FIN622 today mid term paper (09 December 2012)

Total Question     26

MCQs                      22

Question 3 Marks      3

Question 5 Marks       5

Mostly MCQs were from past Papers

Question of Mark 3:-

Question:

Projects	Beta	Standard deviation
Security X	0.8	0.4
Security Y	2	0.3

1. Which security is defensive and why?
2. Whish security has greater unsystematic risk and why?
3. Which security requires more risk premium and why?

Question:    Why calculation of common stock is difficult than bonds?  Marks

Question:          Expected rate of return on market portfolio 14%

T-bills yield 6%

Expected return (investor) 10%

Calculate Beta of stock=?

Question of 5 Marks:-

Projects	Initial investment	PV of cash flows
W	(50000)	65000
X	(100000)	120000
Y	(85000)	113000
Z	(96000)	105000

 

Question:     Interest tax shields are valuable, why don’t all taxpaying firms borrow as much as possible.

Question:

 

Projects	Initial investment	PV of cash flows
W	(50000)	65000
X	(100000)	120000
Y	(85000)	113000
Z	(96000)	105000

 

 

1. Calculate NPV.
2. Rank projects according to NPV and calculate total NPV of selected projects.