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Question 6 Not yet answered Marked out of 1.00 Question text What does capital budgeting place an emphasis on? Select one: a. Accounting profit figures
Question 6
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What does capital budgeting place an emphasis on?
Select one:
a. Accounting profit figures
b. Balance sheet figures
c. Cash flow figures
d. Tax profit figures
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Question 7
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If a business has a number of options on which to spend an amount of money (for new projects or expansions), but the fact that the amount is limited means that not all options can be pursued, the business would have to go through a process of:
Select one:
a. Wait and see
b. Restructuring
c. Capital rationing
d. Project management
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Question 8
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If a project costs R100,000 to implement, and generates net cash flows of R30,000 a year for 10 years, what is its payback period?
Select one:
a. Three years
b. Two years
c. 10 years
d. Four years
e. Five years
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Question 9
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If a projects initial investment is R800,000, and it has an NPV of R120,000, what is its profitability index?
Select one:
a. 0.15
b. 1.15
c. -0.15
d. 0.85
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Question 10
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If a projects NPV is R278,000, and the PV of its cash flows is R2,140,365, what is its initial investment?
Select one:
a. R1,862,365
b. R2,814,635
c. R1,862,635
d. R2,418,365
e. R1,592,365
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Question 11
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If the internal rate of return of a project is higher than the required rate of return for the firm:
Select one:
a. The firm should consider the project as long-term wealth will be created.
b. The firm should not consider the project as long-term wealth will be destroyed.
c. The firm should increase its required rate of return to meet the internal rate of return.
d. The firm should reduce its required rate of return to increase the internal rate of return.
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Question 12
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If the PI of a project was between zero and one, what would the NPV of that same project be?
Select one:
a. Positive
b. Negative
c. Equal to zero
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Question 13
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The further ahead in time one attempts to make projections, the:
Select one:
a. Lower the risk
b. Greater the return
c. Lower the return
d. Greater the risk
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Question 14
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The IRR is the discount rate at which:
Select one:
a. NPV = 0
b. PI = 0
c. NPV = PI
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Question 15
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Using the NPV method, if a project has an initial investment of R450,000, and the present value of the projected cash flows is calculated as R375,000, what should the company involved do?
Select one:
a. Reject the project for implementation
b. Further evaluate the project using the payback period method
c. Further evaluate the project using the PI method
d. Consider implementing the project
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Question 16
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Which of the capital budgeting methods would generally be used as an initial screening tool, before the others are applied?
Select one:
a. Net present value method
b. Profitability index method
c. Internal rate of return method
d. Payback period method
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Question 17
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Which of the following would be seen as the approaches to capital budgeting decision making?
Select more than one:
a. Capital-revenue
b. Risk-return
c. Ranking
d. Cost-benefit
e. Accept-reject
Question 18
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Which capital budgeting approach should a firm use if it has to choose the best of a selection of mutually exclusive projects?
Select one:
a. Risk-return
b. Cost-benefit
c. Capital-revenue
d. Ranking
e. Accept-reject
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