This quiz works best with JavaScript enabled. Home > Corporate Finance > Capital Budgeting > Capital Budgeting – Quiz 2 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Capital Budgeting Quiz 2 (20 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. What is Internal Rate of Return (IRR)? A) The return that makes NPV equal to 1. B) The return that makes NPV equal to 2. C) The return that makes NPV equal to 0. D) The return that makes NPV equal to 4. Show Answer Correct Answer: C) The return that makes NPV equal to 0. 2. How to make a decision for which project to choose? A) When IRR higher than the required rate of return. B) When IRR less than the required rate of return. C) When IRR equal to the required rate of return. D) When IRR equal to zero. Show Answer Correct Answer: A) When IRR higher than the required rate of return. 3. When selecting the best project from a group of mutually exclusive projects, you should choose the project with the highest ..... A) Net present value. B) Internal rate of return. C) Accounting rate of return. D) Payback period. Show Answer Correct Answer: A) Net present value. 4. If an NPV calculation has given you cash flows and inflation rates; which discount rate would you use in your NPV calc A) Real WACC. B) Nominal WACC. C) Required rate of return. D) None of above. Show Answer Correct Answer: B) Nominal WACC. 5. The present value of an investment's future cash flows divided by the initial cost of the investment is called the ..... A) NPV. B) IRR. C) Profitability index. D) Payback period. Show Answer Correct Answer: C) Profitability index. 6. Capital Investment is also known as A) Capital Budgeting. B) Capital Hedging. C) Capital Spending. D) Capital Savings. Show Answer Correct Answer: A) Capital Budgeting. 7. NPV A is higher than NPV B, the two proposed projects are mutually exclusive, so the decision is A) Choose project A. B) Choose project B. C) Select project A & B. D) No Select project A & B. Show Answer Correct Answer: A) Choose project A. 8. If PI of the Project A is 1.2 ; Project B is 1.1 ; Project C is 1.4 and Project D is 1.8 then Rank will be as ..... A) A, C, B, D. B) D, C, A, B. C) C, D, B, A. D) B, D, C, A. Show Answer Correct Answer: B) D, C, A, B. 9. What is disadvantage of IRR? A) Simple to use. B) Gives information that investors want. C) Project can have multiple IRR in one time. D) Easy to make a decision. Show Answer Correct Answer: C) Project can have multiple IRR in one time. 10. What is RADR? A) Risk Accounted Discount Rate. B) Return Adjusted Discount Rate. C) Risk Adjusted Discount Rate. D) Return Accounted Discount Rate. Show Answer Correct Answer: C) Risk Adjusted Discount Rate. 11. In a flexible budget, the set formula is fixed expenses $ 50,000 + variable loads $ 4/direct labor hour. What is the total budget if direct labor hours are 9,000 hours? A) $ 36.000. B) $ 50.000. C) $ 86.000. D) $ 136.000. Show Answer Correct Answer: C) $ 86.000. 12. Investment in Equipment Replacement is also called A) Non Profit Investment. B) Non Measurable Profit Investment. C) Expansion Investment. D) Replacement Investment. Show Answer Correct Answer: D) Replacement Investment. 13. You must know all the cash flows of an investment project to compute its A) NPV, IRR, PI and discount payback period. B) NPV, IRR, PI, payback period and discount payback period. C) NPV, IRR, PI. D) NPV, accounting rate of return, IRR, PI. Show Answer Correct Answer: B) NPV, IRR, PI, payback period and discount payback period. 14. In payback method analysis, an investment is rejected if the payback period is ..... the required period of time. A) Less than. B) Greater than. C) Equal to. D) None of above. Show Answer Correct Answer: B) Greater than. 15. The time value of money is explicitly recognized through the process of A) Interpolating. B) Discounting. C) Annuitizing. D) Budgeting. Show Answer Correct Answer: B) Discounting. 16. With regard to a capital investment, net cash inflow is equal to the A) Cost savings resulting from the investment. B) Sum of all future revenues from the investment. C) Net increase in cash receipts over cash payments. D) Net increase in cash payments over cash receipts. Show Answer Correct Answer: C) Net increase in cash receipts over cash payments. 17. Opening a new distribution network, generally is an investment proposal put forward by the department A) Finance. B) Production. C) Marketing. D) R & D. Show Answer Correct Answer: C) Marketing. 18. Planning and managing a firm's long term investments and projects Long term assets Invest in projects worth more than they cost A) Capital Budgeting. B) Net Present Value (NPV). C) Payback period. D) Book rate of return. Show Answer Correct Answer: A) Capital Budgeting. 19. The payback capital budgeting technique considers (Time Value of Money, Income over entire life of project) A) Yes Yes. B) Yes No. C) No Yes. D) No No. Show Answer Correct Answer: D) No No. 20. In payback method analysis, an investment is rejected if the payback period is ..... some specified period of time. A) Less than. B) Greater than. C) Equal to. D) None of the above. Show Answer Correct Answer: B) Greater than. ← PreviousNext →Related QuizzesCorporate Finance QuizzesCapital Budgeting Quiz 1Capital Budgeting Quiz 3Capital Budgeting Quiz 4Capital Budgeting Quiz 5 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books