This quiz works best with JavaScript enabled. Home > Finance > Corporate Finance > Capital Budgeting > Capital Budgeting – Quiz 3 🏠 Homepage 📘 Download PDF Books 📕 Premium PDF Books Capital Budgeting Quiz 3 (23 MCQs) Quiz Instructions Select an option to see the correct answer instantly. 1. How to evaluate the risk of a project? A) Need to make sure cash inflows exceed cash outflows. B) Need to make sure cash outflows exceed cash inflows. C) Need to make sure cash inflows equal to cash outflows. D) Need to make sure cash inflows and cash outflows is acceptable. Show Answer Correct Answer: A) Need to make sure cash inflows exceed cash outflows. 2. Which of the following formulas will correctly calculate Net Working Capital? A) Cash + Inventory + Receivables-Payables. B) Cash + Inventory + Receivables + Payables. C) Cash-Inventory + Receivables + Payables. D) Cash + Inventory-Receivables + Payables. Show Answer Correct Answer: A) Cash + Inventory + Receivables-Payables. 3. The present value of an asset's future cash flows minus its purchase price initial investment is A) Net Present Value. B) Modified Internal Rate of Return. C) Internal Rate of Return. D) Payback. Show Answer Correct Answer: A) Net Present Value. 4. Average Return On Investment disebut juga A) Financial Report. B) Residu. C) Payoff Method. D) Accounting Mehod. Show Answer Correct Answer: D) Accounting Mehod. 5. The difference between the present value of an investment and its cost is the ..... A) Profitability index. B) Payback period. C) IRR. D) NPV. Show Answer Correct Answer: D) NPV. 6. Which of the following is an important type of risk in an international capital budgeting context? A) Default risk. B) Business cycle risk. C) Political risk. D) Appropriation risk. Show Answer Correct Answer: C) Political risk. 7. Another name is Capital Budgeting A) Capital Expansion. B) Capital Equipment. C) Capital Budgeting. D) None of above. Show Answer Correct Answer: C) Capital Budgeting. 8. To estimate an unknown number that lies between two known numbers is knows as ..... ? A) Capital budgeting. B) Amortization. C) Capital rationing. D) Interpolation. Show Answer Correct Answer: D) Interpolation. 9. A significant advantage of the net present value is that it ..... A) Fully considers time value of money. B) Takes into consideration the yield to maturity. C) Usus profit in the analysis. D) None of the above. Show Answer Correct Answer: A) Fully considers time value of money. 10. When using the Net present value capital budgeting technique for a company with debt & equity finance, which is the most appropriate discount rate to use? A) Prime interest rate. B) Cost of equity. C) Market interest rate for debt. D) Weighted average cost of capital. Show Answer Correct Answer: D) Weighted average cost of capital. 11. Which of the following statement about NPV is FALSE? A) It does not allow for projects to be ranked. B) It has an inadequate reinvestment assumption. C) It is likely that there will be more than one NPV for a project. D) All of the above. Show Answer Correct Answer: D) All of the above. 12. Stone Corporation recently sold a used machine for P40, 000. The machine had a book value of P60, 000 at the time of the sale. What is the after-tax cash flow from the sale, assuming the company's marginal tax rate is 20 percent? A) P60, 000. B) P40, 000. C) P32, 000. D) P44, 000. Show Answer Correct Answer: D) P44, 000. 13. Which of the following costs would you consider when making a capital budgeting decision? A) Fixed overhead cost. B) Sunk cost. C) Opportunity cost. D) Interest expense. Show Answer Correct Answer: C) Opportunity cost. 14. Factors influencing investment decisions ..... A) Time factor. B) Risk factor. C) Yield factor. D) All answers are correct. Show Answer Correct Answer: D) All answers are correct. 15. ..... is the planning process used to determine whether an organization long term investments A) Capital Budgeting. B) Capital Rationing. C) Cost of Capital. D) Leverage. Show Answer Correct Answer: A) Capital Budgeting. 16. The profitability index is most useful A) When the NPV method and the IRR method give conflicting signals on mutually exclusive projects. B) In capital rationing situations. C) When the cash flow pattern is unusual. D) When project scales are of concern. Show Answer Correct Answer: B) In capital rationing situations. 17. A significant disadvantage of the internal rate of return is that it A) Does not fully consider the time value of money. B) Does not give proper weight to all cash flows. C) Can result in multiple rates of return (more than one IRR). D) Is expressed as a percentage. Show Answer Correct Answer: C) Can result in multiple rates of return (more than one IRR). 18. The project is said to be independent if A) The nature of projects is different. B) Only one project can be executed. C) The nature of the project is the same. D) Projects are interrelated. Show Answer Correct Answer: A) The nature of projects is different. 19. The values of the future net incomes discounted by the cost of capital are called A) Net capital cost. B) Average capital cost. C) Net present values. D) Discounted capital cost. Show Answer Correct Answer: C) Net present values. 20. The NPV of projects A & B is positive, the two project proposals are independent, so the decision is A) No Select project A & B. B) Select Project B. C) Choose Project A. D) Choose Project A & B as long as there are sufficient funds. Show Answer Correct Answer: D) Choose Project A & B as long as there are sufficient funds. 21. Which one of the following represents the rate of return a firm must earn on its assets if it is to maintain the current value of its securities? A) Weighted average cost of capital. B) Internal rate of return. C) Aftertax cost of debt. D) Cost of equity. Show Answer Correct Answer: A) Weighted average cost of capital. 22. Which of the following businesses would the simple payback period method be most appropriate? A) Waste recycling facility. B) Digital marketing agency. C) Software developer. D) Restaurant. Show Answer Correct Answer: D) Restaurant. 23. Strength dari konsep Internal Rate of Return adalah A) Requires estimate of cost of capital. B) May not give value-maximizing decisions for mutually exclusive projects. C) May produce multiple IRRs. D) Tells whether firm value is increased. Show Answer Correct Answer: D) Tells whether firm value is increased. ← PreviousRelated QuizzesCorporate Finance QuizzesFinance QuizzesCapital Budgeting Quiz 1Capital Budgeting Quiz 2 🏠 Back to Homepage 📘 Download PDF Books 📕 Premium PDF Books