FM-Revision final exam

A company plans to invest RM50,000 in a non-current asset. The company expects to use the asset for 15 years and it is expected to have a residual value of RM20,000. The expected annual cash inflows, at the end of each year, are RM5,000. What is the Accounting Rate of Return (ARR)?

• 6%

• 8%

• 10%

• 12%

The following statements have been made about a capital investment project with negative NPV of RM 12,000 at 12%:

       (i) The accounting loss of the project is RM 12,000

       (ii) The internal rate of return is higher than 12%

       (iii) The internal rate of return is lower than 12%

 

       Which of the above statement(s) is (are) FALSE?

• (i) only

• (i) and (ii) only

• (i) and (iii) only

• (ii) and (iii) only

Investors expect a 6% return on equity and annual dividend income is expected at RM0.60 per annum. What is the valuation of the share?

• RM6

• RM8

• RM10

• RM12

A company plans to invest RM50,000 in a non-current asset. The company expects to use the asset for 15 years and it is expected to have a residual value of RM20,000. The expected annual cash inflows, at the end of each year, is RM5,000.

 

       What is the payback period of the investment?

• 6 years

• 9 years

• 10 years

• 15 years

What is the quick (acid test) ratio?

• 6.5 times

• 7 times

• 8.5 times

• 9.5 times

A business has a current ratio of 1.5 and an acid test ratio of 0.9. Assuming that current liabilities amounted to RM50,000, estimate the amount of inventory.

• RM4,500

• RM18,000

• RM30,000

• RM40,500

What is the internal rate of return of an investment project?

• The discount rate that results in a net present value of zero.

• The net present value when discounted at the cost of capital.

• The return on investment required by the management of a business.

• The difference between the return on investment and the cost of capital.

What is the estimated working capital requirement for the company to the nearest RM’000?

• RM69,000

• RM73,000

• RM79,000

• RM85,000

A company has material B in its inventory, which it purchased wrongly at a cost of RM800. The company is deciding whether to: (i) use it as a substitute for material A which would cost RM500 to buy; or (ii) sell material B for RM510 cash LESS selling costs of RM20; or (iii) use it in another contract.

 

If the company decides to use that material in another contract, what is its relevant cost?

• RM490

• RM500

• RM510

• RM800