Model Question Paper Project Financing & Budgeting Subject Code-PM0012 Part A-1 Marks question

Q. No. Question Statement

Budget provides________ in measuring performance and so acts as a _________. a. Transparency, motivator b. Flexibility, motivator c. Performance, motivator d. Performance, inspirer An amortisation schedule is a table with rows and each row displays the amount of ______ to be paid. a. Interest b. Loan c. External Funds d. Capital What does SEC stand for? a. Securities and Exchange Centre b. Stocks and Exchange Commission c. Securities and Exchange Commission

d. Stock and Exchange Centre Uncertainty of the forecast is generated is one of the disadvantage of ________________. a. Parametric estimating systems b. Parametric Model c. Estimated cost d. Cost estimation One of the drawback of Payback Period is that it does not relate to wealth maximisation as _______ . a. IRR b. DCF c. NPV

d. ROI The financing plan should be simple as it decreases the confusion and promotes the support of the __________.

a. Stakeholders b. Executive Staff c. Promoters d. Directors ____________ is the income or expense that alters a financial credit over a given period. a. Cash Flows b. Revenue c. Capital budget d. Profit and loss The articulation for DCF was done after the market crash and before the auditing and pubic accounting was made compulsory by SEC. Here what does SEC stand for? a. Securities and Exchange Commission b. Stock and Exchange Commission c. Society for Exchange Commission

d. Securities and Exchange Centre The _______ is used to make a decision whether to accept or to reject the null hypothesis for a given cost driver term. a. '' F'' statistics b. '' t'' statistics c. t test d. '' t'' value Minimum equity required for any project is expected to be _______ of any major project cost. a. 20% to 25% b. 25% to 30% c. 30 % to 35%

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d. 20% to 30% The fund recognises expense variations from the Project Budget up to _______ within any of the major budget categories such as direct labour, subcontracts, consultants. a. 15% b. 10% c. 14%

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d. 16% ROA helps firms to know the way in which the profitability of a firm is related to the _______ . a. Net income b. Cost of equity c. Total assets d. Rate of returns Which year did G20 make a declaration for international financing of

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projects? a. 2010 b. 2009 c. 2008 d. 2007 Cost overruns occur because of __________, time overruns, scope changes and budget underestimation. a. Cost performance baseline b. Extra costs c. Cost escalations d. Cost budgeting The project is accepted once the NPV is:___________. a. Zero or positive b. One or positive c. Zero or negative

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d. One or negative ____________ is based upon the experience and knowledge of subject matter experts. a. Expert judgment b. Product analysis c. Project funding d. Cost information G20 agreed to speed up the next quota review to be completed by _______, which would ensure that the IMFs finances are on a sustainable footing commensurate, with the needs of the international monetary system. a. April 2011 b. December 2011 c. January 2011

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d. May 2011 A parametric model evaluates bids and proposals that is also known as _________. a. CER b. "Sanity" Checks c. Cost of systems d. System descriptions ___________ deals with the raw materials and goods required in order to supply the product.

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a. Stock budget b. Expense budget c. Stock budget d. Purchase budget ________ can give you the exact amount for the workers fully burdened labour rates.

a. Cost estimation b. Accounting c. calculating d. computing Salary and fringe benefits are categorised as _______ . a. Indirect costs b. Project costs c. Capital costs

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d. Direct costs IRR is also called as: a. Implicate Rate of Return b. Important Rate of Return c. Imcriminate Rate of Return d. Indicate Rate of Return A _____________must successfully manage the resources allocated to the project a. Project manager b. Business developer c. Sponsor d. Project engineer _______ is also known as 'Facilities and Administrative cost'. a. Actual cost b. Indirect cost c. Administrative cost

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d. Direct cost The organisation has to perform different types of _____________ before taking up a project. a. Feasibility study b. Case study c. Surveys d. Analysis PPM 's are designed as a _________________ document. a. Official b. Legal c. Closing d. Stand -alone What does EVT stand for? a. Earned Verification Technique b. Evaluated Validation Technique c. Estimated Value Technique d. Earned Value Technique In __________ as soon as the business case is presented, it is expected that assumptions are questioned.

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a. Sensitivity Analysis

b. Qualitative Analysis c. Quantitative Analysis d. NPV Analysis The _________ analyses every technical, financial and other aspect of the project a. Case Study b. Financial study c. Feasibility study d. Project study The term information memorandum is used in the Section 60A is vastly different from the one used in section ______ a. 60B b. 60C c. 61D d. 61A The debt equity ratio for IDBI bank is ___________ a. 15:1 b. 1.5:1 c. 2:1 d. 1:1.5 Credit risk occurs due to _____________ by the borrower. a. Crossing of credit limit b. Over due c. Non-payment d. Market conditions ____________ is an arrangement under which lenders do not have any direct recourse to the sponsors. a. Raising of Finance b. Limited recourse project financing c. Non recourse project financing d. Sources of Finance PI also calculates in terms of percentage and therefore ignores the scale of _____________. a. Improvement b. Investment c. Importance d. Profit If the risk in infrastructure is identified in the early stages, it will help the team to make ______ to __________ these risks. a. Supply, run out of stock b. Decision, manage c. Facilities, Designs d. Plans, surpass ________ projects are very effective in Bidding situations.

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a. BOOT b. BOO/BOT c. BTO d. BLT Commercial risks are also called_______ .

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a. Political risks b. Cost related risks c. Project risks d. Quality related risks A stand-alone production plant is an example of which system? a. Finance b. Budget c. Build-own-operate d. Project finance The 'n' in the basic formula of NPV stands for:_______. a. Total number of periods b. Period which is a positive integer c. Period which is a negative integer

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d. Total cash flows

Part B -2 Marks question

Q. No. Question Statement
Which of the following is a correct statement with respect to the stakeholders roles and responsibilities in managing risks? 1. Risks related to clients. 2. Risks related to designers. 3. Risks related to government bodies. 4. Risk related to managers. a. 1, 2, & 3 b. 1, 2, & 4 c. 3, 4, & 1 d. 2, 4, 1, & 3 Which of the following is the formula to calculate CPI?

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a. CPI = EV / AC b. CPI = AC / EV c. CPI = EV - AC d. CPI = EV * AC ECI Web Equity Manager can be used to create a financial analysis, ___________ and reports. a. Capital analysis b. Trend analysis c. Ratio analysis d. Financial What is the formula to calculate Schedule Variance? a. SV = PV / EV b. SV = PV + EV c. SV = EV * PV

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d. SV = EV - PV State whether the statement is True or False. 1. The sanctioned amount must be within the overall ceiling of the prudential exposure norms. These norms are prescribed by Reserve Bank of India (RBI) for infrastructure financing. 2. Banks also lend Special Purpose Vehicles (SPVs) to the public sector, registered under the Companies Act. a. 1F, 2F b.1T, 2F c. 1F, 2T

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d. 1T, 2T Identify the correct basic accounting equation:

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a. Assets = liabilities - stockholder's equity b. Assets = Liabilities +stockholder's Equity c. Assets = Liabilities / stockholder's equity d. Assets = Liabilities * stockholder's equity ___________ method calculates the firms cost of capital where each category of capital is proportionately ____________ . a. DCF, weighed b. IRR, calculated c. DCF, calculated

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d. WACC, weighed Which of the following does the PCAR include?

1. Project planning 2. Project organisation 3. Financial management 4. Project evaluation a. 1, 2 & 3 b. 2, 4 & 3 c. 1, 3 & 4 d. 1 & 4 ___________ is a risk that overhead's expenses excessively saddle the company's _________. a. Credit risk, income b. Interest rate risk, profit c. Overhead risk, capability d. Market risk, capability The lack of sufficient professionals and managers, and sufficient amount of _______, results delay in the _______________. a. Knowledge, planning phase b. skilled labour, design phase c. Skilled labour, Construction phase d. Planning, design phase The methods for evaluating the opportunity of an investment project are the _______ method and the _______ method. a. NPV , IRR b. PV, ROI c. NPV, ROI

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d. ROI, IRR Which of the following belong to Cost Management tools and techniques? 1 Cost aggregation 2 Funding limit reconciliation 3 Cost performance baseline 4 Project justification a. 1 2 & 3 b. 2 & 4 c. 3 & 1 d. 1 & 4 State whether true or False

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1. Sales budget identifies the materials, stock levels, and labour needed to produce sales.

2.Capital budget often answers the question Do we have enough money to do such work? by considering a variety of hypothetical situations that may involve various accounts. a. 1T, 2F b. 1F, 2F c. 1T, 2T d. 1F, 2T Which of the following explains Cost Performance Index?

a. It refers to a measure of project efficiency given by project management to determine the progress and efficiency. b. It refers specifically to a method, chart, or other instrument that is implemented for the purposes of determining/measuring the actual cost efficiency of a project. c. It refers to a measurement process by which project management can measure the risks inherent in a given project.

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d. It refers to the various methods of managing the cost. Project budgeting puts down ______________ and _________ in business. a. Funds, Cash flows b. Checks, Controls c. Incentives, Standards d. Limitations, Monitoring State whether the statement is True or false. 1. Bottom-up estimating involves estimating the cost and time of the smallest activities. 2. The project manager relies upon the information or data he has gathered from estimates to set up a realistic project budget.

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a. 1T, 2T b. 2F, 1T c. 1T , 2F d. 2F, 1F Which of the following is true with respect to budget? 1. Budget is an ordinary estimate of a persons or organisations income and expenses for an explicit period in the future. 2. An individual or a firm can look at the amount of money they can use during a particular period using budget. 3. Budget can be described as a process of channelling of finances from savers to users in a variety of forms such as credit, loans and invested funds.

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4. Budget identifies and evaluates the particular areas where the funds are being overspend. a. 1 & 2 b. 2 & 3 c. 1 & 4 d. 3 & 4 Identify the prominent financing instruments from the following options:

1. Factoring 2. Forfeiting 3. Profitability Index 4. Leasing a. 1, 2 & 3 b. 1, 3 & 4 c. 1, 2 & 4

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d. 2, 4 & 3 Identify the correct statement.

a. A company can classify projects by size, as routine proposals involving capital investments. b. A company can classify projects by size, as routine proposals involving large investments. c. A company can classify projects by size, as routine proposals involving nil investments. d. A company can classify projects by size, as routine proposals involving small investments.

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Which of the following is incorrect with respect to financiers involved in financing a project? 1. Within banks, there is difference between commercial banks and multilateral institutions.

2. Banks act as distinctive lenders and offer specialised funds called Mezzanine Loans. 3. Operation and Maintenance Contractor add equity into the project. 4. Export Credit Agencies take construction and completion risks, which include the risk of completing the project on time, within the budget and in accordance to the specifications.

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a. 1, 2 & 3 b. 2, 3 & 4 c. 3, 4 & 1 d. 4, 3 & 1

Part C-4 Marks question

Q. No. Question Statement
Calculate Present value of cash flow using the formula, PV = Cash Flow / (1 + r) n. Where we have an initial investment of Rs.1, 000 and three years of positive cash flow at Rs.500 per year and our discount rate is 8.95%. Year = Y0 Y1 Y2 Y3 Cash Flow = -1,000 500 500 500

a. 259 b. 267

c. 268

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d. 276 Match the following sets. First set 1. Contractual agreement with the SPV 2. Sponsors 3. Government role 4. Export credit agencies Second set A. Government owned banks B. Clients C. Operating concerns D. Obtaining the required approval

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a. 1-B, 2-C, 3-D, 4-A b. 1-D, 2-A, 3-C, 4-B c. 1-C, 2-B, 3-D, 4-C d. 1-A, 2-D, 3-B, 4-C Match the following sets. First Set: 1. Risks related to client. 2. Risks related to designers. 3. Risks related to contractors. 4. Risks related to subcontractors. Second Set: A. Tight project schedule. B. Result of inadequate program scheduling. C. Lower management efficiency. D. The result of customer variations. a. 1 - A, 2 - C, 3 - A, 4 - D b. 1 - D, 2 - A, 3 - B, 4 - A c. 1 - A , 2 - D, 3 - C, 4 - B d. 1 - A, 2 - D, 3 - B, 4 - C Match the following sets. First Set: 1. Budgeting 2. Analysing the cash flow 3. Operating activities 4. Investing activities Second Set: A. Comparing the total unpaid purchases and total sales B. Receipts and tax amounts C. Purchase of stocks and securities D. Benefits projects that have 3-5 years of implementation cycle a. 1-A, 2-C, 3-A, 4-D b. 1-D, 2-A, 3-B, 4-A c. 1-A, 2-D, 3-C, 4-B d. 1-D, 2-A, 3-B, 4-C Match the following sets. First Set: 1. Approaches of cost estimation 2. Estimate 3. Top down approach 4. Budget Second Set: A. Econometric models B. Cost per unit C. Transforms a long term plant into annual segments D. Bottom - up approach

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a. 1-B, 2-D, 3-C, 4-A b. 1-B, 2-D, 3-A, 4-C c. 1-D, 2-B, 3-A, 4-C d. 1-B, 2-A, 3-D, 4-C Executive summary is a critical opening to the report. It should provide: 1 An overview of the evaluation (the 'what' and 'why'). 2. Summary of recommendations. 3. Staff and resources involved. 4. The major sources of data and ways of data collection and analysis. a. 1, 2 & 3 b. 1& 2 c. 1, 2, 3, & 4 d. 1, 2, & 4 Match the following sets: Set A: A. Schedule Variance B. Cost Variance C. Cost Performance Index D. Schedule Performance Index

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Set B: 1. This is the most frequently used cost-efficiency indicator. 2. At the end of the project this will be equal to zero because all of the planned values will have been earned. 3. This is used with the schedule status to predict the completion date. 4. At the end of the project this will be the difference between the Budget At Completion and the Actual Amount Spent.

a. A - 2, B - 1, C - 4, D - 3 b. A - 1, B - 2, C- 4, D - 3 c. A - 4, B - 2, C - 1, D - 3

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d. A - 2, B - 4, C - 1, D - 3 Describe Expert judgement :

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a. It is based upon the experience and knowledge of subject matter experts. It is used to assess and evaluate the inputs and the information the experts contain.

b. It refers to the characteristics of the current and past projects that can be used to develop models that aid in budgeting. c. It refers to the characteristics of the current and past projects based upon the experience and knowledge of subject matter experts. d. It refers to the entire estimated cost of the budget, including any contingency or management reserves. Match the following: First set: 1. Objective of stock price 2. Dividend Decision 3. Investment Decision 4. Valuation Second set: A. Final decision B. How to pick projects C. Fourth decision D. Second decision a. 4A, 2C, 3D, 1B. b. 2A, 3C, 4D, 1B. c. 1A, 2B, 3C, 4D

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d. 3B, 2D, 4C, 1A. _______________ is an investment appraisal method that measures the generated profit as a ________________. a. DCF, cash flow in investment b. ARR, profit c. DCF, profit

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d. ARR, percentage of the investment Match the following: First set: 1. NPV 2. IRR 3. Incremental IRR 4. PI Second set: A. Accept all independent projects greater than zero. B. Accept all projects greater than discount rate. C. Consider alternative with higher rate of return than minimum acceptable rate. D. Accept all projects greater than one.

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a. 1A, 2B, 3C, 4D.

b. 2A, 3C, 4D, 1B. c. 4A, 2C, 3D, 1B. d. 3B, 2D, 4C, 1A. If the proceeds of the loan are not fully withdrawn as of the first principal payment date, then which of the following points is used to determine the principal amount of the loan repayable by the borrower on each principal payment? 1. Any withdrawal of money made after the first principal payment date shall be repaid on the particular date falling after the date of such withdrawal money in amounts. 2. Withdrawals made within two subsequent months prior to any Principal Payment Date shall be payable on any principal payment date and will be treated as withdrawn and outstanding on the second principal. 3. Increasing the value of tax benefits of ownership to which the project will give rise. 4. Reducing the project sponsors credit exposure to the project.

a. 2, 3 & 4 b. 3 & 4 c. 1, 3 & 4

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d. 1 & 2 Match the following sets: Set A: A. Schedule Feasibility B. Economic Feasibility C. Operational Feasibility D. Technical Feasibility Set B: 1. Measures the urgency of the problem or the acceptability of a solution. 2. Measures the reasonable project time table. 3. Measures the technology involvement, its availability and usage by the people and skill required to use technology. 4. Measures the cost-effectiveness of a project or solution.

a. A - 2, B - 1, C - 4, D - 3 b. A - 1, B - 2, C- 4, D - 3 c. A - 4, B - 2, C - 1, D - 3

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d. A - 2, B - 4, C - 1, D - 3

Identify the formula to calculate Return on Investment. a. b. c. d. ROI ROI ROI ROI = Net Net Assets = Net Sales = Net Total Assets Income Income Income (or (or (or (or Profits) Profits) Profits) Profits) X X X X 100 100 100 100

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= Net Income Owners' Equity

Which of the following is an example for Volume Risk?

a. An electricity retailer with fixed price contracts could face two types of volume risks. Firstly the increase in the spot power price and secondly the increase in customer demand. b. The risk involved during the construction and operation of a projects plant and equipment. c. The risks that may affect a project during operations, for instance changes in input and output prices.

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d. Risks that govern licenses and approvals required to construct and operate a project.