1.A cost that a firm will have to pay no matter what is called

Select one:

a.a sunk cost

b.a financing cost

c.an opportunity cost

d.an erosion cost

2.GEQ Enterprise is considering a new project. The project will require the purchase of an equipment at the price of RM300,000, and RM100,000 for additional investment in net working capital. The equipment has an 8-year life and will be depreciated straight-line to a zero book value. At the end of the project life, the equipment is expected to be sold at RM50,000. The project is expected to generate annual sales of RM445,000 and reduction in annual maintenance costs of RM130,000. The tax rate is 25 percent and the required rate of return is 10 percent. What is the annual operating cash flow of this project?

Select one:

a.RM440,625

b.RM137,500

c.RM400,000

d.RM337,500

3.When Net Present Value is equal to RM0, the discount rate is equal to the project's ___________________.

Select one:

a.internal rate of return.

b.profitability index

c.capital asset pricing model.

d.cost of capital

4.Your firm is planning to pay a 15% stock dividend and the current price of the stock is RM84. Based on the equity portion of your firm's balance sheet before the stock dividend, the common stock par value (2 million shares outstanding at RM4 par value) is RM 8,000,000, paid-in capital is RM16,000,000, retained earnings is RM30,000,000 and the total equity is RM54,000,000. Which of the following would result from payment of the stock dividend?

Select one:

a.The effect on the equity account would depend on the market's reaction to the dividend.

b.Total equity would decrease to RM43,478,261.

c.Total equity would increase to RM57,500,000.

d.Total equity would remain at RM54,000,000.

5.Husin purchased 500 shares of RTC stock on May 8. On May 16, he purchased another 200 shares and then on May 20 he purchased a final 100 shares of RTC stock. The company declared a dividend of RM0.94 a share on May 6 to holders of record on Friday, May 22. The dividend is payable on June 12. How much dividend income will Husin receive on June 12?

Select one:

a.RM752

b.RM728

c.RM658

d.RM640

6.WKW Berhad is analyzing a project that requires an initial investment of RM10,000, follows by cash inflows of RM1,000 in Year 1, RM4,000 in Year 2, and RM15,000 in Year 3. Thecost of capitalis 10%. What is the profitability index of the project?

Select one:

a.1.55

b.1.97

c.1.78

d.1.04

7.What is the NPV for the following project if itscost of capitalis 15 percent and its initial after-tax cost is RM5,000,000 and it is expected to provide after-tax operating cash inflows of RM1,800,000 in year 1, RM1,900,000 in year 2, RM1,700,000 in year 3 and RM1,300,000 in year 4?

Select one:

a.(RM137,053)

b.(RM120,800)

c.RM1,700,000

d.RM371,764

8.GEQ Enterprise is considering a new project. The project will require the purchase of an equipment at the price of RM300,000, and RM100,000 for additional investment in net working capital. The equipment has an 8-year life and will be depreciated straight-line to a zero book value. At the end of the project life, the equipment is expected to be sold at RM50,000. The project is expected to generate annual sales of RM445,000 and reduction in annual maintenance costs of RM130,000. The tax rate is 25 percent and the required rate of return is 10 percent. What is the initial cost of this project?

Select one:

a.RM337,500

b.RM137,500

c.RM400,000

d.RM440,625

9.You are contemplating a new automatic surveillance system to replace the current contract security system. It will cost RM450,000 to get the new system and additional RM30,000 to install the system. The system will be depreciated simplified straight-line to zero over the system's four-year expected life. The system is expected to be worth RM250,000 at the end of the four years. The new system will save RM150,000 per year before taxes. If the tax rate is 25 percent and the requred return is 15 percent, what is the NPV for buying the new system?

Select one:

a.RM30,557

b.RM62,500

c.RM123,750

d.RM34,038

10.Sitis Store is reviewing its financial condition. Sales are RM16 million, variable costs is RM8,000,000 and fixed costs is RM4,000,000.Interest expense is RM1,500,000.The firm's net profit after tax is RM1,250,000. What is the firm's degree of combined leverage?

Select one:

a.3.20

b.1.06

c.5.33

d.6.40

11.Today the board of directors of Kenanga Berhad passed a resolution to pay a cash dividend of RM0.42 a share next month. In relation to this dividend, today is referred to which of the following dates?

Select one:

a.Decision date

b.Payment date

c.Declaration date

d.Date-of-record

12.RNQ is considering upgrading its machine, which was purchased 5 years ago for RM150,000. RNQ anticipates that if upgraded, the maintenance cost of the machine could be reduced by RM40,000 annually. The machine would be upgraded with the new system and sold today for RM30,000, but without the upgraded system, it would be worth nothing. Determine the opportunity cost of this scenario.

Select one:

a.RM150,000

b.RM40,000

c.RM30,000

d.RM70,000