1
a. Business Finance
Practice TCA Questions
b. Due to the adoption of a just in time assembly line
system, net working capital is expected to decrease.
Inventory is expected to decrease from $254,600 to
$178724 while accounts payable will also decrease by
$17122. What is the value of the net cash inflow for the
change in net working capital to be included in the initial
investment for the capital budgeting evaluation? Please
round your answer to the nearest whole dollar but exclude
$ and , when typing your answer (i.e. enter $20,245 as
20245). - -Correct Answer--✔️Decrease in inventory:
a. = $254,600 - $178,724
b. = $75,876 inflow
c. Decrease in accounts payable:
d. = $17,122 outflow
e. Net cash inflow:
f. = $75,876 - $17,122
g. = $58,754
c. The optimal capital structure is the one that balances
return and risk factors in order to maximise ____________ by
minimising ____________.
1
, 2
a. earnings per share; dividend payments.
b. dividend payments; the average cost of capital.
c. market value; interest expenses.
d. profits; the average cost of capital.
e. market value; the average cost of capital. - -Correct Answer--
✔️e. market value; the average cost of capital.
d. All of the following investment rules use the concept of
the time value of money EXCEPT:
a. Profitability index
b. The payback period
c. Annualised net present value
d. Net present value
e. Internal rate of return - -Correct Answer--✔️b. The payback
period
e. Currently, ABC Ltd sell only on credit and do not offer
cash discounts. Management is considering offering a 3%
discount for payment within 20 days. Currently, the
average collection period is 50 days, sales are 20,000 units,
selling price is $80 per unit, and variable cost per unit is
$30. If the discount is implemented, it is expected that
sales will increase to 22,000 units, that 60% of sales will
take the discount, and the average collection period will
fall to 30 days. The firm's required rate of return is 10%.
What is the net benefit/loss from implementing the
proposed plan? Note, use a 365-day year.
a. $96,265
2
, 3
b. $71,115
c. $49,995
d. $68,320
e. $65,525 - -Correct Answer--✔️b. $71,115
f. Which of the following statements is true?
a. If all else is equal, an increase in a company's share price will
increase its cost of retained earnings.
b. Higher flotation costs increase the cost of new ordinary
shares, and that leads to an increase in a company's
weighted average cost of capital.
c. Since the money is already available, the cost of retained
earnings is usually much lower than the after-tax cost of
debt.
d. If all else is equal, an increase in a company's share price will
increase its cost of new ordinary shares.
e. When calculating the cost of preference shares, a company
needs to adjust for taxes, because preference share dividends
are tax deductible. - -Correct Answer--✔️b. Higher flotation
costs increase the cost of new ordinary shares, and that leads
to an increase in a company's weighted average cost of
capital.
g. XYZ Ltd has investment opportunities of $1,400,000,
expects the level of retained earnings next year to be
$1648556 and wishes to maintain its optimal debt ratio of
22% without issuing new ordinary shares. Calculate the
expected amount of the dividend, if any, that XYZ will pay
to ordinary shareholders if they follow a residual dividend
policy. Please round your answer to the nearest dollar but
3
a. Business Finance
Practice TCA Questions
b. Due to the adoption of a just in time assembly line
system, net working capital is expected to decrease.
Inventory is expected to decrease from $254,600 to
$178724 while accounts payable will also decrease by
$17122. What is the value of the net cash inflow for the
change in net working capital to be included in the initial
investment for the capital budgeting evaluation? Please
round your answer to the nearest whole dollar but exclude
$ and , when typing your answer (i.e. enter $20,245 as
20245). - -Correct Answer--✔️Decrease in inventory:
a. = $254,600 - $178,724
b. = $75,876 inflow
c. Decrease in accounts payable:
d. = $17,122 outflow
e. Net cash inflow:
f. = $75,876 - $17,122
g. = $58,754
c. The optimal capital structure is the one that balances
return and risk factors in order to maximise ____________ by
minimising ____________.
1
, 2
a. earnings per share; dividend payments.
b. dividend payments; the average cost of capital.
c. market value; interest expenses.
d. profits; the average cost of capital.
e. market value; the average cost of capital. - -Correct Answer--
✔️e. market value; the average cost of capital.
d. All of the following investment rules use the concept of
the time value of money EXCEPT:
a. Profitability index
b. The payback period
c. Annualised net present value
d. Net present value
e. Internal rate of return - -Correct Answer--✔️b. The payback
period
e. Currently, ABC Ltd sell only on credit and do not offer
cash discounts. Management is considering offering a 3%
discount for payment within 20 days. Currently, the
average collection period is 50 days, sales are 20,000 units,
selling price is $80 per unit, and variable cost per unit is
$30. If the discount is implemented, it is expected that
sales will increase to 22,000 units, that 60% of sales will
take the discount, and the average collection period will
fall to 30 days. The firm's required rate of return is 10%.
What is the net benefit/loss from implementing the
proposed plan? Note, use a 365-day year.
a. $96,265
2
, 3
b. $71,115
c. $49,995
d. $68,320
e. $65,525 - -Correct Answer--✔️b. $71,115
f. Which of the following statements is true?
a. If all else is equal, an increase in a company's share price will
increase its cost of retained earnings.
b. Higher flotation costs increase the cost of new ordinary
shares, and that leads to an increase in a company's
weighted average cost of capital.
c. Since the money is already available, the cost of retained
earnings is usually much lower than the after-tax cost of
debt.
d. If all else is equal, an increase in a company's share price will
increase its cost of new ordinary shares.
e. When calculating the cost of preference shares, a company
needs to adjust for taxes, because preference share dividends
are tax deductible. - -Correct Answer--✔️b. Higher flotation
costs increase the cost of new ordinary shares, and that leads
to an increase in a company's weighted average cost of
capital.
g. XYZ Ltd has investment opportunities of $1,400,000,
expects the level of retained earnings next year to be
$1648556 and wishes to maintain its optimal debt ratio of
22% without issuing new ordinary shares. Calculate the
expected amount of the dividend, if any, that XYZ will pay
to ordinary shareholders if they follow a residual dividend
policy. Please round your answer to the nearest dollar but
3
