1. Which of the combinations below best fit the blanks in this statement?

a. Multiple rates of return; less than

b. Mutually exclusive; less than

c. Multiple rates of return; more than

d. Mutually exclusive; more than

2. Tick the factors that financial manager should include when computing the incremental free cash flows of an investment decision.

a. Opportunity costs

b. Financing costs

c. Sunk costs

d. Project externalities

3. Phantom Limited borrows $150,000 at an interest rate of 12% per annum compounding monthly, repayable by equal monthly instalments over 20 years. Calculate the principal and interest components of the first repayment.

a. For the first repayment, the principal component is $151.63 and interest component is $1,200.

b. For the first repayment, the principal component is $101.09 and interest component is $1,200.

c. None of the other answers are true.

d. For the first repayment, the principal component is $151.63 and interest component is $1,500.

4. Carlton Investment Ltd has issued preference shares. On that date the preference share price was $2.05, the annual dividend was $0.14. Calculate the cost for Carlton’s irredeemable preference share.

a. The cost for Carlton’s irredeemable preference share is 28.7% per annum.

b. The cost for Carlton’s irredeemable preference share is 14.64% per annum.

c. The cost for Carlton’s irredeemable preference share is 6.83% per annum.

d. None of the other answers are true.

5. Tick the decisions a financial manager makes in a company.

Investment decision.

Account decision.

Money decision.

Financing decision.

Profit decision.

Dividend decision.