MCQ for CA Final SFM - Chapter 2 Security Valuation

Sample Multiple Choice Questions (MCQ's) for CA Final - Paper 2 - Strategic Financial Management - Chapter 2: Security Valuation - For Practice relevant for May/Nov 23 Examinations

 

Q:1 MNP Ltd. has declared and paid annual dividend of`4 per share. It is expected to grow @ 20% for the next two years and 10% thereafter. The required rate of return of equity investors is 15%. Compute the current price at which equity shares should sell.

Note: Present Value Interest Factor (PVIF) @ 15%:

For year 1 = 0.8696;

For year 2 = 0.7561

 

  1. 103.43
  2. 102.34
  3. 104.34
  4. 100.34

Answer: 3

 

Q:2 ABC Limited’s shares are currently selling at`13 per share. There are 10,00,000 shares outstanding. The firm is planning to raise`20 lakhs to Finance a new project.

Required:

What are the ex-right price of shares and the value of a right, if the firm offers one right share for every two shares held

 

  1. 10, 3
  2. 6, 3
  3. 10, 6
  4. 6, 10

Answer: 1

 

Q:3 X Limited, just declared a dividend of`14.00 per share. Mr. B is planning to purchase the share of X Limited, anticipating increase in growth rate from 8% to 9%, which will continue for three years. He also expects the market price of this share to be`360.00 after three years.

Calculate rupee amount up to two decimal points.

Year-1

Year-2

Year-3

FVIF @ 9%

1.090

1.188

1.295

FVIF @ 13%

1.130

1.277

1.443

PVIF @ 13%

0.885

0.783

0.693

 

You are required to determine the maximum amount Mr. B should pay for shares, if he requires a rate of return of 13% per annum

 

  1. 358.56
  2. 288.56
  3. 285.56
  4. 280.56

Answer: 2

 

Q:4 A Company pays a dividend of`2.00 per share with a growth rate of 7%. The risk free rate is 9% and the market rate of return is 13%. The Company has a beta factor of 1.50. However, due to a decision of the Finance Manager, beta is likely to increase to 1.75. Find out the present value of the share

 

  1. 22
  2. 20
  3. 25
  4. 29

Answer: 3

 

Q:5 XYZ Ltd. paid a dividend of`2 for the current year. The dividend is expected to grow at 40% for the next 5 years and at 15% per annum thereafter. The return on 182 days T-bills is 11% per annum and the market return is expected to be around 18% with a variance of 24%. The co-variance of XYZ's return with that of the market is 30%. You are required to calculate the required rate of return of stock

 

  1. 17.57%
  2. 18.75%
  3. 19.57%
  4. 19.75%

Answer: 4

 

CA Final - Paper 2 - SFM - Chapter 3   

 

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