FIN20014 W2

Which of the following statements is incorrect?

• The overall objective of the financial management of a firm is to maximise profit

• Financing decision of the firm depends on its investment decision

• Dividend decision of the firm depends on its investment decision

• Capital budgeting is used for identifying the best investment from alternatives.

Which of the following statements is correct?

• Managers may join in a company to fulfil own agenda, which creates agency conflict

• Agency problem is surfaced when the managers try to maximise share value.

• Selecting profitable projects does create agency problem in a company

• Shareholders are the agents and managers are the principal.

Which of the following statements is incorrect?

• Perfect certainty assumption results in a single market rate.

• Rational investors try to maximise wealth through investments.

• Perfect capital market assumption allows firms to borrow or invest any amount of money at market rate

• NPV of investment has no impact on share value

Which of the following statements is incorrect?

• NPV of investment has no impact on share value

• Perfect capital market assumtion allows firms to borrow or invest any amount of money at market rate

• Perfect certainty assumption results in a single market rate.

• Rational investors try to maximise wealth through investments.

A firm has intial fund of $300m. Market rate is 10%. The firm has investment opportunity to invest $400m at an average IRR of 15%. What would be the amount of next period dividend?

• $350m

• $360m

• $460m

• $345m