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Created on March 27, 2026 By

CA Sonal Saboo

CMA Final

Final Strategic Financial Management PN-14 Quiz 1

This quiz is based on the CMA Strategic Financial Management paper.
Each question is multiple-choice with 4 options, and only 1 option is correct.
Attempt the quiz to test your understanding of CMA SFM concepts.

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Category: Strategic Financial Management PN-14

1. A finance lease is an agreement between an owner of an asset and a user of that asset wherein the:

a. usual risks and benefits of ownership are transferred to the user;

b. legal title to property is transferred to the lessee when the first lease payment is made;

c. ownership passes to the lessor on inception date of the lease;

d. substantially all of the risks and benefits of ownership remain with the lessor.

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Category: Strategic Financial Management PN-14

2. Limitations of Leasing are

a. The lessor generally imposes certain restrictions on the leased assets. The Lessee may not be permitted to make additions on alterations to suit his needs.

b. A Financial Lease may entail a higher pay out obligation, if the equipment is not found useful subsequently, and the lessee opts for premature termination of the Lease arrangement.

c. In most circumstances, the Lessee does not become the owner of the asset, and is thus deprived of the residual value of the asset.

d. All of these

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Category: Strategic Financial Management PN-14

3. is an imitation of a real-world system using a mathematical model that captures the characteristic features of the system as it encounters random events in time.

a. Simulation

b. Scenario analysis

c. Sensitivity analysis

d. None of these

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Category: Strategic Financial Management PN-14

4. If project cost = Rs.12,000, Annual cash flow = Rs.4,500 Cost of capital = 14%, life = 4 years, PVIFA (14%, 4) = 2.9137, then the sensitivity with respect to the project cost is .

a. 9.27%

b. 10.27%

c. 9.72%

d. 10.72%

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Category: Strategic Financial Management PN-14

5. Given, expected value of profit without perfect information = Rs.1,600 and expected value of perfect information = Rs.300, then expected value of profit with perfect information will be

a. Rs.1,300

b. Rs.1,900

c. Rs.950

d. None of these

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Category: Strategic Financial Management PN-14

6. If expected NPV = Rs.1,20,000 and S.D = Rs.30,000, then coefficient of variation will be .

a. 25%

b. 20%

c. 30.00%

d. 50%

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Category: Strategic Financial Management PN-14

7. If nominal discounting rate is 15%, inflation rate is 5%, then real discounting rate will be .

a. 9.52%

b. 9.25%

c. 10.25%

d. 10.52%

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Category: Strategic Financial Management PN-14

8. Coefficient of variation

a. Is an absolute measure of risk

b. Is a relative measure of risk

c. Is given by mean expected return by standard deviation

d. Is given by the product of mean expected return and standard deviation

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Category: Strategic Financial Management PN-14

9. Given, Investment Rs.1,00,000, Life 3 years, Annual Cash Inflows Rs.2,00,000, Annual Cash Outflows Rs.1,50,000, Appropriate Discount Rate 10%. Calculate NPV .

a. Rs.24,300

b. Rs.23,400

c. Rs.15,000

d. Rs.60,000

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Category: Strategic Financial Management PN-14

10. The analyses investment opportunities involving a sequence of decisions over time.

a. Decision-tree Method

b. Normal Probability Distribution

c. Social Cost Benefit Analysis

d. None of these

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Category: Strategic Financial Management PN-14

11. Which of the following techniques is the most suitable, when NPV and IRR lead to inconsistent ranking due to life disparity between two or more projects?

a. Modified Net Present Value.

b. Modified Internal Rate of Return.

c. Uniform Annual Equivalent Cost/Benefit.

d. Discounted Payback Period.

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Category: Strategic Financial Management PN-14

12. Requirement of Social Cost Benefit Analysis is/are .

a. Monetary Cost Benefit Analysis fails to consider the external effects of a project, which may be positive like development of infrastructure or negative like pollution and imbalance in environment.

b. Taxes and subsidies are monetary costs and gains, but these are only transfer payments from social point of view and therefore irrelevant.

c. Market prices used to measure costs and benefits in project analysis, do not represent social values due to imperfections in market.

d. All of these

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Category: Strategic Financial Management PN-14

13. When NPV is zero, PI is .

a. 0

b. 1

c. 100

d. -1

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Category: Strategic Financial Management PN-14

14. At IRR, NPV is .

a. 0

b. 1

c. 100

d. -1

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Category: Strategic Financial Management PN-14

15. IRR can be viewed as

a. Desired rate of return for the investment proposed

b. Rate of return earned on the initial investment

c. The discount rate at which the capital is procured

d. Rate of return earned on the intermediate cash flows of the project

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Category: Strategic Financial Management PN-14

16. Terminal value of the projects’ cash inflows means

a. The sum of the future cash flows after a particular period of time

b. The present value of the projects’ future cash inflows

c. The sum of the reinvested values of the cash inflows up to the end of the project life

d. The sum of the reinvested values of the cash inflows up to the end of the project life minus initial outlay

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Category: Strategic Financial Management PN-14

17. Which of the following statements is/are true?

a. NPV is not useful for evaluating mutually exclusive projects.

b. The result of the NPV technique is not effected by the discount rate used.

c. Benefit-cost ratio helps in evaluating the projects which differ in initial outlays.

d. The advantage of NPV criteria is that it remains the same for all possible reinvestment rates of intermediate cash flows.

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Category: Strategic Financial Management PN-14

18. The IRR of a project is 10%. If the annual cash flow after tax is Rs.1,30,000 and project duration is 4 years, what is the initial investment in the project?

a. Rs.4,10,000

b. Rs. 4,12,100

c. Rs. 3,90,000

d. Rs. 4,05,000

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Category: Strategic Financial Management PN-14

19. The Profitability Index of a project is 1.28 and its cost of investment is Rs. 2,50,000. The NPV of the project is .

a. Rs. 75,000

b. Rs. 80,000

c. Rs. 70,000

d. Rs. 65,000

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Category: Strategic Financial Management PN-14

20. NPV at discounting rate of 10% = Rs.1250 and NPV at discounting rate of 11% = Rs. (-) 200. The IRR of the proposal is

a. 11.86%

b. 10.86%

c. 9.87%

d. 11.96%

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Category: Strategic Financial Management PN-14

21. A project requires an initial investment of Rs.5,00,000. It yields annual cash inflow of Rs.1,00,000 for 8 years. You are required to find out the pay-back profitability of the project.

a. Rs.3,00,000

b. Rs.1,20,000

c. Rs.8,00,000

d. Rs.40,00,000

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Category: Strategic Financial Management PN-14

22. A project requires an initial investment of Rs.3,00,000. It yields annual cash inflow of Rs.60,000 for 8 years. You are required to find out the pay-back period of the project.

a. 8 years

b. 1 year

c. 5 years

d. 2 months

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Category: Strategic Financial Management PN-14

23. A project with an initial investment of Rs.50 Lakh and life of 10 years, generates CFAT of Rs.10 Lakh per annum. Calculate the Payback Reciprocal.

a. 10%

b. 20%

c. 100%

d. None of these

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Category: Strategic Financial Management PN-14

24. Average Rate of Return (ARR) =

a. (Average Annual Profit after Tax/Average Investment ) x 100

b. (Average Annual Profit after Tax/Opening Investment ) x 100

c. (Average Annual Profit before Tax/Average Investment ) x 100

d. (Average Annual Profit after Tax/Net Sales) x 100

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Category: Strategic Financial Management PN-14

25. Relevant cost analysis or relevant costing is used for various managerial decisions, like .

a. Make or buy decision

b. Accepting or rejecting a special order

c. Both 1 and 2

d. Deciding sale quantity

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Final PN-14 SFM Quiz 1

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