Chapter No.

06 Discounted Cash Flows

Q.1 Naseem Shah plans to invest Rs. 8,000 every year for 3 years starting from today. Interest rate is
10% per annum compounded annually. At the end of year 3 he will receive:
(a) Rs 26,480 (b) Rs 26,328
(c) Rs 29,128 (d) Rs 31,944
Q.2 Project MCG would provide annual inflows of Rs. 650,000 Rs. 500,000, Rs 1,000,000 and Rs
2,500,000 at the end of year 1 to 4 respectively, whereas project ACG would yield annual inflows
of Rs 849,650, Rs 1,166,800 and Rs 2,068,000 from year 1 to 3 respectively. The discount rate at
which both projects would have same net present value is:
(a) 16.31% (b) 17.51%
(c) 18.27% (d) 14.9%
Q.3 Solution Desk Private Limited intends to invest Rs 4 million into a project which would yield
12,14 and 16 percent during three years respectively. The company would also recover the
original investment after 3 years. Company’s cost of capital is 10%, NPV of the project would be:
(a) 385,274 (b) 436,364
(c) 480,841 (d) 1,380,015
Q.4 A development project costing Rs. 2 million is expected to yield Rs. 300,000, Rs. 400,000, Rs.
1,900,000 at the end of each of the next 3 years respectively. The nearest IRR approximation of
the project is:
(a) 10.18% (b) 10.66%
(c) 11.15% (d) 11.51%
Q.5 The rate of interest is 8% per annum compounded monthly, the value of perpetuity of Rs 2,500
per month would be:
(a) Rs 375,000 (b) Rs 187,500
(c) Rs 37,500 (d) Rs 31,250
Q.6 If the rate of interest is 8% per annum compounded quarterly, the value of perpetuity of
Rs 3,500 per quarter would be:
(a) Rs 131,250 (b) Rs 175,000
(c) Rs 262,500 (d) Rs 525,000
Q.7 NCHM invested 5 million. Return rate was 10%, 12% and 14% per year for first, second and third
year respectively. Find NPV if cost of capital is 10% and initial investment also recovered at the
end.
(a) 0.15 million (b) 0.1656 million
(c) 0.2329 million (d) None of these
Q.8 If the discount rate is 12%, The present value of Rs. X received at the end of each year for the
next five years is equal to:
(a) 6x (b) 5x
(c) 3.6x (d) 4.03x

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Q.9 Asia ghee mills invested 4 million. Interest rate on which return based was 10%, 12% and 13%
per year for first, second and third year respectively. Find NPV if cost of capital is 10%
(a) 0.15 million (b) 0.1563 million
(c) 0.2329 million (d) None of these
Q.10 Solution desk invested 9 million. Interest rate was 8%, 12% and 14% per year for first, second
and third year respectively. Find NPV if cost of capital is 9%
(a) 0.15 million (b) 0.1563 million
(c) 0.4922 million (d) None of these
Q.11 Pakistan Railway invested 5 million. Interest rate was 12%, 14% and 16% per year for first,
second and third year respectively. Find NPV if cost of capital is 10%
(a) 0.15 million (b) 0.1563 million
(c) 0.2329 million (d) 0.4816 million
Q.12 A Pharmaceutical Company invested 4 million. Interest rate was 10%, 12% and 13% per year for
first, second and third year respectively. Find NPV if cost of capital is 9%
(a) 0.15 million (b) 0.1563 million
(c) 0.2613 million (d) None of these
Q.13 Adeel Aqeel makes investment of Rs. 8,000 now and in next two years at 10% compounded
annually, calculate his total investment at end of three years.
(a) Rs. 29,000 (b) Rs. 29,128
(c) Rs. 27,000 (d) Rs. 27,500
Q.14 Cash outflow = 3.0 million, cash inflow = 1.0m (1st year) 0.25 million (2nd) 2.25 m (3rd). Find
IRR.
(a) 2.876% (b) 5.897%
(c) 8.746% (d) 6.84%
Q.15 What are the qualities of perpetuity?
(a) Used to find purchase price of share
(b) Used to find value of maintenance fund
(c) Used to find initial deposit required for pension scheme
(d) All of these
Q.16 A Cement Industry intends to invest Rs. 3 million into a project which would yield 10, 12 and 14
percent during three years respectively. The industry would also recover the original investment
after 3 years. If the company’s cost of capital is 10% the NPV of the project is:
(a) Rs 139,745 (b) Rs 46,582
(c) Rs 1,046,582 (d) Rs 3,139,745
Q.17 Punjab Government has issued a five years bond of Rs. 200,000. On maturity the buyer will get
Rs 300,000. If the current interest rate is 8% per annum, is purchasing the bond worth?

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(a) Yes, as present value of Rs 300,000 is more than Rs 200,000

(b) No, as present value of Rs 300,000 is more than Rs 200,000
(c) Yes, as present value of Rs 300,000 is less than Rs 200,000
(d) No, as future value of Rs 200,000 is more than Rs 300,000
Q.18 An Indoor Sports project costing 4 million is expected to yield Rs. 600000, Rs. 800000 & Rs.
4000000 at the end of each year for next 3 years respectively. The IRR of the project is?
(a) 12.22% (b) 21.22%
(c) 22.12% (d) 22.21%
Q.19 Faisal Javed has invested Rs. 700,000 in an investment scheme. In return, he would receive Rs.
74,587 semi-annually in arrears, for the six years. He would not receive any amount afterwards.
Find the nominal and effective rate of return of the scheme.
(a) 8% and 8.16% (b) 8% and 9.16%
(c) 8% and 10.16% (d) 7% and 7.16%
Q.20 If discount rate is 10% then the present value of Rs Z payable annually for 4 years is?
(a) 4.17z (b) 3.17z
(c) 6.25z (d) 5.25z
Q.21 Jalal ud Deen makes investment of Rs. 8,000 now and in next two years at 10% compounded
annually find his total investment at end of three years.
(a) Rs. 29,000 (b) Rs. 29,653
(c) Rs. 27,000 (d) Rs. 29128
Q.22 Mr. Akbar Mughal intends to create an endowment fund to provide for a yearly pension of Rs.
4,000 every year. If the fund is invested in high yielding securities at 7.5% compound interest, the
amount of endowment will be?
(a) 43,333 (b) 35,333
(c) 53,333 (d) 33,333

Q.23 Faisal bank is planning to offer a unique product to its customers whereby it would pay Rs.
250,000 per annum for an indefinite period commencing from the end of year 6. How much
amount should the bank ask its customers to pay now, if the rate of interest that the bank can pay,
is 5% compounded annually?
(a) Rs. 3,191,221 (b) Rs 3,547,829
(c) Rs 3,917,631 (d) Rs 3,960,498
Q.24 Mr. Anwar Ali invested 200,000 in an account today. He also deposit 20,000 quarterly in this
account and made first payment today. If the interest is 8% compounded quarterly. What will be
value after 5 years.
(a) Rs. 992,855 (b) Rs. 222,855
(c) Rs. 792,855 (d) Rs. 692.855

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Q.25 Which of the following statement is CORRECT?

(a) Perpetuity is a special kind of annuity that never ends
(b) It is impossible to find the future value of perpetuity
(c) It is impossible to find the present value of perpetuity
(d) Both a and b
Q.26 You are given sum of annuity due of Rs. 200,000 find the Sum of ordinary annuity of r = 12%
compounded quarterly
(a) 183,174.76 (b) 214,174.76
(c) 194,174.76 (d) 172,174.76
Q.27 If interest rate = 8%, R = 2,500 find present value of perpetuity
(a) Rs. 31250 (b) Rs. 442,500
(c) Rs.500,500 (d) Rs. 222,500
Q.28 If R = 170,000 r = 8% compounding annually, find the P.V at the end of 5th year=?
(a) Rs 5,635,373 (b) Rs 678,761
(c) Rs 363,537 (d) None of these
Q.29 Find perpetuity, P = 2500, r = 8% compounding quarterly.
(a) Rs 123, 537 (b) Rs 563,537
(c) Rs. 125,000 (d) Rs.433, 537
Q.30 If R=3,000 for 3 years, r =8% compounding monthly find present value
(a) Rs 83,537 (b) Rs 95,735
(c) Rs 72,537 (d) Rs 65,537
Q.31 Asif Ali plans to invest Rs 5000 every year starting from today for next 3 years. Interest rate is
10% per annum compounded annually. Future value of the annuity is:
(a) Rs 16,500 (b) Rs 17,050
(c) Rs 17,600 (d) Rs 18,205
Q.32 Find annuity due, if R = 9,000 for 4 years, r=10% compounding yearly.
(a) Rs. 31,381.67 (b) Rs. 33,543.27
(c) Rs 223,537 (d) Rs. 123,544
Q.33 If R = x, I = 10% n = 5. Find the present value of Annuity Due.
(a) 0.215x (b) 2.169x
(c) 1.027x (d) 4.1698x
Q.34 If rate is 12%, find the present value of x at the end of each year for 4 years.
(a) 2.027x (b) 3.037x
(c) 1.027x (d) None

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Q.35 If interest rate is 9% compounding monthly, regular payment R = 3,000 find perpetuity.
(a) Rs. 300,000 (b) R. 400,000
(c) Rs. 250,500 (d) Rs. 550,000
Q.36 Cash outflow = 3.0 million, cash flow = 1.0m (1st year) 0.25 million (2nd) 2.25 m (3rd). Find
IRR.
(a) 2.876% (b) 5.897%
(c) 8.746% (d) 6.845%
Q.37 2.5 million cash outflow: cash inflows of year 1, 2 and 3 are 2 million, 2.9 million, 0.5 million
respectively. Find IRR.
(a) 7.38% (b) 9.38%
(c) 60.2% (d) 10.38%
Q.38 A person invest 500,000 now and 20,000 every year at 10% per annum. Find the total amount
after 10 years.
(a) Rs 1,406,115 (b) Rs. 1,615,619
(c) Rs 1,507,000 (d) Rs. 1,406, 500
Q.39 If the discount rate is 11% the present value of Rs X received at the end of each year for the next
five years is equal to:
(a) 3.17x (b) 4.10x
(c) 3.7x (d) 5x

Q.40 Mr. A invested Rs. 100,000 and received Rs. 50,000 at first, Rs. 40,000 at second year and Rs.
30,000 at third year. Find Net present value in %.
(a) 2.09876% (b) 10.651%
(c) 4.98486% (d) 5.635487%
Q.41 From perpetuity we cannot find
(a) Present value (b) Future value
(c) Both (d) Rate of interest
Q.42 If the rate of interest is 9% per annum compounded monthly the value of perpetuity of Rs 3,000
per month would be:
(a) Rs. 400,000 (b) Rs. 300,000
(c) Rs. 270,000 (d) Rs. 360,000
Q.43 If the rate of interest is 8% per annum compounded monthly the value of perpetuity of Rs. 2,500
per mount would be:
(a) Rs. 375,000 (b) Rs. 187,500
(c) Rs.37,500 (d) Rs. 31,250

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Q.44 Meezan bank launched a new scheme where it offers 40,0000 per year for indefinite time after 8
years. How much amount should bank require to collect from customer today if it offers 5%
interest compounded annually?
(a) 8 million (b) 5.96 million
(c) 5.41 million (d) 5.6 million
Q.45 Sikandar Raza wants to save money over a period of 10 years in order to the expenses to be
incurred on higher education of his son. He has recently invested a sum of Rs 200,000 and plans
to further invest Rs. 20,000 at the end of each quarter, which of the following amount will be
available to him at the end of 10th year if he earns a profit of 6% per annum compounded
quarterly.
(a) Rs 1,448,161 (b) Rs 1,321,027.61
(c) Rs 992,497.74 (d) Rs 718,018.61
Q.46 If the current discount rate is 10%, then the present value of a certain amount X received at the
end of each year will become for 4 years:
(a) 4x (b) 3.16x
(c) Both (d) None
Q.47 Two companies made profits from in different project:
Year 1 Year 2 Year 3 Year 4
Company A 900,000 600,000 300,000 900,000
Company B 1,200,000 800,000 400,000 -
Find the rate at which NPV of both companies will be same.
(a) 29.37% (b) 18.58%
(c) 15.37% (d) 16.33%
Q.48 Project A would provide annual inflows of Rs. 525,000 Rs 648,000, Rs 853,000 and Rs 2,844,000
at the end of year 1 to 4 respectively, whereas project B would yield annual inflow of Rs. 947,000
Rs 1,155,000 and Rs 2,068,000 from year 1 to 3 respectively. The discount rate at which both
project would have same net present value is:
(a) 18.27% (b) 18.83%
(c) 19.31% (d) 19.73%
Q.49 Ashfaq is planning to invest in a scheme whereby he would be required to invest Rs 130,000
annually (at the start of the year) for 5 years. If the interest rate is 13% compounded annually,
what amount would he receive at the end of the 5th year?
(a) Rs 842,435 (b) Rs 951,952
(c) Rs 964,952 (d) Rs 1,075,706
Q.50 Bazooka invested Rs 500,000 for 5 years after which he received a lump sum amount of Rs
762,150. If he earned 10% interest compounded annually during last 2 years, what rate of interest
compounded annually did he earn during the first three years?
(a) 6% (b) 7%

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(c) 8% (d) 9%
Q.51 Dr. Strange has borrowed a certain amount at an interest of 12% compounded semi-annually. In
how many years the amount owed would double?
(a) 3 years (b) 5 years
(c) 6 years (d) 8 years
Q.52 Bholo plans to invest Rs 9,000 every year for 3 years starting from today. Interest rate is 10% per
annum compounded annually. At the end of year 3 Bholo will receive:
(a) Rs 29,790 (b) Rs 31,869
(c) Rs 35,937 (d) Rs 32,769
Q.53 Which of the following statement is CORRECT?
(a) Discounting estimates the present day equivalent of a future cash flow at a specified time
in the future at a given rate of interest
(b) Multiplying by a discount factor is the same as multiplying by a compounding factor
(c) The present value of a cash flow is not affected by rate of interest.
(d) Present value fails to appraise large projects with multiple cash flows.
Q.54 Which of the following is true about perpetuity?
(a) It has unlimited time series (b) It has no future value
(c) Used to find purchase price of a share (d) All of these
Q.55 Two companies made profits from investments in different projects:
Year 1 2 3 4
Company A 9,800 9,500 1,500 --
Company B 8,500 9,000 700 100
Find the rate at which NPV of both companies will be same
(a) 12.4% (b) 20%
(c) 30% (d) None of these
Q.56 Two companies made profits from investments in different projects:
Year 1 Year 2 Year 3
Company A 600,000 900,000 850,000
Company B 600,000 750,000 1200,000
Find the rate at which NPV of both companies will be same
(a) 1.47% (b) 1.33%
(c) 54.65% (d) 15.2%
Q.57 Mr. Bajaj Borrowed Rs 100,000 and promised to pay Rs 1,000 each month to settle the
obligation. If interest rate is 1.8% compounded monthly find the time (approx.) required to settle
the obligation.
(a) 3 years (b) 4 years

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(c) 5 years (d) 9 years

Q.58 Jamshed invested Rs 400,000 in an investment scheme and got Rs 545,881 at the end of three
years.Find effective rate, if interest was compounded monthly
(a) 1.41% (b) 1.92%
(c) 1% (d) 10.92%
Q.59 Azam & Moazzam invested Rs 10 million each compounded quarterly for 5 years. After 5 year
Azam has 20% more than Moazzam. Azam rate is 10%. Find rate of Moazzam.
(a) 6.02% (b) 6.12%
(c) 6.27% (d) 6%
Q.60 Allah Nawaz made an investment of Rs 1.2 million at 12% compounded quarterly & Salman
made investment of Rs 1.8 million at 10% compounded annually. In how many years Allah
Nawaz’s investment would exceed Salman’s investment?
(a) 17.68 years (b) 17 years
(c) 18 years (d) 21 years
Q.61 A loan was repaid in 7 annual installments of Rs.168 each. If the rate of interest be 10% per
annum, compounded annually, the sum borrowed was:
(a) Rs 850.1 (b) Rs 817.9
(c) Rs 1593.8 (d) Rs 936.3
Q.62 Find the IRR of an investment having initial cash outflow of Rs. 213,000. The cash inflows
during the first, second, third and fourth years are expected to be Rs. 65,200, Rs. 96,000, Rs.
73,100 and Rs 55,400 respectively
(a) 11% (b) 12%
(c) 13.12% (d) 14.04%
Q.63 The indebtedness at any time in amortization is called
(a) Principal Repayment (b) Opening balance
(c) Closing Balance (d) Outstanding balance
Q.64 If the discount rate is 9% then find the present value of “X” which is paid in equal annual
Installments for next five years?
(a) 4.641X (b) 0.3158X
(c) 3.89X (d) 0.2155X
Q.65 An annuity is a (n):
(a) Level stream of perpetual cash flows.
(b) Level stream of cash flows occurring for a fixed period of time.
(c) Increasing stream of perpetual cash flows.
(d) Increasing stream of cash flows occurring for a fixed period of time.
e) Decreasing stream of cash flows occurring for a fixed period of time.

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Q.66 An annuity stream where the payments occur forever is called a(n):
(a) annuity due (b) indemnity
(c) perpetuity (d) ordinary annuity.
Q.67 Mr. Shayan invested Rs.500,000 and Rs.25000 every quarter at the rate of 8% compounded
quarterly. What will be the future value after 10 years?
(a) Rs.2614069 (b) Rs.2589512
(c) Rs.1787907 (d) None of these
Q.68 Starting today, Mr. Qudratullah is going to contribute Rs.200 on the first of each month to his
retirement account. His employer will contribute an additional 50 percent of the amount
Qudratullah contributes. If both Qudratullah and his employer continue to do this and he can earn
a monthly rate of 0.75 percent, how much will Qudratullah have in his retirement account 40
years from now? If the per annum rate is compounded monthly.
(a) Rs.936264 (b) Rs.1414929
(c) Rs.1404396 (d) cannot be solved
Q.69 Mr. Qasim Suri invested Rs. 37500 at the start. Mr. Suri also invested Rs.1200 every month for 3
years. Calculate the future value of the investments at the rate of 12% compounded monthly?
(a) Rs. 105346 (b) Rs.56734
(c) Rs.80700 (d) None of these
Q.70 Mr. Shafique receives a perpetual stream of Rs.3500 per quarter at the rate of 8% compounded
quarterly. Calculate the present value of the stream?
(a) Rs.43750 (b) Rs.17500
(c) Rs.175000 (d) None of these
Q.71 If the rate of interest is 8% per annum compounded monthly, then the value of perpetuity of Rs.
2,500 per mount would be:
(a) Rs. 375,000 (b) Rs. 187,500
(c) Rs.37,500 (d) Rs. 31,250
Q.72 Mr. Ittefaq Ali invested Rs. 2500 annually and expected to receive 8% return from the
investment. Calculate the present value of the investment?
(a) Rs.25000 (b) Rs.31250
(c) Cannot be calculated (d) None of these
Q.73 Find the future value of an annuity of Rs.500 for 7 years at interest rate of 14% compounded
annually.
(a) Rs.5,465.25 (b) Rs.5,565.35
(c) Rs.5,365.25 (d) Rs.5,665.35
Q.74 Rs.200 is invested at the end of each month in an account paying interest 6% per year
compounded monthly. What is the future value of this annuity after 10th payment?
(a) Rs.2,400 (b) Rs.2,045
(c) Rs.2,404 (d) Rs.2,004

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Q.75 Zain Iftikhar invests Rs.10,000 every year starting from today for next 10 years. Suppose interest
rate is 8% per annum compounded annually. Future value of the annuity is:
(a) Rs.156,654.87 (b) Rs.157,454.87
(c) Rs.156,555.87 (d) Rs.156,454.87
Q.76 An amount of Rs.5,000 is paid every year for ten years to settle a loan. What is the loan amount if
interest rate is 14% per annum compounded annually?
(a) Rs.27,080.55 (b) Rs.25,080.55
(c) Rs.26,080.55 (d) Rs.24,080.55
Q.77 Asad Manufacturing limited wants to lease out an asset costing Rs.360,000 for a five years
period. It has fixed a rental of Rs.105,000 per annum payable annually starting from the end of
first year. This agreement would be favorable to the company if the interest rate, which the
company earns on its investments is:
(a) 16% (b) 15%
(c) 17% (d) 14%
Q.78 A loan of Rs.10,000 is to be paid back in 30 equal annual installments. The amount of each
installment to cover the principal and 4% p.a. C.I. is:
(a) Rs.587.87 (b) Rs.597.87
(c) Rs.578.31 (d) None of these
Q.79 Mr. Nadeem has borrowed Rs.19,000 for a small business. The loan is for five years at an annual
interest rate of 8 percent compounded quarterly. What is the amount of quarterly payments to pay
back the loan?
(a) Rs.1,361.97 (b) Rs.1,261.97
(c) Rs.1,461.97 (d) Rs.1,161.97
Q.80 Rs.680,000 loan calls for payment to be made in 10 annual installments. If the interest rate is 14%
compounded annually. Annual payment to be made is:
(a) Rs.125,365.20 (b) Rs.130,365.20
(c) Rs.133,365.20 (d) Rs.135,365.20
Q.81 Monthly payment necessary to pay off a loan of Rs.8,000 at 18% per annum compounded
monthly in two years is:
(a) Rs.419.40 (b) Rs.409.40
(c) Rs.399.40 (d) Rs.389.40
Q.82 Rahat Indoori agrees to pay Rs.4,500 per month for 30 months to pay off a Car loan. If the
interest of 18% per annum is charged monthly, the present value of Car is:
(a) Rs.108,271.27 (b) Rs.108,171.27
(c) Rs.108,671.27 (d) Rs.108,071.27
Q.83 A Russian company is considering proposal of purchasing a machine either by making full
payment of Rs.4,000 or by leasing it for four years requiring annual payment of Rs.1,250 or by

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paying Rs. 4,800 at the end of 2nd year. Which course of action is preferable if the company can
borrow money at 14% compounded annually?
(a) Leasing (b) Full payment
(c) Rs. 4,800 after 2 years (d) Either (a) or (c)
Q.84 A machine with useful life of seven years costs Rs.10,000 while another machine with useful life
of five years costs Rs.8,000.The first machine saves labour expenses of Rs.1,900 annually and the
second one saves labour expenses of Rs.2,200 annually. Determine the preferred course of action.
Assume cost of borrowing as 10% compounded per annum.
(a) First Machine (b) Second Machine
(c) Both are same (d) Cannot be determined
Q.85 Zaid bin Hanan borrows Rs.10,000 on condition to repay it with compound interest at 5% per
annum by annual installments of Rs.1,000 each. The number of years by which the debt will be
clear is:
(a) 14.2 years (b) 10 years
(c) 12 years (d) 11 years
Q.86 Mr. Shoaib borrows Rs.20,000 on condition to repay it with C.I. at 5% p.a. in annual installments
of Rs.2,000 each. The number of years for the debt to be paid off is:
(a) 10 years (b) 12 years
(c) 11 years (d) 14.20 years
Q.87 Eurtghrul invests Rs.500 at the end of each year with a bank which pays interest at 10% p.a. C.I.
The amount standing to his credit one year after he has made his yearly investment for the 12th
time would be:
(a) Rs.11,761 (b) Rs.10,000
(c) Rs.12,000 (d) Rs.10,692
Q.88 Hamoon acquired a new car worth Rs.850,000 through a leasing company. He made a down
payment of Rs.200,000 and has agreed to pay the remaining amount in 10 equal semi-annual
installments. The leasing company will charge interest at 19% per annum, over the lease term.
Amount of semi-annual installment and total amount of interest is:
(a) Rs.103,623 and Rs.386,230 (b) Rs.103,533 and Rs. 386,000
(c) Rs.103,523 and Rs.385,230 (d) Rs.103,554 and Rs. 385,830
Q.89 Ashraf purchased a new car and made a down payment of Rs.50,000. He is further required to pay
Rs.30,000 at the end of each quarter for five years. The cash purchase price of the car, if the
quarterly payments include 12% interest compounded quarterly, is:
(a) Rs.498,324.25 (b) Rs.496,324.25
(c) Rs.499,324.25 (d) Rs.497,324.25
Q.90 Shadab Khan has an opportunity to invest in a fund which earns 6% profit compounded annually.
How much should he invest now if he wants to receive Rs.6,000 (including principal) from the
fund, at the end of each year for the next 10 years? How much interest he would earn over the
period of 10 year?

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(a) Rs.44,560.52 and Rs.15,939.48 (b) Rs.44,260.52 and Rs.15,739.48

(c) Rs.44,760.52 and Rs.15,239.48 (d) Rs.44,160.52 and Rs.15,839.48
Q.91 An Officer wants to deposit enough in an account to provide for insurance payments over the next
5 years. Payment of Rs.27,500 must be made each quarter. The account yields an 8% annual rate
compounded quarterly. How much be deposited to pay all the insurance payments?
(a) Rs.448,664.41 (b) Rs.447,664.41
(c) Rs.449,664.41 (d) Rs.446,664.41
Q.92 How much money must be invested in an account at the end of each quarter if the objective is to
have Rs.225,000 after 10 years. The account can earn an interest rate of 9 percent per year
compounded quarterly. How much interest will be earned over the period?
(a) Rs.3,547.87 and Rs.83,903.03 (b) Rs.3,527.87and Rs.83,885.03
(c) Rs.3,557.87 and Rs.83,875.03 (d) Rs.3,537.87and Rs.83,845.03
Q.93 A Property Dealer made a down payment of Rs.200,000 and will make payments of Rs.75,000
each 6 months, for 15 years. The cost of fund is 10% compounded semi-annually. What would
have been equivalent cash price for the house? How much will the buyer actually pay for the
house?
(a) Rs.1,360,933.8 and Rs.2,440,000 (b) Rs.1,362,933.8 and Rs.2,455,000
(c) Rs.1,352,933.8 and Rs.2,450,000 (d) Rs.1,372,933.8 and Rs.2,456,000
Q.94 Shahbaz plans to borrow Rs.400,000 to buy a new car. The loan will be for 3 years at a 12 percent
annual rate compounded monthly. He can pay Rs.12,500 per month during the first year. What
amount would he be required to pay during the next two years in order to repay the loan?
(a) Rs. 13,755 (b) Rs. 13,705
(c) Rs. 13,655 (d) Rs. 13,605
Q.95 A Stitching machine costs a company Rs.1,000,000 & its effective life is estimated to be 20 years.
If the scrap is expected to worth of Rs.50,000 only. The sum to be invested every year at 13.25%
compounded annually for 20 years to replace the machine which would cost 30% more than its
present value is:
(a) Rs.14,797.07 (b) Rs.14,897.07
(c) Rs.14,697.07 (d) Rs.14,997.07
Q.96 To clear a debt Mustafa agrees to pay Rs.1,000 now, another Rs.1,000 a year from now and
another Rs.1,000 in two years. If the future payments are discounted at 8% compounded
quarterly, what is the present value of these payments?
(a) Rs.2,777.33 (b) Rs.2,760.4139
(c) Rs.2,767.41 (d) Rs.2,762.41
Q.97 A ____________ is a constant cash flow for a given number of periods. Fill in the blank.
(a) Perpetuity (b) discounting factor
(c) annuity (d) Net present value

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Q.98 A sinking fund is defined as

(a) saving of a constant amount for future
(b) saving of a continuously changing amount for benefit in the future
(c) lending of a constant amount for specific benefit in future
(d) continuous cash flow for a long time in future
Q.99 ECS is deciding for an endowment fund which is likely to generate Rs. 20,000 per year. How
much can be invested today when the rate of interest is 9%?
(a) Rs. 18,348 (b) Rs. 222,222
(c) Rs. 180,00 (d) Rs. 21,8000
Q.100 In order to purchase an equipment, five annual instalments of Rs. 30,000 are required. Given the
interest rate of 10%, what is the price that you will be paying for that equipment today?
(a) Rs. 27,273 (b) Rs. 33,000
(c) Rs. 28,500 (d) Rs.113,723
Q.101 When calculating IRR, Net Present Value of the project cash flow must be:
(a) zero (b) neglected
(c) one (d) double
Q.102 If an investment of Rupees 100,000 is made on a Digiskill business with a promise of 7% interest
earned each year for the next 10 years. The annual interest would be_______
(a) 7,000 (b) 700
(c) 17,000 (d) 7,700
Q.103 Mr. Patras Bukhari invests Rs 500,000 today with the objective of receiving two equal annual
receipts at the end of first year and second year (inclusive of the original invested amount). If the
interest rate is 16%, compute the amount of interest received in the second receipt.
(a) Rs. 268,519 (b) Rs. 42,963

(c) Rs. 80,000 (d) Rs. 268,518

Q.104 A legal project requires certain amount to be invested today. The project will yield a single return
at the end of four years which is four times the original investment. Compute internal rate of
return of the project
(a) 10 % (b) 21.42 %
(c) 31.42 % (d) 41.42 %
Q.105 Abhijeet needs Rs. 400,000 at the end of fifth year. In order to have this amount he will invest
certain amount at the end of each year for three years. If the interest rate is 8% compute the
amount to be invested at the end of each year.
(a) Rs.105,635 (b) Rs. 214,086
(c) Rs. 14,086 (d) Rs. 314,086

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Q.106 Compute present value of a perpetual stream of cash flow of Rs. 200 each starting from the end of
fifth year if discount rate is 10%.
(a) Rs. 1,366 (b) Rs. 2,000
(c) Rs. 1,242 (d) Rs. 2,400
Q.107 Muhammad Siddique Nasir invests Rs. 40,000 at the end of each month for the first year and Rs.
50,000 at the end of each month for the second year. Compute the total value of funds with him at
the end of second year if interest rate is 12% per annum compounded monthly
(a) Rs. 1,205,763 (b) Rs. 1,305,763
(c) Rs. 1,405,763 (d) Rs. 2,105,763
Q.108 Mehdi Hassan has following investment options:
i. Invest Rs. 500,000 today and get Rs. 200,000 at the end of each year for four years.
ii. Invest Rs. 500,000 today and get Rs. 900,000 at the end of third year.
iii. Invest Rs. 500,000 today and get Rs. 200,000 each at the end of third and fourth year
respectively.
If cost of capital is 15%. Which of the above option(s) must be selected based on net
present value technique?
(a) None (b) All
(c) i and ii (d) ii and iii
Q.109 Ramzan Sugar Mills has following investment options:
i. Invest Rs. 500,000 today and get Rs. 300,000 at the end of each year for two years.
ii. Invest Rs. 500,000 today and get Rs. 900,000 at the end of third year.
Compute internal rate of return for each of the above options

(a) 18% and 21.64% (b) 13.07% and 18.05%

(c) 14.63% and 16.35% (d) 13.07% and 21.64%
Q.110 Asif is thirty years old today, he wishes to set aside a certain amount every year starting from
today till he turns 40. He intends to have Rs. 5,000,000 at the age of 40 to buy his own house. If
interest rate is 11% per annum, compute the annual deposits he must make.
(a) Rs 255,605 (b) Rs. 299,007
(c) Rs. 269,375 (d) Rs. 300,000
Q.111 A Sports project has a net present value of Rs. 524,564 when its cash flows are discounted at 13%
per year. Cash inflows from the project are Rs. 500,000 at the end of each year for three years
starting from the end of third year. Compute the investment made today for the project.
(a) 350,000 (b) 375,000
(c) 400,000 (d) 425,000
Q.112 Which of the following statement is incorrect? (drag down Scenario)
(a) Net present value decreases if discounting rate is increased

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 Chapter No. 06 Discounted Cash Flows

(b) Net present value increases if discounting rate is decreased

(c) Net present value is zero if internal rate of return is used to discount project cash flows
(d) There is a direct relationship between net present value and discount rate, that is if one
increases the other increases as well
Q.113 Which of the following statement is incorrect? (drag down Scenario)
(a) An annuity is a series of regular periodic payments of equal amount for a certain time
interval
(b) A perpetuity is a constant cash flow forever.
(c) A project with a positive net present value must be carried out.
(d) A project with a negative net present value must be carried out.
Q.114 Which of the following statement is correct? (drag down Scenario)
(a) A project must be undertaken if internal rate of return is more than cost of capital.
(b) A project must be undertaken if internal rate of return is less than cost of capital.
(c) A project with a positive net present value must not be undertaken.
(d) A project with a negative net present value must be undertaken
Q.115 A legal project requires Rs. 600,000 today and will result in two annual cash inflows of Rs
300,000 at the end of first year and Rs. 500,000 at the end of second year respectively. Compute
net present value and internal rate of return of the project if cost of capital is 5%

(a) Rs. 239,229 and 7% (b) Rs. 139,229 and 19.64%

(c) Rs. 239,229 and 19.65% (d) Rs. 139,229 and 7%
Q.116 Present value of Rs. 200,000 at the end of each year for five years is Rs. 820,039.5.
What rate of discounting leads to above results?
(a) 6% (b) 5%
(c) 7% (d) 8%
Q.117 Qasim wants to invest certain equal amount at the end of each year for two years in order to have
sufficient funds for following expenses:
i. Rs. 300,000 at the end of third year
ii. Rs. 400,000 at the end of fourth year
If discounting rate is 10% per annum compute the required investment at the end of each
of the two years.
(a) Rs. 287,288 (b) Rs. 294,289
(c) Rs. 277,288 (d) Rs. 267,289
Q.118 Shayan Ali will invest Rs. 35,000 at the start of each year for three years starting one year from
today. Compute the total amount he will have at the end of third year if interest rate is 10% per
annum

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 Chapter No. 06 Discounted Cash Flows

(a) Rs. 115,850 (b) Rs. 125,850

(c) Rs. 110,850 (d) Rs. 112,850
Q.119 A development project has a net present value of Rs 15,028 when discount rate is 15%. At what
discount rate will the net present value of project be Rs. 11,111?
(a) 13% (b) 14%
(c) 10% (d) 20%
Q.120 A project costing Rs. 2.5 million is expected to generate cash flows of Rs. 200,000, Rs. 300,000,
Rs. 2900,000 at the end of each of the next three years respectively, The IRR of the project is
11.7%
(a) True (b) False

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M. SHOAIB(M.Phil) PRC-2(QM)