Financial Management

✅ The correct answer is A.
Payback period in which an expected cash flows are discounted with help of project cost of capital is classified as discounted payback period.

✅ The correct answer is C.
Common stock is a form of corporate equity ownership, a type of security.

✅ The correct answer is C.
Bonds that have high liquidity premium are usually have less frequently traded. A bond is a fixed income instrument that represents a loan made by an investor to a borrower (typically corporate or governmental). A bond could be thought of as an I.O.U. between the lender and borrower that includes the details of the loan and its payments.

✅ The correct answer is B.
A curve which shows attitude towards risk just way reflected in return trade-off function is classified as indifference curve. An indifference curve is a graph that shows a combination of two goods that give a consumer equal satisfaction and utility, thereby making the consumer indifferent.

✅ The correct answer is A.
Value of expected gain = Expected final stock price – Original investment
= Rs. 85 – Rs. 70 = Rs. 15.00

✅ The correct answer is B.
In capital budgeting, positive net present value results in positive economic value added. Capital budgeting is the process a business undertakes to evaluate potential major projects or investments.

✅ The correct answer is A.
Modified rate of return and modified internal rate of return with exceed cost of capital if net present value is positive. The modified internal rate of return is a financial measure of an investment’s attractiveness. It is used in capital budgeting to rank alternative investments of equal size. As the name implies, MIRR is a modification of the internal rate of return and as such aims to resolve some problems with the IRR.

✅ The correct answer is C.
A model for optimizing the selection of securities is the Markowitz model. Harry Markowitz model (HM model), also known as Mean-Variance Model because it is based on the expected returns (mean) and the standard deviation (variance) of different portfolios, helps to make the most efficient selection by analyzing various portfolios of the given assets.

✅ The correct answer is D.
Development of benchmarks, Window dressing and Interpretation of results are the problems encountered in financial statement analysis.

✅ The correct answer is C.
Free cash flow = Operating profit after tax – Net investment in operating capital
= 8000 – 5000 = Rs. 3000.