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Business Finance MCQ Questions and Solutions with Explanations | Commerce

Business Finance MCQ Questions and answers with easy and logical explanations. Commerce provides you all type of quantitative and competitive aptitude mcq questions with easy and logical explanations. Business Finance MCQ is important for exams like B.COM, M.COM, BBA, BBM, CA, CS, CMA, CPA, CFA, UPSC, NET, Banking and other commerce department exam. Page-2 section-1

Each section contains 100 MCQs on Business Finance .
11
Positive NPV in project appraised by a firm may not occur an account of
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Answer & Solution
Answer: Option D
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12
Match List-I with List-II and select the correct answer:
List-I List-II
a. Realised yield method 1. Cost of equity share capital
b. Taxation 2. Cost of equity capital
c. Cost of total capital employed 3. Cost of debt capital
d. Dividend growth is a consideration 4. Weighted cost of capital
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Answer & Solution
Answer: Option C
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13
Which of the following statement(s) is/are false?
1. Capital profits can never be distributed as dividends to the shareholders.
2. Dividends are paid out of profits and, therefore, do not affect the liquidity position of the firm.
3. Every company should follow the policy of low dividend payment.
4. Walter's model suggests that dividend payment dose not affect the market price of the share.
Choose the correct answer
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Answer & Solution
Answer: Option D
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14
Operational techniques include
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Answer: Option D
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15
Which of the following statement is false?
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Answer & Solution
Answer: Option B
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16
Which of the following is an assumption of the APT?
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Answer: Option D
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17
Which of the following are the examples of systematical risk.
1. Elimination of Government Subsidy
2. Increase in bank rate
3. Labour problem
4. High levered fund
Select the correct answer:
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Answer & Solution
Answer: Option C
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18
A company has issued 10% perpetual debt of Rs. 1,00,000 at 5% premium. If tax rate is 30%, then the cost of debt will be
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Answer & Solution
Answer: Option C
Solution:
What is a perpetual debt?
A perpetual debt is a loan that never needs to be repaid. The company keeps paying interest forever.

Premium on debt:
The company issued the debt at a 5% premium. This means the company actually received Rs. 1,00,000 + (5% of Rs. 1,00,000) = Rs. 1,05,000.

Tax effect:
The interest the company pays on its debt is tax-deductible. This means the company can reduce its tax bill by the amount of interest it pays. The tax rate is 30%.

Calculating the cost of debt:
The cost of debt is the effective interest rate after considering the tax savings. It's calculated as follows:
1. Interest payment: 10% of Rs. 1,00,000 = Rs. 10,000
2. Tax saving: 30% of Rs. 10,000 = Rs. 3,000
3. Net interest payment: Rs. 10,000 - Rs. 3,000 = Rs. 7,000
4. Cost of debt: (Net interest payment / Amount received) * 100
= (Rs. 7,000 / Rs. 1,05,000) * 100 = 6.66%

Therefore, the correct answer is C: 6.66%
19
Which one of the following is the most popular method for estimating the cost of equity?
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Answer & Solution
Answer: Option A
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20
Assertion (A): A furores contract specifies in advance the exchange rate to be used, but it is not as flexible as a forward contract.
Reason (R): A futures contract is for a specific currency amount and a specific marurity date.
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Answer & Solution
Answer: Option A
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