Past Papers Business Finance

By: Prof. Fazal Rehman Shamil

Guess Paper 1: Business Finance Fall – 2020 Past Papers

University Name – Confidential

Time Allowed: 3 hours

Total Marks:    70, Passing Marks (35)

Q # 1. Fill in the blanks with appropriate answers.

a) Proper financial management helps to obtain the ____________.
b) ————————– is the basic financial goal of the firm.
c) The fiscal year is the ______ month period.
d) Long term securities are traded in —————- Market.
e) Difference between current assets and current liabilities is called ________.
f) Adjustments in basic ______ transaction are made in the journal.
g) Security in money market have maturity ———— year .
i) cash flow statement consists of ——————-sections.
j) Depreciation id a non __________ expense.
k) Annuities can be calculated on annual basis _________.
l) The borrower makes periodic payments until the loan and _______ is paid.
m) The primary objective of the internal audit is to assist the _______of the organization.
n) There is an —————- relationship between the Risk and Return.

Q # 2. Elaborate the basic financial goals of the firm?

Q # 3. Write a detail note on Financial markets.

Q# 4. You own a bond that pays $75 in annual interest, with a $1,000 par value. It matures in 15 years. Your required rate of return is 6 percent.
a. Calculate the value of the bond.
b. How does the value change if your required rate of return (i) increases to 10 percent or (ii) decreases to 4 percent?

Q # 5. At the end of 15 years , how much is a $ 1500 initial deposit worth, assuming an annual interest rate of 25% compounded a) annually ? b) Semi-annually?
Calculate the future values and present values.

Q # 6. You have been offered a note with four years to maturity , which will pay $ 3,000 at the end of each of the four years . The price of the note to you is $ 10,200. What is the implicit compound annual interest rate you will receive?

Q # 7. Explain the index point mechanism of stock exchange in detail?

Q # 8. Write short notes on any three of the following.
a) Financial statements. b) Capital Budgeting c) Bond Valuation d) Financial Planning.

Guess Paper 2: Business Finance Spring – 2020 Past Papers

University Name – Confidential

Time Allowed: 3 hours

Total Marks:    70, Passing Marks (35)

Q. 1 Differentiate between the following terms;
a. Risk Vs Return
b. Primary market Vs Secondary market
c. Profitability Vs Liquidity

Q.2 Explain the different forms of Business Organization.

Q.3 Elaborate the various legal and ethical challenges in financial management.

Q.4 What are the various sources of short – term financing?
Q.5 Fahad Construction Company is in the process of negotiating with different companies for their business
contracts. The following two projects are offered to them with time period of 5 years and discount rate of 10%. The cash flow to be generated by each project is as follows;
Year Payment of Contract A Payment of Contract B
2001 2,000,000 5,000,000
2002 3,000,000 5,000,000
2003 4,000,000 5,000,000

Required:
Calculate the Present values of the above two projects and mention the project which offers more value to the Fahad Construction Company.

Q.6 Allied Company stock has the following data:
Stock price Rs.100
Currently paid dividend Rs. 10.00
Growth rate 15%

Required:
Calculate the stock price expected 1 year from now? What is the required rate of return on the
Company’s stock?
Q.7 Hassan Corporation has issued bonds that have a 8% coupon rate payable semi-annually. The bonds mature in 5 years, have a face value of Rs. 1000 and a yield to maturity of 6%. What is the price of the bond?
Q.8 Write short notes on any two of the following:
1. Features of bonds
2. Financial markets
3. Types of leasing

Guess Paper 3: Business Finance Fall – 2019 Past Papers

University Name – Confidential

Time Allowed: 3 hours

Total Marks:    70, Passing Marks (35)

Q. 1 Fill in the blanks
a. NPV stands for__________________.
b. FPV stands for __________________.
c. IRR stands for ____________.
d. PI stands for ____________________.
e. ______ is the process of finding present value the inverse of compounding interest.
f. Sum of all the present values minus (-) initial investment is called ______.
g. The amount paid to the common stock holders is called ______________.

Q. 2 Microsoft company is producing computer softwares and applications for the last three decades. Present value of its products is $25,00,000/-After 3 years what will be Future value of Microsoft products if interest rate is 2%??

Q. 3 What is Dividend. Discuss the different types and policy of dividend.

Q. 4 Differentiate between Working Capital and net Working Capital?

Q. 5 Explain Risk? Write down some types of risk.

Q.6 IBM company is producing PC’s from the last 25 years.What is Present value of IBM PC’s if its
Future value will be $11,00,000/- in 5 years if interest rate is 7%?.

Q. 7 Difference between Payback method and NPV.

Q. 8 Write a note on any TWO of the following.
a. Required rate Vs. Coupon interest rate.
b. Ordinary Annuity vs. Annuity Due.
c. Normal loss vs abnormal loss.

Guess Paper 4: Business Finance Spring – 2019 Past Papers

University Name – Confidential

Time Allowed: 3 hours

Total Marks:    70, Passing Marks (35)

Q1. Write a short note on following (Compulsory Question)
a) Balance sheet
b) Income statement
c) Statement of cashflow.

Q2. What is Business Finance and role of Finance Manager in a firm?

Q3. Dell Company is manufacturing laptops from the last two decades. Present value of Dell laptops is
$850000.After 7 years what will Future value of Dell laptops if interest rate is 7%?

Q4. Define Dividend, Dividend Policy and factors affecting Dividend Policy?

Q5. Compare Islamic finance with Conventional financial system.

Q6. Name three capital budgeting models. In your opinion which model is best and Why?
Give logical arguments.

Q7. Elaborate Role of Financial Market in grooming of business.

Q8.. Write a note on any TWO of the following.
(i) Net present value
(ii) Internal rate of return
(iii) Hedging

Guess Paper 5: Business Finance Spring – 2018 Past Papers

University Name – Confidential

Time Allowed: 3 hours

Total Marks:    70, Passing Marks (35)

Q. 1 Write a note on any four from the following.

a. Constant growth.
b. Partnership
c. Primary Market vs. Secondary Market.
d. Annuity Due.
e Characteristics of Marketable Securities
f Capital Rationing
g Stock out

Q. 2 What is weighted average cost of capital (WACC), and how it is calculated, explain with practical
example.

Q. 3 Briefly explain the concept and techniques involved in time value of money.

Q. 4 Assume that star corporation is offering a corporate bond with par value of $1000 and an annual coupon rate of 10%. The maturity period is 10 years. The interest would be paid annually. The required rate of return in the market is 10%.
a. What is the amount of interest to be paid annually?
b. What is the value of this $1000 bond today?
c. What would be the P.V. of the bond if calculated semi annually.

Q. 5 What is the benefit of debt financing? How does it affect the firms cost of debt?

Q. 6 Why do managers often separate short term and long term decisions? Is this separation desirable?

Q. 7 What is the benefit of debt financing? How does it affect the firms cost of debt?

Q. 8 Define Dividend, Dividend Policy and factors affecting Dividend Policy?

Guess Paper 6: Business Finance Fall- 2018 Past Papers

University Name – Confidential

Time Allowed: 3 hours

Total Marks:    70, Passing Marks (35)

Q1. Define the following terms: (Compulsory Question)
a) Cost of capital
b) Cost of debts
c) Cost of equity.

Q2. Haier Company is manufacturing washing machines from the last decade. Present value of Haier
Washing machine is $450000.After 5 years what will Future value of Haier washing machine if
interest rate is 4%??

Q3. What do you know about Risk? What are the tactics used by the financial manager to avoid risk.

Q4. Differentiate the terms cost of capital, cost of debts and cost of equity with respective characteristics.

Q5. What is a commercial bank? Discuss the role and functions of a commercial bank.

Q6. Define working capital? Distinguish between temporary and permanent working capital.

Q7. Differentiate the terms IRR and NPV, and also explain the merits and demerits.

Q.8 Write a note on any TWO of the following.
(i) Opportunity cost
(ii) IRR
(iii) Net working capital.

Guess Paper 7: Business Finance Fall- 2016 Past Papers

University Name – Confidential

Time Allowed: 3 hours

Total Marks:    70, Passing Marks (35)

Q. 1 Write a note on the following.
(i) Debenture (ii) Capital Rationing
(iii) Preferred Stock (iv) Corporation
(v) Operating Leverage (vi) Capital Budgeting
(vii) Lease Financing
Q. 2 Ratio analysis plays vital role in evaluating the financial statements for genuine stakeholders.

Q. 3 Calculate the net present value (NPV) for the following 10 years project. Assume that the firm has an opportunity cost of 12%.
a. Initial investment is $10000 cash inflows are $2000 per year.
b. Initial investment is $25000 cash inflows are $3000 per year.
c. Initial investment is $30000 cash inflows are $5000 per year.

Q. 4 What is the benefit of debt financing? How does it affect the firms cost of debt?

Q. 5 What is Business risk, what steps should be taken by the financial manager to compensate the risk.

Q. 6 Ridge Tools has on its book the amount and specific (after tax) costs shown in the following table for each source of capital.
Source of capital Book Value Specific Cost
Long term debt $700,000 5.3%
Preferred Stock 50,000 12
Common Stock equity 650,000 16
Calculate the firms weighted average cost of capital using book value weight.

Q. 7 What information would you need to construct a common size balance sheet, explain with help of thumbnail sketch?

Q. 8 What is compounding? Elaborate the impact of higher compounding frequency?

Guess Paper 8: Business Finance Spring- 2016 Past Papers

University Name – Confidential

Time Allowed: 3 hours

Total Marks:    70, Passing Marks (35)

Q. 1 Write a note on any four from the following.
a. Junk Bonds
b. Callable Bonds
c. Redeemable Bonds
d. Matured Bonds
e. Immature Bonds
f. Debentures
g. Secured Bonds

Q. 2 What is cost of Capital? What role dose it play in making long term investment decisions? And also explain the cost of debt.

Q. 3 Prepare the loan amortization schedule from the following data.
Loan of $10000 for five years @ 10%.

Q. 4 What is the weighted marginal cost of capital (WMCC)? What does the WMCC schedules represent?

Q. 5 What is the benefit of debt financing? How does it affect the firms cost of debt?

Q. 6 Why do bond values approach their par values at maturity? Is this true for both premium and discount bonds?

Q. 7 Ridge Tools has on its book the amount and specific (after tax) costs shown in the following table for each source of capital.
Source of capital Book Value Specific Cost
Long term debt $700,000 5.3%
Preferred Stock 50,000 12
Common Stock equity 650,000 16
Calculate the firms weighted average cost of capital using book value weight.

Q. 8 Review the logic for the inverse relationship between bond price and interest rate.

Guess Paper 9: Business Finance Spring- 2015 Past Papers

University Name – Confidential

Time Allowed: 3 hours

Total Marks:    70, Passing Marks (35)

Q.1. Enlist various types of Business Organizations and discuss goals of any business organization is details.

Q.2. Write names of different Financial Statements. What is a role and importance of Balance Sheet in the credit granting?
Q.3. Calculate Internal Rate of Return and also make a decision that whether the project should be accepted or rejected in the following situation when Initial Outlay for the project is $5000, 10000, 15000, 10000, 7500 and 2500 while the inflows for year 1 to 6 are $15000, 8000, 10000, 12000, 14000 and 16000 are respectively.(if discounting rate is 10%)
Q.4. Mr. Khan buys a 10-year bond from the PTCL Corporation on January 1, 2008. The bond has a
face value of $10000 and pays an annual 10% coupon. The current market rate of return is 12%
Required: Calculate the price of this bond today. Or
Enlist names of various Bonds & how you will differentiate Zero Coupon Bond from Nonzero Coupon Bond?

Q.5. Calculate the followings:
(a) You have deposited Rs. 10000 in a saving account today. If it is compounded @ 10% for 10 years then how much you will get after completion of period.
(b) You will need Rs.50000 in year 2028 for your Degree course. For such purpose you are willing to make a deposit today in a saving account. If discount rate is 12%, how much you will deposit for getting such amount?

Q.6. Shan Corporation has two projects, Project “ M” and “ N”. Both the projects are equally risky and the cash outflow for both the projects are $2000 each. Outflow occurs at the beginning of the projects. After tax net cash flow of the both projects are as follows:
Year (t) Project (M) Project (N)
0 -$2000 -$2000
1 1000 200
2 800 600
3 600 800
4 400 1600
Total Inflow $2800 $ 3200

Required: (a). Calculate Pay Back and NPV when the discounting rate is 10%.
(b). Which project will be selected if both are mutually exclusive.

Q.7: Briefly discuss the applications of Islamic Modes of Finance.

Q.8: How you will compare the Islamic Economic System with Conventional System on the basis of various features?

Guess Paper 10: Business Finance Fall- 2015 Past Papers

University Name – Confidential

Time Allowed: 3 hours

Total Marks:    70, Passing Marks (35)

Q1. Write short note on the following.
a. Why is the cost of capital important?
b. What is capital budgeting?
c. What are the merits of pay back period?
d. What is market risk?

Q2. Describe the key role of financial manager? Also elaborate various form of business organization.

Q3. Explain the basic three financial statements. Also write a comprehensive note on various types and features of bonds?

Q4. What is Islamic finance? Make a comparison of this with conventional financial system.

Q5. A. what is risk?
B. solar designs is considering an investment in an expanded product line. Two possible types of expansions are being considered. After investigating the possible outcomes the company made the estimates shown in the following table
Expansion A Expansion B
II $12000 $12000
Annual rate of return
Pessimistic 16% 10%
Most likely 20% 20%
Optimistic 24% 36%
i. Determine the range of the rate of return for each of the two projects.
ii. Which project is less risky. Why?
iii. If you making the investment decision, which one would you choos?
Q6. A.Explain time value of money and its importance.
B. Jaani corporation, a growing computer software developer wishes to determine the required rate on an asset Z which has beta of 1.5. the RF rate is 7%, the return on market portfolio of asset is 11%.
NOTE: you are required to calculate CAPM on the basis of above information.

Q7. Attempt any TWO of the following.
a. Explain mudarbah, musharqa and murabaha
b. Relationship between future and present value
c. Portfolio management

Prof. Fazal Rehman Shamil