Question 1

Whenever the net present value of a project is positive,the profitability index is greater or equal to 1.0.

Accepted Answer

A) True 
 B)False

Question 2

The profitability index is the ratio between the some of the cash flows and the projects' cost.

Accepted Answer

A) True 
 B)False

Question 3

What is the IRR for the following project if its initial after-tax cost is $5,000,000 and it is expected to provide after-tax operating cash flows of ($1,800,000)in year 1,$2,900,000 in year 2,$2,700,000 in year 3,and $2,300,000 in year 4?

Accepted Answer

A) 5.83% 
B) 9.67% 
C) 11.44% 
D) none of the above 
A) 5.83% 
B) 9.67% 
C) 11.44% 
D) none of the above

Question 4

The capital-budgeting process starts with which one of the following stages:

Accepted Answer

A) development 
B) identification 
C) implementation 
D) selection 
A) development 
B) identification 
C) implementation 
D) selection

Question 5

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

Question 6

Which of the following statements is correct?

Accepted Answer

A) The typical capital budgeting project involves a small upfront cash outlay,followed by a series of smaller cash inflows and outflows,but the project's cash flows,including the total upfront cost of the project,are not known with certainty before the project starts. 
B) The typical capital budgeting project involves a large upfront cash outlay,followed by a series of larger cash inflows and outflows,but the project's cash flows,including the total upfront cost of the project,are not known with certainty before the project starts. 
C) The atypical capital budgeting project involves a large upfront cash outlay,followed by a series of smaller cash inflows and outflows,but the project's cash flows,including the total upfront cost of the project,are not known with certainty before the project starts. 
D) The typical capital budgeting project involves a large upfront cash outlay,followed by a series of smaller cash inflows and outflows,and the project's cash flows,including the total upfront cost of the project,are known with certainty before the project starts. 
E) none of the above statements are correct 
A) The typical capital budgeting project involves a small upfront cash outlay,followed by a series of smaller cash inflows and outflows,but the project's cash flows,including the total upfront cost of the project,are not known with certainty before the project starts. 
B) The typical capital budgeting project involves a large upfront cash outlay,followed by a series of larger cash inflows and outflows,but the project's cash flows,including the total upfront cost of the project,are not known with certainty before the project starts. 
C) The atypical capital budgeting project involves a large upfront cash outlay,followed by a series of smaller cash inflows and outflows,but the project's cash flows,including the total upfront cost of the project,are not known with certainty before the project starts. 
D) The typical capital budgeting project involves a large upfront cash outlay,followed by a series of smaller cash inflows and outflows,and the project's cash flows,including the total upfront cost of the project,are known with certainty before the project starts. 
E) none of the above statements are correct

Question 7

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

Accepted Answer

A) reduce economies of scale. 
B) reduce product differentiation. 
C) reduce absolute cost advantages. 
D) fail to exploit advantages in distribution channels. 
E) none of the above statements are correct 
A) reduce economies of scale. 
B) reduce product differentiation. 
C) reduce absolute cost advantages. 
D) fail to exploit advantages in distribution channels. 
E) none of the above statements are correct

Question 8

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

Question 9

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 10

The higher the risk of a project,the higher its risk-adjusted discount rate and thus the lower the net present value for a given stream of cash inflows.

Accepted Answer

A) True 
 B)False

Whenever the net present value of a project is positive,the profitability index is greater or equal to 1.0.

The profitability index is the ratio between the some of the cash flows and the projects' cost.

What is the IRR for the following project if its initial after-tax cost is $5,000,000 and it is expected to provide after-tax operating cash flows of ($1,800,000)in year 1,$2,900,000 in year 2,$2,700,000 in year 3,and $2,300,000 in year 4?

The capital-budgeting process starts with which one of the following stages:

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

Which of the following statements is correct?

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

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

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

The higher the risk of a project,the higher its risk-adjusted discount rate and thus the lower the net present value for a given stream of cash inflows.

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Exam 17: Capital Budgeting Analysis

Whenever the net present value of a project is positive,the profitability index is greater or equal to 1.0.

The profitability index is the ratio between the some of the cash flows and the projects' cost.

What is the IRR for the following project if its initial after-tax cost is $5,000,000 and it is expected to provide after-tax operating cash flows of ($1,800,000)in year 1,$2,900,000 in year 2,$2,700,000 in year 3,and $2,300,000 in year 4?

The capital-budgeting process starts with which one of the following stages:

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

Which of the following statements is correct?

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

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

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

The higher the risk of a project,the higher its risk-adjusted discount rate and thus the lower the net present value for a given stream of cash inflows.

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