Question 1

To calculate the net present value in Excel, you use the "=PV()" function.

Accepted Answer

A) True 
 B)False

Question 2

All of the following statements are correct except:

Accepted Answer

A)  The NPV and IRR methods will always agree on whether a project enhances or harms shareholder wealth. 
B)  If a project has a positive NPV, its IRR will always be greater than the cost of capital. 
C)  If a project has a negative NPV, its IRR will always be less than the cost of capital. 
D)  There is never a conflict between NPV and IRR in the case of mutually exclusive projects. 
A)  The NPV and IRR methods will always agree on whether a project enhances or harms shareholder wealth. 
B)  If a project has a positive NPV, its IRR will always be greater than the cost of capital. 
C)  If a project has a negative NPV, its IRR will always be less than the cost of capital. 
D)  There is never a conflict between NPV and IRR in the case of mutually exclusive projects.

Question 3

Sound capital budgeting decisions require a variety of information including internal financial data, external economic and political data, and non-financial data.

Accepted Answer

A) True 
 B)False

Question 4

Independent projects are not in direct competition with one another.

Accepted Answer

A) True 
 B)False

Question 5

Stages of the capital budgeting include all of the following EXCEPT:

Accepted Answer

A)  follow-up. 
B)  selection. 
C)  identification. 
D)  processing 
A)  follow-up. 
B)  selection. 
C)  identification. 
D)  processing

Question 6

The risk-adjusted discount rate (RADR) is the risk adjustment factor that represents the percent of estimated cash inflows that investors would be satisfied to receive for certain rather than the cash inflows that are possible for each year.

Accepted Answer

A) True 
 B)False

Question 7

The net present value and internal rate of return methods will always agree on whether a project enhances or harms shareholder wealth.

Accepted Answer

A) True 
 B)False

Question 8

Examples of external economic data required for project analysis include all of the following except:

Accepted Answer

A)  business cycle stages. 
B)  inflation trends 
C)  labor-management relations 
D)  exchange rate trends 
A)  business cycle stages. 
B)  inflation trends 
C)  labor-management relations 
D)  exchange rate trends

Question 9

The internal rate of return measures the return on the project's initial cost.

Accepted Answer

A) True 
 B)False

Question 10

The profitability index is calculated by subtracting the net investment from the present value of the cash flows.

Accepted Answer

A) True 
 B)False

Question 11

As a rule, independent projects are accepted if the internal rate of return is greater than or equal to:

Accepted Answer

A)  1.0 
B)  zero 
C)  marginal cost of capital 
D)  expected rate of return 
A)  1.0 
B)  zero 
C)  marginal cost of capital 
D)  expected rate of return

Question 12

Unlike other corporations undertaking the capital budgeting process, MNC's need to consider which of the following?

Accepted Answer

A)  the possibility of seizure of assets. 
B)  the development of new products. 
C)  construction techniques 
D)  selection of management 
A)  the possibility of seizure of assets. 
B)  the development of new products. 
C)  construction techniques 
D)  selection of management

Question 13

The stage in the capital budgeting process in which implemented projects are periodically reviewed is called the _____________ stage.

Accepted Answer

A)  follow-up. 
B)  selection. 
C)  identification. 
D)  implementation. 
A)  follow-up. 
B)  selection. 
C)  identification. 
D)  implementation.

Question 14

The stage in the capital budgeting process in which projects that are accepted must be executed in a timely fashion is called the _____________ stage.

Accepted Answer

A)  follow-up. 
B)  selection. 
C)  identification. 
D)  implementation. 
A)  follow-up. 
B)  selection. 
C)  identification. 
D)  implementation.

Question 15

All of the following statements are correct except:

Accepted Answer

A)  The NPV and IRR methods will always agree on whether a project enhances or harms shareholder wealth. 
B)  If a project has a positive NPV, its IRR will always be greater than the cost of capital. 
C)  If a project has a negative NPV, its IRR will always be less than the cost of capital. 
D)  There is always a conflict between NPV and IRR in the case of mutually exclusive projects. 
A)  The NPV and IRR methods will always agree on whether a project enhances or harms shareholder wealth. 
B)  If a project has a positive NPV, its IRR will always be greater than the cost of capital. 
C)  If a project has a negative NPV, its IRR will always be less than the cost of capital. 
D)  There is always a conflict between NPV and IRR in the case of mutually exclusive projects.

Question 16

Your company owns land in a busy shopping district. If the chair of the company's board of directors thinks they can build a plant on that land and that the land will incur no additional cost, the chair fails to take into account:

Accepted Answer

A)  capital expenditures 
B)  opportunity costs 
C)  sunk costs 
D)  depreciation 
A)  capital expenditures 
B)  opportunity costs 
C)  sunk costs 
D)  depreciation

Question 17

Adjusts the required rate of return at which the analyst discounts a project's cash flows based on the project's risk.

Accepted Answer

A)  IRR 
B)  MIRR 
C)  Adjusted IRR 
D)  RADR 
A)  IRR 
B)  MIRR 
C)  Adjusted IRR 
D)  RADR

Question 18

Internal rate of return (IRR) and net present value (NPV) methods:

Accepted Answer

A)  generally arrive at the same accept/reject decisions 
B)  are less sophisticated than the payback period 
C)  cannot make use of the same cash flows 
D)  can be substituted for by the payback period 
A)  generally arrive at the same accept/reject decisions 
B)  are less sophisticated than the payback period 
C)  cannot make use of the same cash flows 
D)  can be substituted for by the payback period

Question 19

Which of the following statements is false?

Accepted Answer

A)  If the payback period is less than the maximum acceptable payback period, accept the project. 
B)  If the payback period is less than the maximum acceptable payback period, reject the project. 
C)  If the payback period is greater than the maximum acceptable payback period, reject the project. 
D)  If the payback period is the same as the maximum acceptable payback period, accept the project. 
A)  If the payback period is less than the maximum acceptable payback period, accept the project. 
B)  If the payback period is less than the maximum acceptable payback period, reject the project. 
C)  If the payback period is greater than the maximum acceptable payback period, reject the project. 
D)  If the payback period is the same as the maximum acceptable payback period, accept the project.

Question 20

The time required for the cumulative cash flows from a project to equal zero is called the:

Accepted Answer

A)  profitability index 
B)  cash flow time frame 
C)  project life 
D)  payback period 
A)  profitability index 
B)  cash flow time frame 
C)  project life 
D)  payback period

To calculate the net present value in Excel, you use the "=PV()" function.

All of the following statements are correct except:

Sound capital budgeting decisions require a variety of information including internal financial data, external economic and political data, and non-financial data.

Independent projects are not in direct competition with one another.

Stages of the capital budgeting include all of the following EXCEPT:

The risk-adjusted discount rate (RADR) is the risk adjustment factor that represents the percent of estimated cash inflows that investors would be satisfied to receive for certain rather than the cash inflows that are possible for each year.

The net present value and internal rate of return methods will always agree on whether a project enhances or harms shareholder wealth.

Examples of external economic data required for project analysis include all of the following except:

The internal rate of return measures the return on the project's initial cost.

The profitability index is calculated by subtracting the net investment from the present value of the cash flows.

As a rule, independent projects are accepted if the internal rate of return is greater than or equal to:

Unlike other corporations undertaking the capital budgeting process, MNC's need to consider which of the following?

The stage in the capital budgeting process in which implemented projects are periodically reviewed is called the _____________ stage.

The stage in the capital budgeting process in which projects that are accepted must be executed in a timely fashion is called the _____________ stage.

All of the following statements are correct except:

Your company owns land in a busy shopping district. If the chair of the company's board of directors thinks they can build a plant on that land and that the land will incur no additional cost, the chair fails to take into account:

Adjusts the required rate of return at which the analyst discounts a project's cash flows based on the project's risk.

Internal rate of return (IRR) and net present value (NPV) methods:

Which of the following statements is false?

The time required for the cumulative cash flows from a project to equal zero is called the:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Structure and the Cost of Capital

Filters

Exam 17: Capital Budgeting Analysis

To calculate the net present value in Excel, you use the "=PV()" function.

All of the following statements are correct except:

Sound capital budgeting decisions require a variety of information including internal financial data, external economic and political data, and non-financial data.

Independent projects are not in direct competition with one another.

Stages of the capital budgeting include all of the following EXCEPT:

The risk-adjusted discount rate (RADR) is the risk adjustment factor that represents the percent of estimated cash inflows that investors would be satisfied to receive for certain rather than the cash inflows that are possible for each year.

The net present value and internal rate of return methods will always agree on whether a project enhances or harms shareholder wealth.

Examples of external economic data required for project analysis include all of the following except:

The internal rate of return measures the return on the project's initial cost.

The profitability index is calculated by subtracting the net investment from the present value of the cash flows.

As a rule, independent projects are accepted if the internal rate of return is greater than or equal to:

Unlike other corporations undertaking the capital budgeting process, MNC's need to consider which of the following?

The stage in the capital budgeting process in which implemented projects are periodically reviewed is called the _____________ stage.

The stage in the capital budgeting process in which projects that are accepted must be executed in a timely fashion is called the _____________ stage.

All of the following statements are correct except:

Your company owns land in a busy shopping district. If the chair of the company's board of directors thinks they can build a plant on that land and that the land will incur no additional cost, the chair fails to take into account:

Adjusts the required rate of return at which the analyst discounts a project's cash flows based on the project's risk.

Internal rate of return (IRR) and net present value (NPV) methods:

Which of the following statements is false?

The time required for the cumulative cash flows from a project to equal zero is called the:

The Financial Environment

Money and the Monetary System

Banks and Other Financial Institutions

Federal Reserve System

Policy Makers and the Money Supply

International Finance and Trade

Savings and Investment Process

Interest Rates

Time Value of Money

Bonds and Stocks: Characteristics and Valuations

Securities and Markets

Financial Return and Risk Concepts

Business Organization and Financial Data

Financial Analysis and Long-Term Financial Planning

Managing Working Capital

Short-Term Business Financing

Capital Structure and the Cost of Capital

Filters