Which of the following statements is correct for a project with a positive is NPV$?$

a$.$ IRR exceeds the cost of capital.

b$.$ Accepting the project has an indeterminate effect on shareholders.

c$.$ The discount rate exceeds the IRR.

d$.$ The profitability index equals one.

e$.$ IRR is equal to the cost of capital

If the levered beta is $1\mathrm{.}24,$ at debt$-$equity ratio of $0\mathrm{.}5$ and tax rate of $25\%,$ what is stocks unlevered beta?

a$.0\mathrm{.}81$

b$.0\mathrm{.}93$

c$.0\mathrm{.}90$

d$.0\mathrm{.}78$

e$.1\mathrm{.}12$

In a capital budgeting decision incremental cash flows mean

a$.$ Cash flows which are increasing

b$.$ Cash flows occurring over a period of time

c$.$ Cash flows directly related to the project

d$.$ Difference between cash inflows and cash outflows for each and every expenditure

e$.$ Both $($a$)$ and $($b$)$ above

Which of the following are important principles underlying the measurement of the costs and benefits of a project?

a$.$ All costs and benefits must be measured in terms of cash flows.

b$.$ Interest on long$-$term loans must be included for determining the net cash flows.

c$.$ Interest on long$-$term loans must not be included for determining the net cash flows.

d$.$ The cash flows must be measured in incremental terms.

e$.$ Only $($a$),($c$)$ and $($d$)$ of the above

Which of the following statements is$/$are true regarding the capital expenditure decision?

a$.$ Opportunity cost must be ignored

b$.$ Sunk cost must be included

c$.$ Cash flows must be defined from the point of view of suppliers of long term funds

d$.$ Interest on long$-$term debt must be excluded

e$.$ Both $($c$)$ and $($d$)$ above

Which of the following will not have any impact on the cost of the project?

a$.$ Increase in the expected cost of land.

b$.$ Decrease in margin money requirements.

c$.$ Increase in pre$-$operative salaries.

d$.$ Increase in excise duty on the items to be produced,

e$.$ Decrease in import duty of machinery.

The rationale for not including sunk costs in capital budgeting decisions is that they

a$.$ Are usually small in magnitude

b$.$ Revert at the end of the investment

c$.$ Are irreversible

d$.$ Represent nominal, not real, outflows

e$.$ Are historical costs.

New capital budgeting decisions are evaluated using the existing cost of capital of the firm because

a$.$ The firm does not pay taxes

b$.$ The firm is assumed to be financed by all equity

c$.$ Cost of det is always less than cost of equity

d$.$ New assets are assumed to have the same risk as existing assets

e$.$ The firm does not pay dividends till the new project earn profits.

If a company has a debt$-$to$-$equity ratio of $0\mathrm{.}65,$ a cost of debt of $5\%,$ and a cost of equity of $10\%,$ with a tax rate of $30\%,$ what is the WACC?

a$.7\mathrm{.}8\%$

b$.8\mathrm{.}75\%$

c$.7\mathrm{.}44\%$

d$.8\mathrm{.}2\%$

e$.6\mathrm{.}9\%$

Which of the following is false with respect to the IRR?

a$.$ It considers the cash flow streams throughout the life of the project

b$.$ It is appealing to the businessmen who prefer to think in terms of the rate of return from the project

c$.$ It considers the time value of money

d$.$ It is uniquely defined for every type of project

e$.$ Several mutually exclusive projects may be ranked on the basis of IRR despite the changes in the cost of capital

Conflicts in ranking of projects on the basis of Net Present value and Internal Rate of Return arise due to

a$.$ Disparity in the timing of cash inflows

b$.$ Disparity in the size of cash inflows

c$.$ Disparity in the life of cash inflows

d$.$ Both $($a$)$ and $($b$)$ above

e$.$ All of $($a$),($b$)$ and $($c$)$ above

Which of the following statements is true?

a$.$ A high internal rate of return is always a desirable feature for the firm.

b$.$ If the NPV of the cash flows at $12\%$ discount rate is positive, the IRR is also $12\%.$

c$.$ If the NPV of the cash flows is positive, we can conclude that IRR is unequally defined

d$.$ If the NPV of the cash flows is zero, the IRR of the project is equal to the opportunity cost of capital.

e$.$ Both $($a$)$ and $($d$)$ above

Which analysis believes that the variables are independent of each other?

a$.$ Scenario analysis

b$.$ Sensitivity analysis

c$.$ Simulation analysis

d$.$ NPV analysis

e$.$ Cost$-$Benefit analysis

Which of the following is a part of the economic appraisal of any project?

a$.$ Determination of present and past consumption trends in the society.

b$.$ Determination of the total value of imports and exports by the country,

c$.$ Determination of consumer requirements.

d$.$ Impact of the project on the and investments.

e$.$ Determination of optimal scale of operations.

If two projects are mutually exclusive and differ substantially in term of the initial outlays and subsequent expenses, which of the following criteria of evaluation is best suited?

a$.$ Payback period.

b$.$ Annual capital charge.

c$.$ NPV$.$

d$.$ IRR

e$.$ Accounting rate of return.

The interaction among variables of the project with its probability of change are assumed under which method of risk analysis in capital budgeting?

a$.$ Scenario analysis

b$.$ Sensitivity analysis

c$.$ Simulation analysis

d$.$ NPV analysis

e$.$ Cost$-$Benefit analysis

A project can have