#1
Which of the following is a financial investment evaluation method that calculates the present value of future cash flows?
Payback period
Net Present Value (NPV)
Internal Rate of Return (IRR)
Accounting Rate of Return (ARR)
#2
What does the payback period method assess in investment evaluation?
Profitability
Risk
Time it takes to recover initial investment
Market trends
#3
Which of the following investment evaluation methods considers the accounting profit relative to the initial investment?
Net Present Value (NPV)
Internal Rate of Return (IRR)
Payback period
Accounting Rate of Return (ARR)
#4
What is the main limitation of the payback period method?
It does not account for the time value of money
It is difficult to calculate
It ignores cash flows beyond the payback period
It is not widely accepted by financial analysts
#5
Which of the following investment evaluation methods does not consider the time value of money?
Net Present Value (NPV)
Internal Rate of Return (IRR)
Payback period
Profitability Index (PI)
#6
What is the primary advantage of using the Internal Rate of Return (IRR) method?
It is easy to understand
It considers the timing of cash flows
It is widely accepted by financial analysts
It accounts for all cash flows over the investment period
#7
Which financial investment evaluation method is based on the principle that the sooner cash flows are received, the more valuable they are?
Net Present Value (NPV)
Payback period
Internal Rate of Return (IRR)
Profitability Index (PI)
#8
Which investment evaluation method accounts for the time value of money?
Payback period
Net Present Value (NPV)
Accounting Rate of Return (ARR)
Return on Investment (ROI)
#9
What is the formula for calculating the Net Present Value (NPV) of an investment?
Initial Investment - Present Value of Cash Inflows
Present Value of Cash Inflows - Initial Investment
Initial Investment + Present Value of Cash Inflows
Initial Investment / Present Value of Cash Inflows
#10
Which investment evaluation method is also known as the discounted cash flow method?
Payback period
Net Present Value (NPV)
Accounting Rate of Return (ARR)
Return on Investment (ROI)
#11
What does the Profitability Index (PI) indicate in investment analysis?
The ratio of present value of cash inflows to initial investment
The time it takes to recover the initial investment
The discount rate that makes the NPV zero
The profit margin of the investment
#12
Which investment evaluation method may result in multiple rates of return for a single investment project?
Net Present Value (NPV)
Internal Rate of Return (IRR)
Payback period
Profitability Index (PI)
#13
In investment evaluation, what does a negative Net Present Value (NPV) indicate?
The investment is profitable
The investment is not profitable
The investment has broken even
The investment has a high payback period
#14
What does the Profitability Index (PI) represent?
The ratio of discounted cash inflows to initial investment
The time it takes to recover the initial investment
The discount rate that makes the NPV zero
The profit margin of the investment
#15
What does the Internal Rate of Return (IRR) indicate in investment evaluation?
The time it takes to recover the initial investment
The discount rate that makes the NPV of an investment zero
The total cash inflows over the investment period
The profit margin of the investment
#16
In investment evaluation, what does a positive Net Present Value (NPV) indicate?
The investment is profitable
The investment is not profitable
The investment has broken even
The investment has a high payback period
#17
Which investment evaluation method is often criticized for assuming that cash flows can be reinvested at the project's internal rate of return?
Net Present Value (NPV)
Internal Rate of Return (IRR)
Payback period
Profitability Index (PI)
#18
In investment evaluation, what does the Modified Internal Rate of Return (MIRR) address?
The timing of cash flows
The reinvestment rate assumption
The accounting profit relative to initial investment
The liquidity aspect of an investment
#19
Which investment evaluation method is more suitable for ranking mutually exclusive projects?
Net Present Value (NPV)
Payback period
Internal Rate of Return (IRR)
Profitability Index (PI)