Sample Multiple Choice Questions (MCQ's) for CA Intermediate - Paper 8 - FINANCIAL MANAGEMENT & ECONOMICS FOR FINANCE - SECTION A - FINANCIAL MANAGEMENT Chapter 4: COST OF CAPITAL - For Practice relevant for May/November 23 Examinations


Q1. Which of the following is not an assumption of the capital asset pricing model (CAPM)?

  1. The capital market is efficient.
  2. Investors lend or borrow at a risk-free rate of return.
  3. Investors do not have the same expectations about the risk and return.
  4. Investor’s decisions are based on a single-time period. 

Answer: 3

Q2.  Given: risk-free rate of return = 5 %; market return = 10%; cost of equity = 15%; value of beta (β) is:

  1. 1.9
  2. 1.8
  3. 2.0
  4. 2.2

Answer: 3

Q3.  ____________may be defined as the cost of raising an additional rupee of capital:

  1. Marginal cost of capital
  2. Weighted Average cost of capital
  3. Simple Average cost of capital
  4. Liquid cost of capital

Answer: 1

Q4.  Which of the following cost of capital requires to adjust taxes?

  1. Cost of Equity Share
  2. Cost of Preference Shares,
  3. Cost of Debentures
  4. Cost of Retained Earnings

Answer: 3

Q5.  Marginal Cost of capital is the cost of:

  1. Additional Revenue
  2. Additional Funds
  3. Additional Interests
  4. None of the above

Answer: 2

Q6.  In order to calculate Weighted Average Cost of Capital, weights may be based on: 

  1. Market Values 
  2. Target Values 
  3. Book Values
  4. Anyone of the above

Answer: 4

Q7.  Firm’s Cost of Capital is the average cost of:  

  1. All sources of finance
  2. All Borrowings
  3. All share capital
  4. All Bonds & Debentures

Answer: 1


CA Intermediate FMECO - SECTION A - MCQ for Chapter 5 -   

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