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

b. Balance sheet figures

c. Cash flow figures

d. Tax profit figures

Clear my choice

Question 7

Not yet answered

Marked out of 1.00

Question text

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

Clear my choice

Question 8

Not yet answered

Marked out of 1.00

Question text

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

Clear my choice

Question 9

Not yet answered

Marked out of 1.00

Question text

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

Clear my choice

Question 10

Not yet answered

Marked out of 1.00

Question text

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

Clear my choice

Question 11

Not yet answered

Marked out of 1.00

Question text

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.

Clear my choice

Question 12

Not yet answered

Marked out of 1.00

Question text

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

Clear my choice

Question 13

Not yet answered

Marked out of 1.00

Question text

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

Clear my choice

Question 14

Not yet answered

Marked out of 1.00

Question text

The IRR is the discount rate at which:

Select one:

a. NPV = 0

b. PI = 0

c. NPV = PI

Clear my choice

Question 15

Not yet answered

Marked out of 1.00

Question text

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

Clear my choice

Question 16

Not yet answered

Marked out of 1.00

Question text

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

Clear my choice

Question 17

Not yet answered

Marked out of 1.00

Question text

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

Not yet answered

Marked out of 1.00

Question text

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