MCQ ON NATURE AND TECHNIQUES OF CAPITAL BUDGETING NET COMMERCE/MANAGEMENT

 MCQ ON NATURE AND TECHNIQUES OF CAPITAL BUDGETING
NET COMMERCE/MANAGEMENT
MCQ

   WHICH ONE OF THE FOLLOWING METHODS OF CAPITAL BUDGETING ASSUMES THAT CASH INFLOWS ARE REINVESTED AT THE PROJECT’S RATE OF RETURN.

•                    NET PRESENT VALUE

•                    ACCOUNTING RATE OF RETURN

•                    INTERNAL RATE OF RETURN

•                    DISCOUNTED PAY BACK PERIOD

RIGHT ANSER IS INTERNAL RATE OF RETURN

   ----------- IS LONG TERM PLANNING FOR MAKING AND FINANCING PROPOSED CAPITAL OUTLAY

1.       CAPITAL BUDGETING

2.       WORKING CAPITAL MANAGEMENT

3.       PLANNING FOR CAPITAL

4.       NONE OF THE ABOVE

•                       RIGHT ANSWER IS CAPITAL BUDGETING

   IF NPV IS POSITIVE ,THEN IRR WILL BE

1.       POSITIVE

2.       K<r

3.       K=r

4.       NONE OF THESE

K =R

   NAME THE METHOD IN WHERE DESIRED RATE OF RETURN IS NOT KNOWN

1.       NET PRESENT VALUE METHOD

2.       PROFITABILITY INDEX

3.       IRR

4.       NONE OF THESE

RIGHT ANSWER IS IRR

   WHICH METHOD IS KNOWN AS TIME ADJUSTED RATE OF RETURN

1.       ACCOUNT RATE OF RETURN METHOD

2.       NET PRESENT VALUE METHOD

3.       INTERNAL RATE OF RETURN METHOD

4.       NONE OF THE ABOVE

THE RIGHT ANSWER IS IRR

   WHICH OF THE FOLLOWING CAPITAL BUDGETING TECHNIQUES TAKES INTO CONSIDERATION THE INCREMENTAL ACCOUNTING INCOME RATHER CASH FLOWS

1.       INTERNAL RATE OF RETURN

2.       NET PRESENT VALUE

3.       ACCOUNTING RATE OF RETURN

4.       CASH PAYBACK PERIOD

   THE CURRENT WORTH OF A SUM OF MONEY TO BE RECEIVED AT THE FUTURE DATE IS CALLED

1.       REAL VALUE

2.       FUTURE VALUE

3.       PRESENT VALUE

4.       SALVAGE VALUE

   THE DIFFERENCE BETWEEN THE PRESENT VALUE OF CASH INFLOWS AND THE PRESENT VALUE OF CASH OUTFLOWS ASSOCIATED WITH THE PROJECT IS KNOWN AS

1.       NET PRESENT VALUE OF THE PROJECT

2.       NET HISTORICAL VALUE OF THE PROJECT

3.       NET SALVAGE VALUE OF THE PROJECT

4.       NET FUTURE VALUE OF THE PROJECT

   GENERALLY A PROJECT IS CONSIDERED  ACCEPTABLE IF THE NET PRESENT VALUE IS

•                       NEGATIVE OR ZERO

•                       NEGATIVE OR POSITIVE

•                       POSITIVE OR ZERO

•                       NEGATIVE

   A PROFITABILITY INDEX OF .92 FOR A PROJECT MEANS THAT

1.       THE PROJECT COST ARE LESS THAN THE PRESENT VALUE OF PROJECT ‘S BENEFITS

2.       THE PROJECT’S NPV IS GREATER THAN ZERO

3.       THE PROJECT NPV IS GREATER THAN 1

4.       THE PROJECT RETURNS 92 CENTS IN PRESENT VALUE FOR EACH  CURRENT DOLLAR INVESTED COST

   WHICH OF THE FOLLOWING STATEMENT IS CORRECT

1.       IF THE NPV OF THE PROJECT IS GREATER THAN 0,ITS PI WILL BE ZERO

2.       IF THE IRR OF A PROJECT IF 0%,ITS NPV USING A DISCOUNT RATE K IS GREATER THAN ZERO WILL BE 0

3.       IF THE PI IS LESS THAN 1,ITS NPV IS SHOULD BE LESS THAN 0

4.       IF THE IRR OF A PROJECT IS GREATER THAN DISCOUNT RATE K,ITS PI WILL BE LESS THAN 1 AND ITS NPV WILL BE GREATER THAN 0

   ASSUME THAT A FIRM HAS  ACCURATLEY CALCULATED THE NET CASH FLOWS RELATING TO INVESTMENT PROPOSAL IS GREATER THAN ZERO AND THE FIRM IS NOT UNDER CONSTRAIN OF CAPITAL RATIONING :

1.       ACCEPT THE PROPOSAL SINCE THE ACCEPTANCE OF VALUE CREATING INVESTMENT SHOULD INCREASE SHAREHOLDER’S WEALTH

2.       CALCULATE THE PAYBACK PERIOD TO MAKE CERTAIN THAT INITIAL CASH OUTLAY CAN BE RECOVERED WITH IN APPROPRIATE PERIOD OF TIME

3.       CALCULATE THE IRR OF THIS INVESTMENT TO BE CERTAIN THAT IRR IS GREATER THAN COST OF CAPITAL

4.       COMPARE THE PROFITABILITY INDEX OF THE INVESTMENTS TO THOSE OTHER POSSIBLE INVESTMENTS

   THE DISCOUNT RATE AT WHICH TWO PROJECTS HAVE IDENTICAL ------- IS REFERRED TO AS FISHER ‘RATE OF INTERSECTION

1.       PRESENT VALUE

2.       NET PRESENT VALUE

3.       IRRS

4.       PROFITABILITY INDEX

   TWO MUTUALLY EXCLUSIVE INVESTMENT PROPOSALS HAVE SCALE DIFFERENCE  ( I.E COST  OF THE PROJECT DIFFER ) RANKING THESE TWO PROJECTS.RANKING THESE PROJECTS ON THE BASIS OF NPV,IRR ANDPI METHODS ----- GIVE THE CONTRADICTORY RESULT

1.       WILL NEVER

2.       MAY

3.       WILL ALWAYS

4.       WILL GENERALLY

   THE ------ METHOD PROVIDES CORRECT RANKING OF THE MUTUALLY EXCLUSIVE PROJECTS

1.       NET PRESENT VALUE

2.       IRR

3.       PAYBACK PERIOD

4.       PROFITABILITY INDEX

   IF CAPITAL IS RATIONED FOR ONLY THE CURRENT PERIOD,A FIRM SHOULD PROBABLY FIRST CONSIDER SELECTING PROJECTS BY DESCENDING ORDER OF

1.       PROFITABILITY INDEX

2.       NET PRESENT VALUE

3.       INTERNAL RATE OF RETURN

4.       PAYBACK PERIOD

   A PROJECT’S PROFITABILITY INDEX IS EQUAL TO THE RATIO OF -----PROJECT’S FUTURE CASH FLOWS TO  PROJECT-----

1.       NET PRESENT VALUE,INITIAL CASH OUTLAY

2.       PRESENT VALUE ,DEPRECIABLE BASIS

3.       NET PRESENT VALUE,DEPRECIABLE BASIS

4.       PRESENT VALUE,INITIAL CASH OUTLAY

§THE PROCESS OF PLANNING EXPENDITURE THAT WILL INFLUENCE THE OPERATION OF THE FIRM OVER A NUMBER OF YEARS IS CALLED:-

1.       INVESTMENT

2.       CAPITAL BUDGETING

3.       NET PRESENT VALUATION

4.       DIVIDEND VALUATION

   WHICH OF THE FOLLOWING IS AN EXAMPLE OF A CAPITAL INVESTMENT PROJECT

1.       REPLACEMENT OF WORN OUT EQUIPMENT

2.       EXPANSION OF PRODUCT FACILITIES

3.       DEVELOPMENT OF EMPLOYEE TRAINING PROGRAMME

4.       ALL OF THE ABOVE ARE EXAMPLE OF CAPITAL INVESTMENT PROJECTS

   THE NET PRESENT VALUE METHOD AND INTERNAL RATE OF RETURN METHOD WILL ALWAYS YIELD THE SAME DECISIONS WHEN

1.       A SINGLE PROJECT IS EVALUATED

2.       A MUTUALLY EXCLUSIVE PROJECTS ARE EVALUATED

3.       A LIMITED NUMBER OF PROJECTS MUST BE SELECTED FROM A LARGE NUMBER OF  OPPORTUNITIES

4.       ALL OF THE ABOVE ARE CORRECT

   IN CASES WHERE CAPITAL MUST BE RATIONED A FIRM SHOULD RANK PROJECTS ACCORDING TO THEIR

1.       NET PRESENT VALUE

2.       IRR

3.       PROFITABILITY INDEX

4.       EXTERNAL RATES OF RETURN