Iibm Sem I Essay

2226 Words Jun 24th, 2015 9 Pages
Financial Management
Part 1 :
Multiple choices:
1. The approach focused mainly on the financial problems of corporate enterprise.
a. Ignored non-corporate enterprise
2. These are those shares, which can be redeemed or repaid to the holders after a lapse of the stipulated period.
c. Redeemable preference shares
3. This type of risk arises from changes in environmental regulations, zoning requirements, fees, licenses and most frequently taxes.
b. Domestic risk
4. It is the cost of capital that is expected to raise funds to finance a capital budget or investment proposal.
a. Future cost
5. This concept is helpful in formulating a sound & economical capital structure for a firm.
c. Designing optimal corporate capital structure
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An annuity will be represented as inflow of cash in the cash flow statement for the recipient of the annuity and out flow of cash in the cash flow statement of the person or firm paying out the annuity.
There are 2 types of Annuity:
1. Ordinary : An annuity with payments that occur at the end of each period.
2. Due : An annuity with payments that occur at the beginning of each period.
4. What is the Difference between NPV and IRR?
Ans:
The net present value (NPV) and the internal rate of return (IRR) could as well be defined as two faces of the same coin as both reflect on the anticipated performance of a firm or business over a particular period of time. The main difference however should be more evident in the method or should I say the units used. While NPV is calculated in cash, the IRR is a percentage value expected in return from a capital project.
Due to the fact that NPV is calculated in currency, it always seems to resonate more easily with the general public as the general public comprehends monetary value better as compared to other values. This does not necessarily mean that the NPV is automatically the best option when evaluating a firm’s progress. The best option would depend on the perception of the individual doing the calculation, as well as, his objective in the whole exercise. It is evident that managers and administrators would prefer the IRR as a method, as

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