#1
What is Capital Budgeting?
A method used to calculate short-term expenses
A process of analyzing and selecting long-term investment projects
A technique for managing daily operational costs
A method of determining employee salaries
#2
Which of the following is NOT a capital budgeting technique?
Net Present Value (NPV)
Payback Period
Return on Investment (ROI)
Cost of Goods Sold (COGS)
#3
Which of the following is NOT a component of capital budgeting?
Project evaluation
Project financing
Project implementation
Project termination
#4
What is the objective of capital budgeting?
To maximize sales revenue
To minimize operational costs
To allocate financial resources to long-term investments
To calculate short-term profits
#5
Which of the following factors is NOT considered in capital budgeting?
Risk
Inflation
Market share
Tax implications
#6
What does the Payback Period measure?
The time it takes to recoup the initial investment
The interest rate of a project
The present value of future cash flows
The total cost of the project
#7
Which of the following is a disadvantage of the Internal Rate of Return (IRR) method?
It considers the time value of money
It's difficult to understand and calculate
It doesn't consider the size of the investment
It may result in multiple rates of return
#8
What is the Discounted Payback Period?
A method that does not consider the time value of money
The time it takes for a project's cumulative discounted cash flows to equal its initial investment
A technique used to calculate the payback period in real terms
The time it takes for a project to recoup its initial investment without discounting
#9
Which of the following is a capital budgeting decision criterion that considers both the size and timing of cash flows?
Net Present Value (NPV)
Payback Period
Profitability Index (PI)
Discounted Payback Period
#10
What does the Profitability Index (PI) indicate?
The ratio of net present value to initial investment
The ratio of net cash flows to initial investment
The rate of return of a project
The time it takes to recoup the initial investment
#11
What is the purpose of sensitivity analysis in capital budgeting?
To determine the internal rate of return of a project
To analyze the impact of uncertainty in project variables on NPV or IRR
To calculate the payback period of a project
To estimate the net cash flows of a project
#12
What is the main objective of sensitivity analysis in capital budgeting?
To analyze how sensitive a project's NPV is to changes in its sales volume, cost, or other factors
To calculate the payback period of a project
To determine the IRR of a project
To estimate the project's net cash flows
#13
What is the Modified Internal Rate of Return (MIRR) method?
A method that adjusts the IRR to reflect the timing of cash flows
A method that modifies the payback period calculation
A method used to calculate the net present value of a project
A method to determine the cost of capital
#14
Which of the following is a non-discounted cash flow technique?
Net Present Value (NPV)
Internal Rate of Return (IRR)
Profitability Index (PI)
Payback Period
#15
What is the primary limitation of the Net Present Value (NPV) method?
It is difficult to understand and calculate
It ignores the timing of cash flows
It does not consider the time value of money
It relies on accurate estimates of future cash flows
#16
Which of the following is a characteristic of a mutually exclusive project?
The acceptance of one project requires the acceptance of another
The acceptance of one project precludes the acceptance of another
The projects have identical cash flows
The projects are independent of each other
#17
What does the Modified Internal Rate of Return (MIRR) address?
It addresses the issue of multiple IRRs
It addresses the issue of inconsistent cash flows
It addresses the issue of the timing of cash flows
It addresses the issue of discounting cash flows