Financial Management

✅ The correct answer is C.
Economic value added is the incremental difference in the rate of return over a company’s cost of capital. In essence, it is the value generated from funds invested in a business. If the economic value added measurement turns out to be negative, this means that management is destroying the value of the funds invested in a business

✅ The correct answer is B.
Federal Reserve policy and federal surplus or deficit of budget affect the cost of money. The Federal Reserve System is the central banking system of the United States of America. The Federal Open Market Committee (FOMC) sets monetary policy.

✅ The correct answer is A.
While calculating the weighted average cost of capital, market value weights are preferred because Book value weights are historical in nature.

✅ The correct answer is B.
Bond yield = Cost of common stock – Bond risk premium
= 14% – 9% = 5.00%

✅ The correct answer is B.
Dividends paid to common shareholders and divided by common shares outstanding are equals to dividends per share. Dividend per share (DPS) is the sum of declared dividends issued by a company for every ordinary share outstanding. The figure is calculated by dividing the total dividends paid out by a business, including interim dividends, over a period of time by the number of outstanding ordinary shares issued.

✅ The correct answer is D.
Double declining balance method and sum of years digits are included in accelerated methods.

✅ The correct answer is D.
In capital asset pricing model, an amount of risk that stock contributes to portfolio of market is classified as beta coefficient. Beta coefficient is a measure of sensitivity of a company’s stock price to movement in the broad market index. It is an indicator of a stock’s systematic risk which is the undiversifiable risk inherent in the whole financial system. Beta coefficient is an important input in the capital asset pricing model (CAPM)

✅ The correct answer is A.
Cash Flow per Share = Net Income / Shares Outstanding
= 313650000 / 55000000 = Rs. 5.70

✅ The correct answer is D.
Present value of future cash flows is divided by an initial cost of project to calculate profitability index.

✅ The correct answer is A.
If market interest rates are expected to rise, you would expect bond prices to fall more than stock prices. The prevailing rate of interest offered on cash deposits, determined by demand and supply of deposits and based on the duration (the longer the duration, the higher the rate) and amount (the higher the amount, the higher the rate) of deposits.