1 Which of the following is not a form of long term finance?

a. Leasing medium to longterm

b. Factoring can offer a short term also long term

c. Franchising

d. Hire Purchase medium to longterm

2 In capital budgeting ______ projects are preferred.

a. Higher payback period

b. Lower payback period

c. Higher cost

d. Lower cost

3 You are supplied with the following information regarding Top Limited. (Net Operating Income R12 000 000) (WACC 8%) Using the Net Income Approach, what is the value of Top Limited?

a. R96 000 000

b. R15 000 000

c. R150 000 000

d. R100 000 000

4 A firm can acquire a target firm by:

a. Paying the managers of the target firm

b. Purchasing the assets of the target firm

c. Purchasing the shares of the target firm

d. Purchasing the liabilities of the target firm

5 Excessive use of debt according to the Miller-Modigliani theory of capital structure with taxes results in:

a. Financial Losses

b. Financial Profits

c. Financial Risk

d. Financial Distress

6 The length of time within which the investment made for the project will be recovered by the cash flows from the project is known as:

a. Span of Return

b. Period of Return

c. Net Present Value

d. Payback Period

7 A debenture that is covered by certain assets of a company are known as:

a. Redeemable debenture

b. Secured debenture

c. Convertible debenture

d. Participating debenture

8 Under condition of capital budgeting what is considered to be the limiting factor?

a. Finance

b. Investment Opportunities

c. Budgets

d. Ideas

9 In theory a successful merger transaction is one that:

a. Increases financial leverage

b. Increases the market price of the acquirers stock over what it would have been without the acquisition

c. Avoids the use of additional leverage to acquire a firm

d. Enables the acquirer to diversify its asset base

10 The following information relates to Project X Year Cash Flow (0-40 000) (1-32 000) (2-24 000 3-16 000) The firms cost of capital is 14%.

Using the same information above, what is the Net Present Value of Project X?

a. R18 800

b. R17 300

c. R16 000

d. R 13 900