#1
Which of the following is NOT an investment appraisal technique?
Net Present Value (NPV)
Internal Rate of Return (IRR)
Accounting Rate of Return (ARR)
Profit and Loss Statement (P&L)
#2
What does the Payback Period measure?
The time it takes to recoup the initial investment
The annual return on investment
The total profit over the investment period
The internal rate of return
#3
Which investment appraisal technique considers the time value of money?
Payback Period
Net Present Value (NPV)
Accounting Rate of Return (ARR)
Profitability Index (PI)
#4
What does the Profitability Index (PI) indicate?
The ratio of net present value to initial investment
The percentage return on investment
The time it takes to recoup the initial investment
The average rate of return
#5
What is the main limitation of using the Payback Period as an investment appraisal technique?
It ignores the time value of money
It is difficult to calculate
It only considers cash flows after the payback period
It does not account for risk
#6
Which investment appraisal technique provides a measure of the efficiency of an investment project?
Net Present Value (NPV)
Accounting Rate of Return (ARR)
Profitability Index (PI)
Internal Rate of Return (IRR)
#7
What is the formula for calculating Net Present Value (NPV)?
NPV = Initial Investment / Total Cash Flows
NPV = Total Cash Flows / Discount Rate
NPV = ∑ (Cash Flows / (1 + Discount Rate)^t)
NPV = Total Cash Flows * Discount Rate
#8
Which investment appraisal technique takes into account the time value of money and risk?
Payback Period
Accounting Rate of Return (ARR)
Net Present Value (NPV)
Profitability Index (PI)
#9
Which investment appraisal technique considers the total cash flows generated by a project relative to the initial investment?
Payback Period
Internal Rate of Return (IRR)
Accounting Rate of Return (ARR)
Profitability Index (PI)
#10
Which investment appraisal technique can be used to evaluate mutually exclusive projects?
Accounting Rate of Return (ARR)
Payback Period
Profitability Index (PI)
Internal Rate of Return (IRR)
#11
In Net Present Value (NPV) analysis, if the NPV is positive, what does it indicate?
The project's profitability
The project's unprofitability
The project is feasible
The project's riskiness
#12
Which investment appraisal technique assumes reinvestment at the project's cost of capital?
Accounting Rate of Return (ARR)
Payback Period
Internal Rate of Return (IRR)
Profitability Index (PI)
#13
Which of the following statements regarding the Internal Rate of Return (IRR) is true?
IRR always considers the time value of money
IRR is only suitable for short-term projects
IRR cannot handle projects with unconventional cash flows
IRR is the discount rate at which the NPV of a project equals zero
#14
What is the primary drawback of using the Accounting Rate of Return (ARR) method?
It does not consider the time value of money
It is difficult to calculate
It is not suitable for comparing projects of different durations
It does not account for project risk
#15
Which investment appraisal technique is commonly used to rank projects when capital is rationed?
Payback Period
Net Present Value (NPV)
Profitability Index (PI)
Internal Rate of Return (IRR)
#16
What does a negative Net Present Value (NPV) indicate?
The project is highly profitable
The project is feasible
The project's cash inflows exceed cash outflows
The project is not financially viable