Question 1

Estimates of revenues and costs should take the business unit view, rather than the corporate view.

Accepted Answer

A) True 
 B)False  False

Question 2

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 E

Question 3

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. 
E) all of the above are correct 
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. 
E) all of the above are correct D

Question 4

In the case of independent projects:

Accepted Answer

A) the financial manager is responsible for choosing the average of these alternatives since only one can be chosen; selecting one project requires the selection of the other. 
B) they are to be evaluated based on their expected effect on net income; all such projects that enhance net income should be included in the firm's capital budget. 
C) the financial manager is responsible for choosing the best of these alternatives since only one can be chosen; selecting one project precludes the other from being undertaken. 
D) they are to be evaluated based on their past effect on shareholder wealth; all such projects that enhance shareholder wealth should be included in the firm's capital budget. 
E) none of the above statements are correct 
A) the financial manager is responsible for choosing the average of these alternatives since only one can be chosen; selecting one project requires the selection of the other. 
B) they are to be evaluated based on their expected effect on net income; all such projects that enhance net income should be included in the firm's capital budget. 
C) the financial manager is responsible for choosing the best of these alternatives since only one can be chosen; selecting one project precludes the other from being undertaken. 
D) they are to be evaluated based on their past effect on shareholder wealth; all such projects that enhance shareholder wealth should be included in the firm's capital budget. 
E) none of the above statements are correct

Question 5

Capital budgeting is

Accepted Answer

A) the process of identifying, evaluating, and implementing a firm's working capital requirements. 
B) the process of identifying, evaluating, and implementing a firm's management 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) none of the above statements are correct 
A) the process of identifying, evaluating, and implementing a firm's working capital requirements. 
B) the process of identifying, evaluating, and implementing a firm's management 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) none of the above statements are correct

Question 6

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 7

When the net present value for a project is negative, the internal rate 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 8

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 greater 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 greater than the regular IRR if the cost of capital is less than the regular IRR. 
E) all of the above are correct

Question 9

When applied to the analysis of independent projects, NPV and IRR never provide conflicting resultsaccept or reject decisions.

Accepted Answer

A) True 
 B)False

Question 10

Shanghai Shipping is considering investing in a project that requires an after-tax initial investment of 156 million and is expected to produce after-tax cash inflows of $40 million for each of the next five years.The firm's cost of capital is 8%.Based on this information, the IRR of the project is _________ percent and the firm should _________ the project.

Accepted Answer

A) 9.9; accept 
B) -9.9, reject 
C) 8.9, accept 
D) -8.9, reject 
E) none of the above 
A) 9.9; accept 
B) -9.9, reject 
C) 8.9, accept 
D) -8.9, reject 
E) none of the above

Question 11

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

Question 12

122.69.The capital budgeting process consists of all of the following stages except:

Accepted Answer

A) follow-up. 
B) selection. 
C) implementation. 
D) development. 
E) all of the above are included in the capital budgeting process 
A) follow-up. 
B) selection. 
C) implementation. 
D) development. 
E) all of the above are included in the capital budgeting process

Question 13

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

Accepted Answer

A) investment costs 
B) estimates of revenues, costs, and cash flows 
C) financing costs 
D) transportation costs 
E) all of the above are included 
A) investment costs 
B) estimates of revenues, costs, and cash flows 
C) financing costs 
D) transportation costs 
E) all of the above are included

Question 14

Which of the following statements is correct?

Accepted Answer

A) Capital budgeting is the process of identifying, evaluating, and implementing a firm's financing strategies. 
B) Capital budgeting seeks to identify projects that will reduce a firm's competitive advantage and by so doing decrease shareholders' wealth. 
C) By its nature, capital budgeting involves short-term projects. 
D) Capital budgeting projects usually require small initial investments and may involve acquiring or constructing plant and equipment. 
E) none of the above statements are correct 
A) Capital budgeting is the process of identifying, evaluating, and implementing a firm's financing strategies. 
B) Capital budgeting seeks to identify projects that will reduce a firm's competitive advantage and by so doing decrease shareholders' wealth. 
C) By its nature, capital budgeting involves short-term projects. 
D) Capital budgeting projects usually require small initial investments and may involve acquiring or constructing plant and equipment. 
E) none of the above statements are correct

Question 15

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 16

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) SWOT. 
B) MOGS. 
C) STOW. 
D) GOMS. 
E) none of the above statements are correct 
A) SWOT. 
B) MOGS. 
C) STOW. 
D) GOMS. 
E) none of the above statements are correct

Question 17

The process of allocating funds among competing investment opportunities is referred to as:

Accepted Answer

A) capital expenditures 
B) initial cash flow analysis 
C) long-term forecasting 
D) capital budgeting 
A) capital expenditures 
B) initial cash flow analysis 
C) long-term forecasting 
D) capital budgeting

Question 18

Information generation develops three types of data: internal financial data, external economic and political data, and non-financial data.

Accepted Answer

A) True 
 B)False

Question 19

In the case of independent projects:

Accepted Answer

A) the financial manager is responsible for choosing the average of these alternatives since only one can be chosen; selecting one project requires the selection of the other. 
B) they are to be evaluated based on their expected effect on shareholder wealth; all such projects that enhance shareholder wealth should be included in the firm's capital budget. 
C) the financial manager is responsible for choosing the best of these alternatives since only one can be chosen; selecting one project precludes the other from being undertaken. 
D) they are to be evaluated based on their past effect on shareholder wealth; all such projects that enhance shareholder wealth should be included in the firm's capital budget. 
E) none of the above statements are correct 
A) the financial manager is responsible for choosing the average of these alternatives since only one can be chosen; selecting one project requires the selection of the other. 
B) they are to be evaluated based on their expected effect on shareholder wealth; all such projects that enhance shareholder wealth should be included in the firm's capital budget. 
C) the financial manager is responsible for choosing the best of these alternatives since only one can be chosen; selecting one project precludes the other from being undertaken. 
D) they are to be evaluated based on their past effect on shareholder wealth; all such projects that enhance shareholder wealth should be included in the firm's capital budget. 
E) none of the above statements are correct

Question 20

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

Estimates of revenues and costs should take the business unit view, rather than the corporate view.

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

All of the following statements are correct except:

In the case of independent projects:

Capital budgeting 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.

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

All of the following statements are correct except:

When applied to the analysis of independent projects, NPV and IRR never provide conflicting resultsaccept or reject decisions.

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

122.69.The capital budgeting process consists of all of the following stages except:

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

Which of the following statements is correct?

Capital budgeting is

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 process of allocating funds among competing investment opportunities is referred to as:

Information generation develops three types of data: internal financial data, external economic and political data, and non-financial data.

In the case of independent projects:

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

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

Exam 17: Capital Budgeting Analysis

Estimates of revenues and costs should take the business unit view, rather than the corporate view.

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

All of the following statements are correct except:

In the case of independent projects:

Capital budgeting 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.

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

All of the following statements are correct except:

When applied to the analysis of independent projects, NPV and IRR never provide conflicting resultsaccept or reject decisions.

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

122.69.The capital budgeting process consists of all of the following stages except:

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

Which of the following statements is correct?

Capital budgeting is

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 process of allocating funds among competing investment opportunities is referred to as:

Information generation develops three types of data: internal financial data, external economic and political data, and non-financial data.

In the case of independent projects:

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

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