Question 1

In a capital budgeting context,a project's required rate of return is called the yield to maturity.

Accepted Answer

A) True 
 B)False

Question 2

Capital budgeting is

Accepted Answer

A)  the process of identifying,evaluating,and implementing a firm's investment opportunities.
B)  the process of identifying,evaluating,and implementing a firm's objectives.
C)  the process of identifying,evaluating,and implementing a firm's strategic plans.
D)  the process of identifying,evaluating,and implementing a firm's financing requirements.
E)  all of the above statements are correctF) A) and B)
G) A) and C)

Question 3

Examples of external economic data required for project analysis include all of the following except:

Accepted Answer

A)  business cycle stages
B)  inflation trends
C)  taxes
D)  exchange rate trends
E)  all of the above are includedF) All of the above
G) B) and E)

Question 4

A firm's cost of capital represents a firm's weighted average cost of financing.

Accepted Answer

A) True 
 B)False  True

Question 5

The profitability index is the least preferable method to use to evaluate capital budgeting projects because it does not take the time value of money into account.

Accepted Answer

A) True 
 B)False

Question 6

One weakness of the payback period method is that all cash flows beyond the payback period are ignored.

Accepted Answer

A) True 
 B)False

Question 7

The IRR

Accepted Answer

A)  shows the graphical relationship between a project's NPV and cost of capital.
B)  is the return that causes the NPV to be zero.
C)  is the return that causes the NPV to be positive.
D)  measures the firm and project's required rate of return.
E)  none of the aboveF) B) and C)
G) C) and E)

Question 8

Reasons NPV,IRR,MIRR,and PI will sometimes disagree in the case of mutually exclusive investments include all of the following except:

Accepted Answer

A)  different cash flow patterns.
B)  different time horizons.
C)  different sizes.
D)  different locations.
E)  all of the above are correctF) B) and C)
G) A) and B)

Question 9

Examples of non-financial data required for project analysis include all of the following except:

Accepted Answer

A)  financing costs
B)  quantity and quality of labor force in different locations
C)  labor-management relations
D)  status of technological change in the industry
E)  all of the above are includedF) A) and E)
G) All of the above

Question 10

The stage in the capital budgeting process that involves finding potential capital investment opportunities and determining whether a project involves a replacement decision and/or revenue expansion is called the _____________ stage.

Accepted Answer

A)  follow-up.
B)  selection.
C)  identification.
D)  development.
E)  none of the above are includedF) A) and B)
G) A) and C)

Question 11

Independent projects are not in direct competition with one another.

Accepted Answer

A) True 
 B)False

Question 12

The ratio between the present value of a project's cash inflows and the present value of its initial investment is called the:

Accepted Answer

A)  MIRR.
B)  IRR.
C)  PI.
D)  NPV.
E)  none of the above are correctF) A) and C)
G) B) and D)

Question 13

The time required for the cumulative cash flows from a project to equal zero is called the:

Accepted Answer

A)  profitability index
B)  cash flow time frame
C)  project life
D)  payback periodE) C) and D)
F) B) and C)

Question 14

The after-tax cash flows without the project are referred to as:

Accepted Answer

A)  the net investment
B)  incremental cash flows
C)  the base case
D)  none of the aboveE) B) and D)
F) A) and D)

Question 15

The profitability index measures the present value of benefits received for each dollar invested.

Accepted Answer

A) True 
 B)False  True

Question 16

Which of the following is true of sunk costs?

Accepted Answer

A)  not included in initial cash flow
B)  similar to opportunity costs
C)  often combined with terminal cash flow
D)  deciding factor in most project decisionsE) A) and B)
F) All of the above

Question 17

The corporate planning tool that develops project plans that fit well with the firm's plans is often referred to by the following acronym:

Accepted Answer

A)  MOSG.
B)  SMOG.
C)  OMGS.
D)  GOMS.
E)  none of the above statements are correctF) B) and E)
G) A) and B)

Question 18

The profitability index is calculated by subtracting the net investment from the present value of the cash flows.

Accepted Answer

A) True 
 B)False

Question 19

Examples of external economic data required for project analysis include all of the following except:

Accepted Answer

A)  business cycle stages.
B)  inflation trends
C)  labor-management relations
D)  exchange rate trends
E)  all of the above are includedF) None of the above
G) A) and E)

Question 20

Two or more projects that perform the same function are said to be:

Accepted Answer

A)  mutually exclusive projects
B)  independent projects
C)  joint projects
D)  none of the aboveE) A) and B)
F) C) and D) A

Exam 17: Capital Budgeting Analysis

In a capital budgeting context,a project's required rate of return is called the yield to maturity.

Correct AnswerverifiedShow Answer

Capital budgeting is

Correct AnswerverifiedShow Answer

Examples of external economic data required for project analysis include all of the following except:

Correct AnswerverifiedShow Answer

A firm's cost of capital represents a firm's weighted average cost of financing.

Correct AnswerverifiedTrue

The profitability index is the least preferable method to use to evaluate capital budgeting projects because it does not take the time value of money into account.

Correct AnswerverifiedShow Answer

One weakness of the payback period method is that all cash flows beyond the payback period are ignored.

Correct AnswerverifiedShow Answer

The IRR

Correct AnswerverifiedShow Answer

Reasons NPV,IRR,MIRR,and PI will sometimes disagree in the case of mutually exclusive investments include all of the following except:

Correct AnswerverifiedShow Answer

Examples of non-financial data required for project analysis include all of the following except:

Correct AnswerverifiedShow Answer

The stage in the capital budgeting process that involves finding potential capital investment opportunities and determining whether a project involves a replacement decision and/or revenue expansion is called the _____________ stage.

Correct AnswerverifiedShow Answer

Independent projects are not in direct competition with one another.

Correct AnswerverifiedShow Answer

The ratio between the present value of a project's cash inflows and the present value of its initial investment is called the:

Correct AnswerverifiedShow Answer

The time required for the cumulative cash flows from a project to equal zero is called the:

Correct AnswerverifiedShow Answer

The after-tax cash flows without the project are referred to as:

Correct AnswerverifiedShow Answer

The profitability index measures the present value of benefits received for each dollar invested.

Correct AnswerverifiedTrue

Which of the following is true of sunk costs?

Correct AnswerverifiedShow Answer

The corporate planning tool that develops project plans that fit well with the firm's plans is often referred to by the following acronym:

Correct AnswerverifiedShow Answer

The profitability index is calculated by subtracting the net investment from the present value of the cash flows.

Correct AnswerverifiedShow Answer

Examples of external economic data required for project analysis include all of the following except:

Correct AnswerverifiedShow Answer

Two or more projects that perform the same function are said to be:

Correct AnswerverifiedA

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
True

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A