Q.1 Please write the alphabate of selected
choice in the answer column: (12)
(Answer)
i |
What are the earnings per share
for a company that earned Rs. 100,000 last year in after-tax profit,
has 200,000 common shares outstanding and Rs. 1.2 million retained
earnings at the end of the year?
A) Rs. 100,000 B)
Rs. 6.00 C)
Rs. 0.50
D) Rs. 6.50 E)
None of the above |
|
ii |
Which of the following would NOT improve the
current ratio?
A) Borrowing short-term to finance fixed assets
B) Issue long-term debt to finance inventory
C) Sell common stock to reduce current liabilities
D) Sell fixed assets to reduce accounts payable
E) None of the above |
|
iii |
Which of the following is NOT a cash flow for
a firm?
A) Depreciation B)
Dividends C)
Mark-up payments
D) Taxes
E) None of the above |
|
iv |
For a profitable firm total sources of funds
always ________ total uses of funds:
A) Be equal to B)
Be greater than C)
Be less than
D) Have no consistent relationship E)
None of the above
|
|
vi |
Net working capital refers to:
A) Total assets minus fixed assets B) Current
assets minus current liabilities
C) Current assets minus inventories
D) Current assets
E) None of the above |
|
vii |
Which of the following would be considered
a use of funds:
A) A decrease in accounts receivable B)
A decrease in cash
C) An increase in accounts payable
D) An increase in cash
E) None of the above |
|
viii |
Which asset-liability combination would most
likely result un the firm’s having the greater risk of technical
insolvency?
A) Increasing current assets while lowering current
liabilities
B) Increasing current assets while incurring more current liabilities
C) Reducing current assets, increasing current liabilities, and
reducing long term debt
D) Replacing short-term debt with equity
E) None of the above |
|
ix |
Normal debt-equity ratio as prescribed by SBP
is:
A) 70:30 B) 75:25 C)
60:40 D) 80:20
E) None of the above |
|
x |
Which of the following provides biggest security
value to a bank:
A) First pari passé charge on fixed assets
B) First exclusive hypothecation charge on movable assets
C) First floating charge on book debts and assets
D) None of the above |
|
xi |
Which one of these is included in the cost
of land and site development?
A) Basic cost of land including conveyance and
other allied charges
B) Cost of gates, godowns, warehouses and open yard facilities
C) Basic cost of land including conveyance and other charges,
and cost of tube wells and garages.
D) Cost of laying approach roads, internal roads, sewers,
drainage, and cost of land
E) None of the above |
|
xii |
The primary loan document in project financing
is:
A) Demand Promissory Note B)
Charge Document
C) Loan Agreement D)
None of the above |
|
xiii |
Material cost consists of:
A) The price paid to the suppliers
B) The price paid to the supplier plus freight expenses
C) The price paid to the supplier plus freight expenses
and insurance charges
D) None of the above |
|
Q.1 State True or False in the answer column.
Give brief reason for your selection at the space provided
below the question: (15)
(Answer)
i |
Fixed costs arise as a result
of capacity creation and vary with the changes in levels of capacity
utilization. |
|
ii |
Project Finance is a type of finance in which
lenders look primarily to cash flow and assets of the project
as the source of payment of mark-up and principal. |
|
iii |
It is not advisable to assume a high capacity
utilization level in the first year of a project’s operation.
|
|
iv |
Pre-operating expenses are indirectly related
to project’s implementation schedule. |
|
v |
The amount payable for obtaining know-how
and engineering services for settling up a project and the royalty
payable annually must necessarily be included in the project cost.
|
|
vi |
Taking cognizance of inflation, it would
be advisable to make a higher contingency provision of, say, 20%
in the cost of the project. |
|
vii |
An equitable mortgage of an immovable property
may be created by deposit of title deeds with the bank except
in cantonment areas. |
|
viii |
The cushion period mark-up included in the
re-purchase price is waived as a rebate for timely payment by
the borrower. |
|
ix |
A subordinated loan is a secured loan extended
by the sponsors of the project and is subordinate to the claim
of the bank/DFI. |
|
x |
Where mark-up or principal is overdue by
180 days or more, the loan is classified as substandard and the
unrealized mark-up is not to be credited to the Income Account
in terms of the Prudential Regulations. |
|
xi |
In developing countries like Pakistan, appropriate
technology should be selected, and not the latest or sophisticated
one. |
|
xii |
Repairs and maintenance are directly related
to the state of machinery. |
|
xiii |
Internal rate of return represents the rate
of return on the unrecovered investment balance in the project.
|
|
xiv |
An industry is considered to be efficient
and hence has a comparative advantage if the Official Exchange
Rate is less than its Domestic Resources Cost. |
|
xv |
Cost and benefits of a project must be measured
in terms of cash flows and not accounting income. |
|
Q.3 Fill in the blanks: (05)
i. Cash flows associated with a project may be divided into three
components:
ii. Terminal cash flow of a project consists of two components:
Q4. What do the following commonly
used abbreviations stand for?
(8)
1.
CIRC
2. BMR
3. PERT 4.
CIF
5.
FOB
6. DRC 7.
IERR 8.
CPM
Q.5 It is estimated
that Eldec Industries Limited will operate at 40% of its installed capacity
in the first year, 60% in the second year, and 90% from the third year
onwards. Projections for the third year of production are as follows:
(10)
A.
Sales: Rs.
27,000,000
80,000
units @ Rs. 150
B.
Variable Costs:
Raw
materials Rs.
8,100,000
Consumable
Stores Rs.
2,000,000
Power,
fuel, water, etc Rs.
1,000,000
Selling
expenses Rs.
900,000 Rs.
12,000,000
C.
Fixed Costs:
Wages
and salaries Rs.
3,000,000
Repairs
& Maintenance Rs.
300,000
Depreciation
Rs. 1,600,000
Rent,
insurance, etc Rs.
200,000
Administrative
expenses Rs.
800,000
Mark-up
Rs.
2,100,000
Rs. 8,000,000
You are required to calculate:
(i) Break-even volume of production
(ii) Break-even sales
(iii) Break-even capacity
(iv) Relative margin of safety
(v) Contribution margin per unit
Q6. You have
been hired as a Consultant by the sponsors of a new project being promoted
by them. Selection of technology is presently under consideration. What
factors would have a bearing on your choice of technology? Also, discuss
various ways of acquiring technology. (10)
Q.7 There are
often time and cost slippages in projects during their implementation.
What are the causes of over-runs and how can these be controlled through
proper monitoring? (10)
Q.8 Banks often
nominate their representatives on the Boards of the Companies financed
by them. What is the role of Nominee Directors and how can they safeguard
the interest of the bank? (10)
Q.9 Why is sponsors’
appraisal needed in project financing? How would you as a financial
analyst, appraise the sponsors of a new project which the Bank is planning
to finance. (10)
Q.10 What are the objectives of economic
appraisal? What criteria would you use to find out if these objectives
are being achieved?. (10)