Question 1

The profitability index measures the present value of benefits received for each dollar invested.

Accepted Answer

A) True 
 B)False  True

Question 2

Two or more projects that perform the same function are said to be:

Accepted Answer

A) mutually exclusive projects 
B) independent projects 
C) joint projects 
D) none of the above 
A) mutually exclusive projects 
B) independent projects 
C) joint projects 
D) none of the above A

Question 3

A firm's cost of capital represents a firm's weighted average cost of financing.

Accepted Answer

A) True 
 B)False  True

Question 4

In a capital budgeting context,a project's required rate of return is called the yield to maturity.

Accepted Answer

A) True 
 B)False

Question 5

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

Accepted Answer

A) financing costs 
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) financing costs 
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 6

Independent projects are not in direct competition with one another.

Accepted Answer

A) True 
 B)False

Question 7

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 
E) all of the above are included 
A) business cycle stages. 
B) inflation trends 
C) labor-management relations 
D) exchange rate trends 
E) all of the above are included

Question 8

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

Question 9

One weakness of the payback period method is that all cash flows beyond the payback period are ignored.

Accepted Answer

A) True 
 B)False

Question 10

Capital budgeting is

Accepted Answer

A) the process of identifying,evaluating,and implementing a firm's investment opportunities. 
B) the process of identifying,evaluating,and implementing a firm's objectives. 
C) the process of identifying,evaluating,and implementing a firm's strategic plans. 
D) the process of identifying,evaluating,and implementing a firm's financing requirements. 
E) all of the above statements are correct 
A) the process of identifying,evaluating,and implementing a firm's investment opportunities. 
B) the process of identifying,evaluating,and implementing a firm's objectives. 
C) the process of identifying,evaluating,and implementing a firm's strategic plans. 
D) the process of identifying,evaluating,and implementing a firm's financing requirements. 
E) all of the above statements are correct

Question 11

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) taxes 
D) exchange rate trends 
E) all of the above are included 
A) business cycle stages 
B) inflation trends 
C) taxes 
D) exchange rate trends 
E) all of the above are included

Question 12

The corporate planning tool that develops project plans that fit well with the firm's plans is often referred to by the following acronym:

Accepted Answer

A) MOSG. 
B) SMOG. 
C) OMGS. 
D) GOMS. 
E) none of the above statements are correct 
A) MOSG. 
B) SMOG. 
C) OMGS. 
D) GOMS. 
E) none of the above statements are correct

Question 13

The IRR

Accepted Answer

A) shows the graphical relationship between a project's NPV and cost of capital. 
B) is the return that causes the NPV to be zero. 
C) is the return that causes the NPV to be positive. 
D) measures the firm and project's required rate of return. 
E) none of the above 
A) shows the graphical relationship between a project's NPV and cost of capital. 
B) is the return that causes the NPV to be zero. 
C) is the return that causes the NPV to be positive. 
D) measures the firm and project's required rate of return. 
E) none of the above

Question 14

The profitability index is the least preferable method to use to evaluate capital budgeting projects because it does not take the time value of money into account.

Accepted Answer

A) True 
 B)False

Question 15

The stage in the capital budgeting process that involves finding potential capital investment opportunities and determining whether a project involves a replacement decision and/or revenue expansion 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 16

Reasons NPV,IRR,MIRR,and PI will sometimes disagree in the case of mutually exclusive investments include all of the following except:

Accepted Answer

A) different cash flow patterns. 
B) different time horizons. 
C) different sizes. 
D) different locations. 
E) all of the above are correct 
A) different cash flow patterns. 
B) different time horizons. 
C) different sizes. 
D) different locations. 
E) all of the above are correct

Question 17

Which of the following is true of sunk costs?

Accepted Answer

A) not included in initial cash flow 
B) similar to opportunity costs 
C) often combined with terminal cash flow 
D) deciding factor in most project decisions 
A) not included in initial cash flow 
B) similar to opportunity costs 
C) often combined with terminal cash flow 
D) deciding factor in most project decisions

Question 18

The after-tax cash flows without the project are referred to as:

Accepted Answer

A) the net investment 
B) incremental cash flows 
C) the base case 
D) none of the above 
A) the net investment 
B) incremental cash flows 
C) the base case 
D) none of the above

Question 19

The ratio between the present value of a project's cash inflows and the present value of its initial investment is called the:

Accepted Answer

A) MIRR. 
B) IRR. 
C) PI. 
D) NPV. 
E) none of the above are correct 
A) MIRR. 
B) IRR. 
C) PI. 
D) NPV. 
E) none of the above are correct

Question 20

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

Accepted Answer

A) True 
 B)False

The profitability index measures the present value of benefits received for each dollar invested.

Two or more projects that perform the same function are said to be:

A firm's cost of capital represents a firm's weighted average cost of financing.

In a capital budgeting context,a project's required rate of return is called the yield to maturity.

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

Independent projects are not in direct competition with one another.

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

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

One weakness of the payback period method is that all cash flows beyond the payback period are ignored.

Capital budgeting is

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

The corporate planning tool that develops project plans that fit well with the firm's plans is often referred to by the following acronym:

The IRR

The profitability index is the least preferable method to use to evaluate capital budgeting projects because it does not take the time value of money into account.

The stage in the capital budgeting process that involves finding potential capital investment opportunities and determining whether a project involves a replacement decision and/or revenue expansion is called the _____________ stage.

Reasons NPV,IRR,MIRR,and PI will sometimes disagree in the case of mutually exclusive investments include all of the following except:

Which of the following is true of sunk costs?

The after-tax cash flows without the project are referred to as:

The ratio between the present value of a project's cash inflows and the present value of its initial investment is called the:

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

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

The profitability index measures the present value of benefits received for each dollar invested.

Two or more projects that perform the same function are said to be:

A firm's cost of capital represents a firm's weighted average cost of financing.

In a capital budgeting context,a project's required rate of return is called the yield to maturity.

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

Independent projects are not in direct competition with one another.

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

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

One weakness of the payback period method is that all cash flows beyond the payback period are ignored.

Capital budgeting is

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

The corporate planning tool that develops project plans that fit well with the firm's plans is often referred to by the following acronym:

The IRR

The profitability index is the least preferable method to use to evaluate capital budgeting projects because it does not take the time value of money into account.

The stage in the capital budgeting process that involves finding potential capital investment opportunities and determining whether a project involves a replacement decision and/or revenue expansion is called the _____________ stage.

Reasons NPV,IRR,MIRR,and PI will sometimes disagree in the case of mutually exclusive investments include all of the following except:

Which of the following is true of sunk costs?

The after-tax cash flows without the project are referred to as:

The ratio between the present value of a project's cash inflows and the present value of its initial investment is called the:

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

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