This quiz works best with JavaScript enabled. Home > Finance > Corporate Finance > Capital Budgeting > Capital Budgeting – Quiz 1 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Capital Budgeting Quiz 1 (30 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. Investment proposals that are mutually exclusive have the following characteristics, except A) The nature of projects is different. B) One of the various alternative proposals must be chosen. C) The nature of the project is the same. D) There is no true choice. Show Answer Correct Answer: A) The nature of projects is different. 2. The safety environment project has characteristics A) Replacement of old Assets. B) Don't know. C) New Business Expansion. D) Nonrevenue-producing project. Show Answer Correct Answer: D) Nonrevenue-producing project. 3. Capital Budgeting is A) Capital Expansion. B) Capital Equipment. C) Capital Budgeting. D) None of above. Show Answer Correct Answer: C) Capital Budgeting. 4. Investment appraisal criteria that measure the payback period for all costs incurred A) Internal Rate of Return. B) Profitability Index. C) Payback Period. D) Net Present Value. Show Answer Correct Answer: C) Payback Period. 5. If PVCIF is Rp 850.000 and PVCOF is Rp. 450.000 then NPV is ..... A) Rp. 130.000. B) Rp. 400.000. C) Rp. 40.000.000. D) Rp. 40.000. Show Answer Correct Answer: B) Rp. 400.000. 6. You must know the discount rate of an investment project to compute its A) NPV, IRR, PI, and discount payback period. B) NPV, PI, discount payback period. C) NPV, PI, IRR. D) NPV, accounting rate of return, PI, discount payback period. Show Answer Correct Answer: B) NPV, PI, discount payback period. 7. Investments whose profit cannot be measured are the exception A) Promotion expenses. B) Installation of waste water cleaning installations. C) Research and development costs. D) Employee training and education program costs. Show Answer Correct Answer: B) Installation of waste water cleaning installations. 8. In capital budgeting, risk refers to A) The chance that a project will prove acceptable. B) The conflicting IRR and NPV in a project. C) The degree of variability of initial outlay. D) The uncertainty of cash inflows. Show Answer Correct Answer: D) The uncertainty of cash inflows. 9. The payback method assumes that all cash inflows are reinvested to yield a return equal to A) The hurdle rate. B) The internal rate of return. C) Zero. D) The discount rate. Show Answer Correct Answer: C) Zero. 10. This answers the question, "How much is my asset worth right now? " A) Capital budgeting. B) Discount rate. C) Net present value. D) Internal rate of return. Show Answer Correct Answer: C) Net present value. 11. The investment proposal with the greatest relative risk would have A) The highest standard deviation of net present value. B) The highest coefficient of variation of net present value. C) The highest expected value of net present value. D) The lowest opportunity loss likelihood. Show Answer Correct Answer: B) The highest coefficient of variation of net present value. 12. The project is accepted if A) If the profitability index is equal to one. B) The funds are unlimited. C) If the profitability index is greater than on. D) Both (B) and (C). Show Answer Correct Answer: C) If the profitability index is greater than on. 13. Which of the following capital budgeting techniques ignores time value of money? A) Internal Rate of Return. B) Payback period. C) Profitability index. D) Net Present Value. Show Answer Correct Answer: B) Payback period. 14. Full name of the acronyms NPV A) Network Present Value. B) Net Present Value. C) Net Presenting Value. D) Net Particular Value. Show Answer Correct Answer: A) Network Present Value. 15. An investment plan requires an initial investment (differential accounting) of Rp. 90,000,000, - estimated cash profit after tax / year for 5 consecutive years, namely 15 million / year, what is the payback period? A) 5 years. B) 6.5 Years. C) 7 years. D) 6 years. Show Answer Correct Answer: D) 6 years. 16. A situation in which accepting one investment prevents the acceptance of another investment is called the: A) Net present value profile. B) Operational ambiguity decision. C) Mutually exclusive investment decision. D) Issues of scale problem. Show Answer Correct Answer: C) Mutually exclusive investment decision. 17. Which of the following criterion is often preferred A) A) Net present value. B) (B) Profitability index. C) C) Internal Rate of Return. D) D) All of the above. Show Answer Correct Answer: D) D) All of the above. 18. Which of the following capital budgeting techniques are used under "capital rationing"conditions? A) Net present value. B) Internal rate of return. C) Payback period. D) Profitability index. Show Answer Correct Answer: D) Profitability index. 19. Assume that a hospital wishes to invest $205,570.50 in an ultrasound device that is expected to generate a cash inflow of $50,000 per year for 6 years. Calculate the IRR of the investment? A) 12%. B) 11%. C) 10%. D) 13%. Show Answer Correct Answer: A) 12%. 20. What is the present value of $ 1 received five years from now if the annual rate of return is 12%? A) $ 1.00. B) $ 1.76. C) $ 0.57. D) $ 1.60. Show Answer Correct Answer: C) $ 0.57. 21. What is Internal Rate of Return (IRR)? A) The return that makes NPV equal to 2. B) The return that makes NPV equal to 4. C) The return that makes NPV equal to 0. D) The return that makes NPV equal to 1. Show Answer Correct Answer: C) The return that makes NPV equal to 0. 22. How to make a decision for which project to choose? A) When IRR less than the required rate of return. B) When IRR higher 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: B) When IRR higher than the required rate of return. 23. When selecting the best project from a group of mutually exclusive projects, you should choose the project with the highest ..... A) Payback period. B) Net present value. C) Accounting rate of return. D) Internal rate of return. Show Answer Correct Answer: B) Net present value. 24. 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. 25. The present value of an investment's future cash flows divided by the initial cost of the investment is called the ..... A) Profitability index. B) NPV. C) IRR. D) Payback period. Show Answer Correct Answer: A) Profitability index. 26. Capital Investment is also known as A) Capital Savings. B) Capital Budgeting. C) Capital Spending. D) Capital Hedging. Show Answer Correct Answer: B) Capital Budgeting. 27. 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) No Select project A & B. D) Select project A & B. Show Answer Correct Answer: A) Choose project A. 28. 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. 29. What is disadvantage of IRR? A) Gives information that investors want. B) Easy to make a decision. C) Simple to use. D) Project can have multiple IRR in one time. Show Answer Correct Answer: D) Project can have multiple IRR in one time. 30. 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) $ 50.000. B) $ 136.000. C) $ 36.000. D) $ 86.000. Show Answer Correct Answer: D) $ 86.000. Next →Related QuizzesCorporate Finance QuizzesFinance QuizzesCapital Budgeting Quiz 2Capital Budgeting Quiz 3 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books