Financial Forensics Quiz 2: 3 December 2023 (September 2023 term)

Two mutually exclusive projects have 3-year lives and a required rate of return of 10.5 percent. Project A costs ₹75,000 and has cash flows of ₹18,500, ₹42,900, and ₹28,600 for Years 1 to Year 3, respectively. Project B costs ₹72,000 and has cash flows of ₹22,000, ₹38,000, and ₹26,500 for Years 1 to Year 3, respectively. Using the NPV, which project, or projects, if either, should be accepted?

PQR financials is a loan provider for businesses, and it is evaluating the following companies for providing a loan.
a) Company A: Debt Equity Ratio: 0.8, Times Interest Earned: 8
b) Company B: Debt Equity Ratio: 0.2, Times Interest Earned: 8
c) Company C: Debt Equity Ratio: 0.8, Times Interest Earned: 2
d) Company D: Debt Equity Ratio: 0.2, Times Interest Earned: 2
As a financial analyst of PQR, you have to review the above information and provide a recommendation to the CEO of the company. What would be your recommendation to the CEO, regarding the best company to give the loan to?

A company is having a lower PE ratio which of the following statement(s) about the company is most likely true:
a) Statement A : The company is undervalued in the market
b) Statement B : The company’s furfure performance look promising
c) Statement C : The company’s furfure performance doesn’t look promising