Question

Question No 1:
Sumi Inc. has policy of paying a Rs. 9 per share dividend every year. If this policy is to continue indefinitely, what will be the value of a share of stock at a 12% required rate of return?
Rs. 30
Rs. 45
Rs. 60
Rs. 75

Question No: 2
The XYZ Corporation is considering an investment that will cost Rs. 80,000 and have a useful life of 4 years. During the first 2 years, the net incremental after-tax cash flows are Rs. 25,000 per year and for the last two years they are Rs. 20,000 per year. What is the payback period for this investment ?
3.2 Years
3.5 Years
4.0 Years
Cannot be determined from the given information

Question No: 3
Which of the following statement is INCORRECT regarding a normal project ?
a)If the IRR of a project is greater than the discount rate, k, then its PI will be greater than 1
b)If the NPV of a project is greater than 0, then its PI will exceed 1
c)If the IRR of a project is 8%, its NPV, using a discount rate, k, greater than 8%, will be less than 0
d)If the PI of a project equals 0, then the project's initial cash outflow equals the PV of its cash flows

Answer 1

Q1. 75
9/0.12=75

Q2 3.5

Q3, If the PI of a project equals 0, then the project's initial cash outflow equals the PV of its cash flows.