**

- The spot rate of the US dollar is ₹65.00/USD and the four month forward rate is 65.90/USD. The annualized premium is
**4.2%**- 5.1%
- 6.0%
- 6.4%

- A stock is currently sells at ₹350. The put option to sell the stock sells at ₹380 with a premium of ₹20. The time value of option will be
- ₹10
- ₹-10
- ₹20
**₹0**

- An investor owns a stock portfolio equally invested in a risk free asset and two stocks. If one of the stocks has a beta of 0.75 and the portfolio is as risky as the market, the beta of the stock in portfolio is
- 2.12
**2.25**- 2.56
- 2.89

- You are given the following information: required rate of return on risk free security 7%; required rate of return on market portfolio of investment 12%; beta of the firm 1.7. The cost of equity capital as per CAPM approach is
**16.3%**- 18.0%
- 18.60%
- 19%

- The following statement is true in the context of rupee-dollar exchange rate with ri denoting interest rate in India and ru denoting interest rate in the US.
- Rupee will be at forward discount if ri > ru
**Rupee will be at forward premium if ru > ri**- Rupee will be forward premium if ri > ru
- Rupee will be at par with dollar if ri = ru.

- The following is not a systematic risk.
- Market Risk
- Interest Rate Risk
**Business Risk**- Purchasing Power Risk

- The following statement is true: (If ‘r’ denotes the correlation coefficient)
- r = +1 implies full diversification of securities in a portfolio
**r = -1 implies full diversification of securities in a portfolio**- r = 0 implies an ideal situation of zero risk
- ‘r’ is independent of diversification. Nothing can be inferred based on r

- The following is not a feature of Capital Market Line:
- There is no unsystematic risk
- The individual portfolio exactly replicates market portfolio in terms of risk and reward
- Estimates portfolio return based on market return
**Diversification can minimize the individual portfolio risk**

- A project has a 10% discounted pay back of 2 years with annual after tax cash inflows commencing from year end 2 to 4 of ₹400 lacs. How much would have been the initial cash outlay which was fully made at the beginning of year 1?
- ₹400 lacs
**₹452 lacs**- ₹633.80 lacs
- ₹497.20 lacs

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