# STRATEGIC FINANCIAL MANAGEMENT MCQ 2

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
• 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
• 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
• 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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