2014

1. “The ultimate goal of a business organization is to maximize wealth, not profit.”- Explain. Note,
Book-9
2. The NPV and IRR criteria always lead to same decision, when the projects are conventional and
independent. Prove this statement. Note
3. Define and distinguish between systematic and unsystematic risk. Book-40, Note
4. Distinguish between Mutually Exclusive and Independent project with illustration. Book-259,
Note
5. What is the advantage of using Discounted Pay Back Period (DPBP)? How is the Discounted Pay
Back Period (DPBP) calculated? Book-267, Note
6. How investor can be classified based on investor risk attitude? Book-40 (Risk Preferences)
7. How incremental cash flows affect equipment replacement decision? Note, Book-260
8. Differentiate between maximum expected return criterion (MERC) and maximum expected
utility criterion (MEUC).

2013
1. What is certainty equivalent approach? How does it differ from risk adjusted discount rate?
Book-294, Note
2. Explain the relationship between the number of securities in the portfolio and the portfolio risk.
Note
3. What risk does beta measure? How can you find the beta of a portfolio? Book-42, Note
4. How the discounted payback period (DPBP) is calculated? Does DPBP solve the deficiencies of
regular payback rule? Book-266, Note
5. In what ground MIRR have theoretical superiority over the regular IRR in capital budgeting?
Book-281, Note
6. How to determine a project’s cash flows? Note
7. The NPV and IRR may lead to different decision when the projects are mutually exclusive.
Explain. Note
8. Briefly explain NPV versus IRR in case of independent and dependent projects. Note

2012
1. What are the steps involved in capital budgeting process? Book-256, Note
2. How are total risk, non-diversifiable risk and diversifiable risk related? Book-39,40, Note
3. Why non-diversifiable risk is the only relevant risk? Book-39,40, Note
4. Difference between independent and mutually exclusive projects. Book-259, Note
5. How does conventional cash flow differ from non-conventional cash flow patterns? Note
6. Why is the coefficient of variation preferred over the standard deviation for comparing asset
risk? Book-291, Note
 7. Distinguish between an efficient portfolio and optimal portfolio. 2013-Q2
8. Define capital budgeting. Explain the importance of capital budgeting as an investment
decisions. Book-259, Note
9. Discuss the concept of cash flow with relevant example. Note
10. Discuss the impact of correlation between securities in a portfolio on the portfolio risk. 2013-Q2
11. Briefly explain the concept of efficient portfolio. 2013-Q2
12. What happens to the risk of a portfolio as more and more securities are added to the portfolio?
2013-Q2

2011

1. Is there any relationship exist among NPV, IRR and profitability index? If so, specify the
relationship.
2. What risk does beta measure? How can you find the beta of a portfolio? Book-42, Note
3. How investor can be classified based on investor risk attitude? Note Book-40 (Risk Preferences)
4. How capital budgeting ranking method and accept reject decision criteria differs. Note
5. In what ground MIRR have theoretical superiority over the regular IRR in capital budgeting?
Book-283
6. How present value and future value concepts are related with the capital budgeting technique?
Explain your answer using relevant equation and examples. Note

2010

1. Distinguish among the different types of investors risk attitude. Note Book-40 (Risk Preferences)
2. Give two examples for each of the following types of investment projects- Note
-Mutually exclusive projects
-Complementary projects
-Substitute projects
-Independent projects.
3. The NPV and IRR criteria always lead to same decision, when the projects are conventional and
independent. Prove this statement. Note
4. Distinguish between an efficient portfolio and optimal portfolio. Note
5. Identify and compare the various alternative goal of the corporation. Which goal is best and
why? Book-6
6. What is capital budgeting? Why it is important for taking decision in financing a project? Note,
Book-254,259
7. What is capital rationing? In which circumstances its use is desirable? Note
2009

1. Mansion the drawbacks of internal rate of return of payback period method. Book-274
2. Define discounted payback period and profitability index with example. Book-266,283
3. What criteria should we use in the evaluation of alternative investment proposal? What is
meant by Multiple IRR?
4. Show the elements of terminal cash flow and explain the concept of modified IRR. Note, Book-
281
5. State the basic characteristics of mutually exclusive project and define independent project.
Note
6. Define capital rationing and state its importance. In which circumstances its use is desirable?
Note
7. What might be options in Capital budgeting? Book-277
8. Define security line. What does it represent? Book-44
9. How do we measure the beta of a portfolio? Book-42, Note
10. What is investor’s required rate of return? Note
11. Explain the effect of inflation on rates of return. Note
12. Define systematic and unsystematic risk with example. Book-39,40

2008

1. What is the main reason that an agency relationship exists in the corporate form of
organization? In this context, what kind of problem can arise? Note
2. How the discounted payback period is calculated? Does discounted payback solve the
deficiencies of regular payback rule? -Explain Book-266
3. Briefly explain the alternative towards risk. What are the steps that management can take to
reduce the riskiness of a project? Book-286
4. Define variance and standard deviation. How are these calculated? Book-291
5. How does diversification reduce risk? Give example. Note
6. What is meant by sensitivity analysis? How it is done? Note
7. What are mutually exclusive investment project? What is an independent project? 2009-Q5
8. If capital rationing is not optimal, why would you use it for investment decision? 2009-Q6
9. Is the economic efficiency of a business enhanced by the use of modern capital budgeting
technique? Why? Note
10. Explain what is meant by time value of money? Why is a bird in the hand worth two (as so) in
the bush? Book-260
11. Which capital budgeting concept ignores time value of money concept? Is it optimal? Book-260