MST 1 (2022)

Corporate Finance and Asset management

Total Time: 40 mins Total Marks: 20 Marks

● Each section is compulsory, try to attempt all.
● The question paper has 3 sections. All sections are compulsory.
Section 1
● This section consists of Multiple Choices questions
● Answer all the questions (1 X 10= 10 Marks)
1. Capital structure is the study _______?
a) Only debt b)Only equity
c) debt and equity d) None of the above
2. Business finance is needed to _______
A) Expand a business b) grow a business c) run a business d) All of the above
3. Which one is related to planning, organizing, directing, controlling of financial activities?
a) Financial management b)financial decisions c)Investment decisions d)Capital structure

4. ____ is the decision related to composition of capital structure & also depends upon ability of the business to
generate cash.
a) Market Condition
b) Flexibility
c) Cash flow ability
d) Control
5. _____ refers to the structure of total capital funds raised by the company.
(a) Fixed capital
(b) Capital structure
(c) Capital requirements
(d) Under capitalization
6. Optimal size of firms is a factor of which of the following principles
A) Investment b) financing c)Dividend d)capital structure

7. Under the assets management decisions greater emphasis is put on the management of

a) Current assets
b) Fixed assets
c) Tangible assets
d) Intangible assets

8. Why does discount rate calculation exist?

a) As a substitute of b.y.e b)Late yield conversions c) Short hand calculations d)Several discount rates

9. Which is the best measure to calculate yield on T-bills?

a) Bond yield equivalent b) yield equivalent c) Discounted yield equivalent d)None of the above

10. Annuity is a stream of __________

a) Both inflows and outflows b) Cash withdrawn

C) Equal cash flows d) unequal cash flows
 Section 2
Short Answer Type Questions

This section carries short answer questions, answer any 2 out of 3 (2 X 2=4 Marks)
1. Pen down the principles of Corporate finance.
2. A project costs $600,000, its scrap is $40,000 after five years, and profits after depreciation and taxes over
five years are $50,000, $70,000, $60,000 and $30,000. Calculate the average rate of return on investment.
3. Write about the factors that affect capital structure decisions of a company.

Section 3
This section carries Case Study/ Numerical questions (1X 6 = 6 Marks)

1. Calculate the net present value for Proposals A and B when the discount rate is 10%. The cash flows shown
below are before depreciation and after taxes and recommend which proposal company should undertake.

Year A B
$ $
1 5,000 20,000
2 10,000 10,000
3 10,000 5,000
4 3,000 3,000
5 2,000 20,000
A B
Investment ($) 20,000 30,000
Life of Investment (years) 5 5
Scrap Value ($) 1,000 2,000

2. Calculate the Future value of ordinary annuity and annuity due given that CF- $5000, Rate of return- 8%,
and time is 5 years. (4+2 marks)