QUESTION 1

Advantages of a capital budget process include all the following EXCEPT:

A	Improve equity across generations.
B	Extra review of infrastructure projects to prevent mistakes.
C	Facilitate borrowing to finance all infrastructure projects.
D	Prioritize purchase of infrastructure assets.

QUESTION 2

Which of the following statements best describes the nature of capital assets?

A	less acquisition frequency than items in the operating budget
B	large price tag
C	long useful life
D	All of the above

QUESTION 3

Why are the capital costs of long-term projects discounted to present value?

A	To better account for the relative stability of tax-free government investments as compared to private sector projects.
B	Because the amount of money that is spent in interest payments for the project should not be incorporated into the capital budget.
C	To better account for the resource yield that will be foregone by a long-term investment.
D	Because money that is received in the future has a greater value than money received now.

QUESTION 4

Capital budgeting process needs to address:

A	Shall a government take on a particular capital project?
B	Can a government afford capital projects?
C	How will a government carry out the capital investment project?
D	all of the above

QUESTION 5

To discount, we use Present value=future value / (1+rate of interest)ⁿ

A. True

B. False