Polls for the course: FAC534: Advanced Corporate Finance

Title Total Questions Anonymous

 Poll 1 1 question No

What are the financial characteristics of doing business in corporate form? Ans. Multiple sources
of finance are available ( Single Choice)

Answer 1: YES

Answer 2: NO

Answer 3: CAN'T SAY

 Poll 2 1 question No

1. What are the financial characteristics of doing business in corporate form? Ans. Valuation
becomes easier? ( Single Choice)

Answer 1: YES

Answer 2: NO

Answer 3: CAN'T SAY

 Poll 3 1 question No

1. What are the financial characteristics of doing business in corporate form? Ans. Transparency
in financial reports? ( Single Choice)

Answer 1: YES

Answer 2: NO

Answer 3: CAN'T SAY

 Title Total Questions Anonymous

 Poll 4 1 question No

1. What are the financial characteristics of doing business in corporate form? Ans. Profits can be
as large as possible (with constraints) ( Single Choice)

Answer 1: YES

Answer 2: NO

Answer 3: CAN'T SAY

 Poll 5 1 question No

1. How can principal-agent relationship problems be minimized? Ans. Pay managers handsome
salary, perquisites, benefits ( Single Choice)

Answer 1: YES

Answer 2: NO

Answer 3: CAN'T SAY

 Poll 6 1 question No

1. How can principal-agent relationship problems be minimized? Ans. Shareholder activism should
be encouraged ( Single Choice)

Answer 1: YES

Answer 2: NO

Answer 3: CAN'T SAY

 Title Total Questions Anonymous

 Poll 7 1 question No Edit 

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1. How can principal-agent relationship problems be minimized? Ans. India should have laws akin
to Sarbanes-Oxley Act of USA ( Single Choice)

Answer 1: YES

Answer 2: NO

Answer 3: CAN'T SAY

 Poll 8 1 question No Edit 

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1. How can principal-agent relationship problems be minimized? Ans. Profits can be as large as
possible (with constraints) ( Single Choice)

Answer 1: YES

Answer 2: NO

Answer 3: CAN'T SAY

 Poll 9 1 question No Edit 

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1. Why book value does not equal market value? ( Single Choice)
 Title Total Questions Anonymous

Answer 1: Shareholders calculate share value correctly and separately

Answer 2: Shareholders’ perception about future performance of the company is different

Answer 3: Market does not understand fair value

Answer 4: Balance sheet is always manipulated

 Poll 10 1 question No Edit 

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1. Why net operating income does not correspond to net operating cash earned, even if we ignore
non-cash expenses? ( Single Choice)

Answer 1: Mismatch between cash and accrued transactions

Answer 2: Cash receipts are always earlier than cash payments

Answer 3: Cash payments are always earlier than cash receipts

Answer 4: Inventory does not generate cash

 Poll 11 1 question No

1. Does stock market contribute to enterprise value? ( Single Choice)

Answer 1: Yes, market value of equity itself is enterprise value

Answer 2: Yes, market determines enterprise value

Answer 3: No, market gives only a reference value

Answer 4: No, market has no role in determining enterprise value

 Title Total Questions Anonymous

 Poll 12 1 question No Edit 

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1. Why companies voluntarily delist? ( Single Choice)

Answer 1: Shareholder value will increase

Answer 2: Market capitalization will increase

Answer 3: Brand value will increase

Answer 4: Fear of hostile takeover

 Poll 13 1 question No Edit 

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1. 1. ARR has many defects. Is it very relevant for a modern finance manager? ( Single Choice)

Answer 1: Yes, if the project is of short duration, say one year or less.

Answer 2: No, it only considers accounting profit, not cash flow

 Poll 14 1 question No Edit 

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1. 2. Is Simple PBP better tool over ARR? ( Single Choice)

Answer 1: Yes, it considers cash flow instead of accounting profit

Answer 2: No, accounting profit is better parameter than cash flow

 Title Total Questions Anonymous

 Poll 15 1 question No Edit 

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1. 3. Is D-PBP better tool over Simple PBP? ( Single Choice)

Answer 1: Yes, it takes care of time value of money

Answer 2: No, time value of money is not relevant

 Poll 16 1 question No Edit 

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1. The CEO of a large company attended a course on corporate finance. He expressed that all the
firm’s projects must have pay back periods of 5 years or less otherwise, the projects won’t be
approved. Give your advice, assuming he knows time value of money ( Single Choice)

Answer 1: Sequencing and quantum of cash flow must not be ignored as it has +ve /-ve tax
impacts affecting returns on investment

Answer 2: Every project has a gestation period and this cannot be ignored

Answer 3: None of the above

Answer 4: All of the above

 Poll 17 1 question No Edit 

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1. Which one is more relevant to the finance manager; NPV or IRR? ( Single Choice)

Answer 1: NPV first and then IRR as he has to ultimately arrange fund at a cost lesser than
IRR

Answer 2: IRR is more relevant than +ve NPV

Answer 3: If NPV is +ve, he need not bother for IRR

Answer 4: If NPV is -ve, he should reject the project

 Title Total Questions Anonymous

 Poll 18 1 question No Edit 

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1. Under what circumstances CFO or FM should use IRR or NPV to evaluate investment? ( Single
Choice)

Answer 1: It is IRR when fund cost is a constraint and it is NPV when fund cost is not a
constraint

Answer 2: It is immaterial whether he uses IRR or NPV as long as the ARR is higher than
industry average.

Answer 3: For a short duration project, it NPV

Answer 4: For a long duration project, it is IRR

 Poll 19 1 question No Edit 

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1. If project is to be financed substantially by financial institutions, what should the lender consider
first NPV or IRR? ( Single Choice)

Answer 1: NPV at lending rate

Answer 2: NPV at WACC

Answer 3: IRR

Answer 4: None of the above

 Title Total Questions Anonymous

1 question No
 Poll 20

1. The IRR for an irrigation project is 12%. If the opportunity cost of capital is 10%, then ( Single Choice)

Answer 1: The NPV is negative

Answer 2: The benefit-cost ratio is less than zero

Answer 3: The project is not economically viable

Answer 4: All of the above

Answer 5: None of the above

 Poll 21 1 question No

1. If two projects have similar investment costs, similar life and similar total cash inflow over the life, then;
( Single Choice)

Answer 1: IRR for both would be the same

Answer 2: IRR would be higher for the project whose cash inflow would be high towards the end of life

Answer 3: IRR would be lower for the project whose cash inflow would be high towards the beginning of
life

Answer 4: None of the above

 Poll 22 1 question No

1. A project whose acceptance does not prevent or require the acceptance of one or more alternative
projects is referred to as __________. ( Single Choice)

Answer 1: contingent project

Answer 2: mutually exclusive project

Answer 3: dependent project

Answer 4: independent project

 Title Total Questions Anonymous

 Poll 23 1 question No

1. Which of the following statements is not correct regarding IRR? ( Single Choice)

Answer 1: Each project has a unique IRR

Answer 2: IRR does not consider the time value of money

Answer 3: IRR is rarely used by firms because they know their cost of capital and use NPV instead

Answer 4: A lender prefers IRR over NPV of borrower's projects

 Poll 24 1 question No

1. At the end of a manufacturing project (with finite life), working capital alters NPV because ( Single
Choice)

Answer 1: It adds to cash inflow

Answer 2: It reduces ultimate investment cost at the beginning

Answer 3: there is no impact on NPV

Answer 4: None of the above

 Poll 25 1 question No

1. For a special purpose project with limited (finite) life, the discount factor to be chosen as ( Multiple
Choice)

Answer 1: Interest rate if the project is funded with borrowal

Answer 2: Cost of equity if the project is funded through profit plough back

Answer 3: WACC of the firm

Answer 4: None of the above