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MCQ on Project Finance and Types of Financing

1. Zero-Coupon Bonds are bonds is-sued at and redeemed at par.
(A) Face value to discount
(B) Discount to face value plus premium
(C) Par to the discounted value
(D) Discount to face value

2. The objective of economic appraisal is to –
(A) Examine the project from the entire economy’s point of view
(B) Determine whether the project will improve the economic welfare of the country
(C) Both (A) and (B)
(D) Neither (A) nor (B)

3. A lowers the interest rate risk by neutralizing the inflation risk.
(A) Carrot and stick bond
(B) Capital indexed bonds
(C) Commodity bonds
(D) Dual convertible bond

4. ____ are those which are creat¬ed by combining the features of equity with bond, preference, and equity.
(A) Mixed instruments
(B) Baby bond
(C) Hybrid instruments
(D) Hypothetical instruments

5. Project appraisal by financial institution takes into consideration
(A) Promoter’s capacity and competence
(B) Project
(C) Economic Aspects
(D) All of above

6. IDR is an instrument denominated in ______.
(A) Foreign currency
(B) Indian Rupees
(C) Partly in (A) and partly in (B)
(D) Either (A) or (B)

7. _____ means any instrument in the form of a depository receipt created by a Domestic Depository in India against the underlying equity shares of a company incorporated outside India.
(A) Global Depository Receipt (GDR)
(B) American Depository Receipt (ADR)
(C) Indian Depository Receipt (IDR)
(D) Any of the above

8. A project would normally be under¬taken if its net present value is:
(A) Negative
(B) Exactly the same as the NPV of existing projects
(C) Positive
(D) Zero

9. External sources of finance do not include:
(A) Leasing
(B) Debentures
(C) Retained earnings
(D) Overdrafts

10. Which of the following is a drawback to a business that issues debentures?
(A) Lenders do not have any voting rights
(B) There is the dilution of control
(C) There is a dilution of ownership
(D) The value of liabilities increases

11. Which of the following is not one of the three fundamental methods of firm valuation?
(A) Discounted Cashflow
(B) Income or earnings – where the firm is valued on some multiple of accounting income or earnings.
(C) Balance sheet – where the firm is valued in terms of its assets.
(D) Market Share

12. Internal sources of finance do not include:
(A) Better management of working capital
(B) Ordinary shares
(C) Trade credit
(D) Retained earnings

13. The promoter’s capacity and competence should be examined with reference to –
(A) Their management background, traits as entrepreneurs, business
(B) Industrial experience, and past performance in other concerns,
(C) Their integrity and reputation, market standing, and legal competence.
(D) All of the above

14. Financial aspects of the project are judged with reference to ____.
(A) Availability of land and site
(B) Availability of servicing facilities like machine shops, electric repair shops, etc
(C) NPV, Benefit-Cost Ratio, Internal Rate of Return, Sensitivity & Risk Analysis
(D) Availability of workforce as per required skill and arrangements proposed for training-in-plant and outside

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By Team Learning Mantras