Advanced Financial Theory and Practice Midterm Summer 2026 Question Paper

(DIU) Mid Term Examination Title of the Course: Advanced Financial Theory and Practice (0412-325) Points: 25 [Instructions: Answer all the questions. The figures the in the right margin indicate the points of each question. Maintain the sequence of l parts of ach queston. Be spectic while answering Group A: 09 R1. Differentiate between (i) accounting profit and economic profit by CLOI 03 highlighting respective equations, and (i) positive and normative views in finance. The internal rate of return (IRR) rule das several shortcomings relative to CLO1 03 the net present value (NPV) approach. Interpret these shortcomings and LO2 demonstrate how the NPV deals with them. Q.3. Discuss the 'evolution of finance theories' by highlighting three CLO1 03 influential theories. L03 Group B: 8A. 06 "We are clearly better off when capital markets exist" - justify the CLO3 06 statement by displaying and explaining relevant graphs. LOS Group C: 10 0.5. Suppose you are a financial analyst and you have been provided with the . following data of one of the client firms that faces three projects. The firm is interested in using the required rate of return of 5 percent for discounting the cash flows. CLO3 L05 Year 1 2 4 Project X -100,000 40,000 - 45,000 35,000 45,000 Amounts are in Tk. Project Y - 15,000 20,700 25,700 Project Z -70,000 50,000 60,000 40,000 Requirements: 2) Estimate the NPV of the projects. 02 Page 10f2 J Assuming the projects are mutually exciusive and there is no capital constraint, which project should be selected? Justify your answer based on shareholders' wealth maximization goal. 8) Suppose the firm has a capital constraint of Tk.120,000 and the projects become independent. Evaluate each of the projects and choose the project (s) that you want to select. d) Suppose the firm has a capital constraint of Tk.120,000 and the projects become mutually exclusive. Evaluate each of the projects and select the best one for you. Estimate the NPV (N, a) of each project. 1) Measure the annual equivalent value of each project. ww.diubbaon.top/ 02 01 02 02