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Corporate Finance - Corporate Finance Section 1 Online Exam Quiz

Important questions about Corporate Finance - Corporate Finance Section 1. Corporate Finance - Corporate Finance Section 1 MCQ questions with answers. Corporate Finance - Corporate Finance Section 1 exam questions and answers for students and interviews.

1. Which of the following is the most appropriate definition of corporate governance?

Options

A : A system of defined roles for management and the majority shareholders.

B : A system of checks and balances to minimize the conflicting interests among shareowners.

C : A system of internal controls and procedures by which individual companies are managed.

D :

2. Analyst 1: Corporate governance is the system of internal controls and procedures by which individual companies are managed. Analyst 2 : Corporate governance provides a framework that defines the rights, roles and responsibilities of various groups within an organization. Which analyst’s statement is most likely correct?

Options

A : Analyst 1.

B : Analyst 2.

C : Both.

D :

3. Which of the following is least likely a common interest of shareholders and creditors?

Options

A : High profits.

B : High return on invested capital.

C : Dividends.

D :

4. Which of the following scenarios is least likely to create a conflict of interest between shareholders and management?

Options

A : A company's decision to venture into new markets.

B : A takeover bid from a rival firm.

C : A proposal to redraft the employee bonus structure.

D :

5. Which of the following is not a function of the board of directors?

Options

A : To protect shareholder interests and provide strategic direction.

B : To protect the interest of management in front of shareholders.

C : To monitor company and management performance.

D :

46. The project has the following annual cash flows:

Options

A : 2.8.

B : 3.1.

C : 3.5

D :

47. A project investment of $100 generates after-tax cash flows of $50 in Year 1, $60 in Year 2, $120 in Year 3 and $150 in Year 4. The required rate of return is 15 percent. The net present value is closest to:

Options

A : $153.51.

B : $158.33.

C : $168.52.

D :

48. A project manager is working on a complicated large-scale project for a company that will require multiple investments over time while giving cashinflows in some years over a period of four years. He develops the following cash flow schedule for his project:

Options

A : 18%.

B : 16%.

C : 13%.

D :

49. Given below are the cash flows for a capital project. The required rate of return is 10 percent.

Options

A : 1.01 years longer than the payback period.

B : 0.81 years longer than the payback period.

C : 1.21 years longer than the payback period.

D :

50. A project has the following annual cash flows:

Options

A : 7.5%.

B : 15.5%.

C : 19.5%.

D :

51. A capital investment of 90, 000 is expected to generate an after – tax cash flow of 50,000 one year from today and a cash flow of $55,000 two years from today. The cost of capital is 12 percent. The internal rate of return is closest to:

Options

A : 7.89 percent.

B : 13.45 percent.

C : 10.74 percent.

D :

52. A capital project with a net present value (NPV) of €14.02 has the following cash flows in euros:

Options

A : 10%.

B : 12%.

C : 16%.

D :

53. An analyst determines the following cash flows for a capital project:

Options

A : $1.0.

B : $1.5.

C : $3.5.

D :

54. Given below are the cash flows for a capital project.

Options

A : Option A in the above table.

B : Option B in the above table.

C : Option C in the above table.

D :

55. A project requires an initial outlay of $75,000. It is expected to result in positive cash flows of $20,000 for the first two years. Projections for the third and fourth year are $36,000 and $38,000 respectively. Given that the discount rate is 9%, the discounted payback for the project is closest to:

Options

A : 2.6 years.

B : 3.0 years.

C : 3.4 years.

D :

57. A perpetual after-tax cash flow stream of $2,000 is created by an investment of $15,000. The required rate of return is 8 percent. The investment’s profitability index is closest to:

Options

A : 1.50.

B : 1.67.

C : 1.25

D :

58. Digital Design Corporation is considering an investment of £400 million with expected after-tax cash inflows of £100 million per year for five years and an additional after-tax salvage value of £50 million in Year 5. The required rate of return is 7.5 percent. What is the investment’s PI?

Options

A : 0.8.

B : 1.2.

C : 1.1.

D :

59. At which point the net present value profiles of two mutually exclusive projects with normal cash flows are most likely to intersect the horizontal axis?

Options

A : Crossover rate for the projects.

B : Internal rates of return of the projects.

C : The company’s weighted average cost of capital (WACC).

D :

60. Alpha Corporation is considering investing €500 million with expected aftertax cash inflows of €110 million per year for six consecutive years. The required rate of return is 8 percent. The project’s NPV and IRR are closest to:

Options

A : Option A in the above table.

B : Option B in the above table.

C : Option C in the above table.

D :

61. While developing the net present value (NPV) profiles for two investment projects, the analyst notes the only difference between the two projects is that Project Alpha is expected to receive larger cash flows early in the life of the project, while Project Beta is expected to receive larger cash flows late in the life of the project. The sensitivities of the projects’ NPVs to changes in the discount rate is best described as:

Options

A : equal for the two projects.

B : lower for Project Alpha than for Project Beta.

C : greater for Project Alpha than for Project Beta.

D :

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