Question 1

All of the following statements are correct EXCEPT:

Accepted Answer

A) Capital budgeting analysis is a framework for evaluating all business decisions;it is not only a tool for the "financial" types. 
B) Proper analysis will identify relevant cash flows and an appropriate discount rate to reflect the risk of the strategy and will compare the benefits and costs of the project by considering the time value of money. 
C) Whether the investment is one in a business strategy,building a new warehouse,seeking fuel efficient methods of doing business,upgrading information technology systems,or investing in human resources,we should try to quantify the benefits and cost of these choices in order to evaluate them properly. 
D) To achieve success over time,a firm's managers must identify and invest in projects that provide positive net present values to maximize shareholder wealth. 
E) all of the above statements are correct 
A) Capital budgeting analysis is a framework for evaluating all business decisions;it is not only a tool for the "financial" types. 
B) Proper analysis will identify relevant cash flows and an appropriate discount rate to reflect the risk of the strategy and will compare the benefits and costs of the project by considering the time value of money. 
C) Whether the investment is one in a business strategy,building a new warehouse,seeking fuel efficient methods of doing business,upgrading information technology systems,or investing in human resources,we should try to quantify the benefits and cost of these choices in order to evaluate them properly. 
D) To achieve success over time,a firm's managers must identify and invest in projects that provide positive net present values to maximize shareholder wealth. 
E) all of the above statements are correct

Question 2

An examination of a firm's opportunities,strengths,threats and weaknesses is often referred to by the following acronym:

Accepted Answer

A) WOTS. 
B) OSTW. 
C) STOW. 
D) TWOS. 
E) none of the above statements are correct 
A) WOTS. 
B) OSTW. 
C) STOW. 
D) TWOS. 
E) none of the above statements are correct

Question 3

All of the following statements are correct except:

Accepted Answer

A) Capital budgeting is the process of identifying,evaluating,and implementing a firm's investment opportunities. 
B) Capital budgeting seeks to identify projects that will enhance a firm's competitive advantage and by so doing increase shareholders' wealth. 
C) By its nature,capital budgeting involves long-term projects,although capital budgeting techniques also can be applied to working capital decisions 
D) Capital budgeting projects usually require large initial investments and may involve acquiring or constructing plant and equipment. 
E) all of the above statements are correct 
A) Capital budgeting is the process of identifying,evaluating,and implementing a firm's investment opportunities. 
B) Capital budgeting seeks to identify projects that will enhance a firm's competitive advantage and by so doing increase shareholders' wealth. 
C) By its nature,capital budgeting involves long-term projects,although capital budgeting techniques also can be applied to working capital decisions 
D) Capital budgeting projects usually require large initial investments and may involve acquiring or constructing plant and equipment. 
E) all of the above statements are correct

Question 4

Examples of non-financial data required for project analysis include all of the following except:

Accepted Answer

A) distribution channels 
B) quantity and quality of labor force in different locations 
C) labor-management relations 
D) status of technological change in the industry 
E) all of the above are included 
A) distribution channels 
B) quantity and quality of labor force in different locations 
C) labor-management relations 
D) status of technological change in the industry 
E) all of the above are included

Question 5

Nonfinancial information plays no part in capital budgeting.

Accepted Answer

A) True 
 B)False

Question 6

Positive NPV projects may originate from cost saving projects such as those that

Accepted Answer

A) create economies of scale. 
B) create product differentiation. 
C) generate absolute cost advantages. 
D) exploit advantages in distribution channels. 
E) all of the above statements are correct 
A) create economies of scale. 
B) create product differentiation. 
C) generate absolute cost advantages. 
D) exploit advantages in distribution channels. 
E) all of the above statements are correct

Question 7

If a project has a positive net present value,then the profitability index is:

Accepted Answer

A) greater than one 
B) less than one 
C) equal to one 
D) cannot tell from this information 
A) greater than one 
B) less than one 
C) equal to one 
D) cannot tell from this information

Question 8

Unlike other corporations undertaking the capital budgeting process,___________ need to consider possible added political and economic risks such as the possibility of seizure of assets,unstable currencies,foreign exchange controls and foreign tax regulations.

Accepted Answer

A) MOGs. 
B) MNCs. 
C) SWOTs. 
D) LTDs. 
E) none of the above 
A) MOGs. 
B) MNCs. 
C) SWOTs. 
D) LTDs. 
E) none of the above

Question 9

Any positive economic profit or positive net present value must arise from

Accepted Answer

A) a perfectly competitive market situation. 
B) cost-producing projects that allow the firm to increase costs above the current level such as economies of scale and access to distribution channels. 
C) government contracts or preferences. 
D) two of the above are correct. 
E) none of the above statements are correct 
A) a perfectly competitive market situation. 
B) cost-producing projects that allow the firm to increase costs above the current level such as economies of scale and access to distribution channels. 
C) government contracts or preferences. 
D) two of the above are correct. 
E) none of the above statements are correct

Question 10

Two years ago,a company spent $450,000 on a consulting study that focused on the technology of the firm's operations.Now it appears that technology is noncompliant with existing regulations.New technology must replace the old project.The $450,000 would represent:

Accepted Answer

A) an opportunity cost 
B) an operating expenditure 
C) a sunk cost 
D) none of the above 
A) an opportunity cost 
B) an operating expenditure 
C) a sunk cost 
D) none of the above

Question 11

All of the following statements are correct EXCEPT:

Accepted Answer

A) Capital budgeting analysis is a framework for evaluating all business decisions;it is not only a tool for the "financial" types. 
B) Proper analysis will identify relevant cash flows and an appropriate discount rate to reflect the risk of the strategy and will compare the benefits and costs of the project by considering the time value of money. 
C) Whether the investment is one in a business strategy,building a new warehouse,seeking fuel efficient methods of doing business,upgrading information technology systems,or investing in human resources,we should not try to quantify the benefits and cost of these choices in order to evaluate them properly. 
D) To achieve success over time,a firm's managers must identify and invest in projects that provide positive net present values to maximize shareholder wealth. 
E) all of the above statements are correct 
A) Capital budgeting analysis is a framework for evaluating all business decisions;it is not only a tool for the "financial" types. 
B) Proper analysis will identify relevant cash flows and an appropriate discount rate to reflect the risk of the strategy and will compare the benefits and costs of the project by considering the time value of money. 
C) Whether the investment is one in a business strategy,building a new warehouse,seeking fuel efficient methods of doing business,upgrading information technology systems,or investing in human resources,we should not try to quantify the benefits and cost of these choices in order to evaluate them properly. 
D) To achieve success over time,a firm's managers must identify and invest in projects that provide positive net present values to maximize shareholder wealth. 
E) all of the above statements are correct

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

All of the following statements are correct except:

Accepted Answer

A) MIRR solves some of the problems presented by IRR in that MIRR rankings of mutually exclusive projects with comparably-sized initial investments will agree with the NPV rankings of those projects. 
B) MIRR always gives a single answer-it will not give us multiple answers as the IRR approach sometimes does. 
C) MIRR is most useful in the case of mutually exclusive investments and in cases where project cash flows change sign more than once. 
D) MIRR is always less than the regular IRR if the cost of capital is less than the regular IRR. 
E) all of the above are correct 
A) MIRR solves some of the problems presented by IRR in that MIRR rankings of mutually exclusive projects with comparably-sized initial investments will agree with the NPV rankings of those projects. 
B) MIRR always gives a single answer-it will not give us multiple answers as the IRR approach sometimes does. 
C) MIRR is most useful in the case of mutually exclusive investments and in cases where project cash flows change sign more than once. 
D) MIRR is always less than the regular IRR if the cost of capital is less than the regular IRR. 
E) all of the above are correct

Question 14

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

Accepted Answer

A) follow-up. 
B) selection. 
C) identification. 
D) development. 
E) all of the above are included 
A) follow-up. 
B) selection. 
C) identification. 
D) development. 
E) all of the above are included

Question 15

The majority of capital budgeting projects are short-lived projects.

Accepted Answer

A) True 
 B)False

Question 16

To maximize shareholder wealth,a financial manager needs to find capital budgeting projects that have positive net present values.

Accepted Answer

A) True 
 B)False

Question 17

All of the following are considered stages in the capital budgeting process EXCEPT:

Accepted Answer

A) development 
B) identification 
C) implementation 
D) selection 
E) all are included 
A) development 
B) identification 
C) implementation 
D) selection 
E) all are included

Question 18

The stage in the capital budgeting process that involves applying the appropriate capital budgeting techniques to help make a final accept or reject decision is called the _____________ stage.

Accepted Answer

A) follow-up. 
B) selection. 
C) identification. 
D) development. 
E) none of the above are included 
A) follow-up. 
B) selection. 
C) identification. 
D) development. 
E) none of the above are included

Question 19

When the net present value for a project is negative,the internal rater of return is _________ the cost of capital.

Accepted Answer

A) greater than 
B) greater than or equal to 
C) less than 
D) equal to 
A) greater than 
B) greater than or equal to 
C) less than 
D) equal to

Question 20

Unlike other corporations undertaking the capital budgeting process,___________ need to consider possible added political and economic risks such as the possibility of seizure of assets,unstable currencies,foreign exchange controls and foreign tax regulations.

Accepted Answer

A) MOGs. 
B) INCs. 
C) SWOTs. 
D) LTDs. 
E) none of the above 
A) MOGs. 
B) INCs. 
C) SWOTs. 
D) LTDs. 
E) none of the above

All of the following statements are correct EXCEPT:

An examination of a firm's opportunities,strengths,threats and weaknesses is often referred to by the following acronym:

All of the following statements are correct except:

Examples of non-financial data required for project analysis include all of the following except:

Nonfinancial information plays no part in capital budgeting.

Positive NPV projects may originate from cost saving projects such as those that

If a project has a positive net present value,then the profitability index is:

Unlike other corporations undertaking the capital budgeting process,___________ need to consider possible added political and economic risks such as the possibility of seizure of assets,unstable currencies,foreign exchange controls and foreign tax regulations.

Any positive economic profit or positive net present value must arise from

Two years ago,a company spent $450,000 on a consulting study that focused on the technology of the firm's operations.Now it appears that technology is noncompliant with existing regulations.New technology must replace the old project.The $450,000 would represent:

All of the following statements are correct EXCEPT:

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

All of the following statements are correct except:

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

The majority of capital budgeting projects are short-lived projects.

To maximize shareholder wealth,a financial manager needs to find capital budgeting projects that have positive net present values.

All of the following are considered stages in the capital budgeting process EXCEPT:

The stage in the capital budgeting process that involves applying the appropriate capital budgeting techniques to help make a final accept or reject decision is called the _____________ stage.

When the net present value for a project is negative,the internal rater of return is _________ the cost of capital.

Unlike other corporations undertaking the capital budgeting process,___________ need to consider possible added political and economic risks such as the possibility of seizure of assets,unstable currencies,foreign exchange controls and foreign tax regulations.

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 Valuation

Securities 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

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Exam 17: Capital Budgeting Analysis

All of the following statements are correct EXCEPT:

An examination of a firm's opportunities,strengths,threats and weaknesses is often referred to by the following acronym:

All of the following statements are correct except:

Examples of non-financial data required for project analysis include all of the following except:

Nonfinancial information plays no part in capital budgeting.

Positive NPV projects may originate from cost saving projects such as those that

If a project has a positive net present value,then the profitability index is:

Unlike other corporations undertaking the capital budgeting process,___________ need to consider possible added political and economic risks such as the possibility of seizure of assets,unstable currencies,foreign exchange controls and foreign tax regulations.

Any positive economic profit or positive net present value must arise from

Two years ago,a company spent $450,000 on a consulting study that focused on the technology of the firm's operations.Now it appears that technology is noncompliant with existing regulations.New technology must replace the old project.The $450,000 would represent:

All of the following statements are correct EXCEPT:

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

All of the following statements are correct except:

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

The majority of capital budgeting projects are short-lived projects.

To maximize shareholder wealth,a financial manager needs to find capital budgeting projects that have positive net present values.

All of the following are considered stages in the capital budgeting process EXCEPT:

The stage in the capital budgeting process that involves applying the appropriate capital budgeting techniques to help make a final accept or reject decision is called the _____________ stage.

When the net present value for a project is negative,the internal rater of return is _________ the cost of capital.

Unlike other corporations undertaking the capital budgeting process,___________ need to consider possible added political and economic risks such as the possibility of seizure of assets,unstable currencies,foreign exchange controls and foreign tax regulations.

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 Valuation

Securities 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