Which of the following is not used in capital budgeting? A. B. C. D. Time Value of Money Sensitivity Analysis Net Assets Value Method Cash Flows

Which of the following is not used in capital budgeting?

A.

B.

C.

D.

Time Value of Money

Sensitivity Analysis

Net Assets Value Method

Cash Flows
by

1 Answer

Answer :

Net Assets Value Method
by

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Which of the following statements is correct regarding the internal rate of return (IRR) method? A. Each project has a unique internal rate of return. B. As long as you are not dealing with mutually exclusive projects, capital rationing, or unusual projects having multiple sign changes in the cash-flow stream, the internal rate of return method can be used with reasonable confidence. C. The internal rate of return does not consider the time value of money. D. The internal rate of return is rarely used by firms today because of the ease at which net present value is calculated

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Which of the following is true? A. Discounted cash flow analysis is the least precise of the cash flow techniques, because it does not consider the time value of money. B. NPV is the least precise of the cash flow analysis techniques, because it assumes reinvestment at the discount rate. C. Payback period is the least precise of the cash flow analysis techniques, because it does not consider the time value of money. D. IRR is the least precise of the cash flow analysis techniques, because it assumes reinvestment at the cost of capital.

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Last Answer : C. Payback period is the least precise of the cash flow analysis techniques, because it  does not consider the time value of money.

Which of the following is not incorporated in capital budgeting? A. Tax effect B. Time Value of Money C. Required rate of return D. Rate of cashdiscount

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Which of the following does not affect cash flows from a proposal: A. Salvage value B. Depreciation amount C. Tax rate change D. Method of project financing

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Risk in capital budgeting implies that the decision maker knows _ of the cash flows. A. Variability B. Certainty C. Probability D. None of these

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What is the most accurate method of obtaining project information that can reduce the amount of risk? 1. Observations on the current project 2. Determining the risk by using brainstorming techniques 3. The use of historical data from previous projects that were similar in nature 4. Sensitivity analysis 5. Delphi technique.

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Risk, as it relates to working capital, means that there is jeopardy to the firm for not maintaining sufficient current assets to . A. meet its cash obligations as they occur and take advantage of prompt payment B. discounts C. support the proper level of sales and take prompt payment discounts D. maintain current and acid-test ratios at or above industry norms E. meet its cash obligations as they occur and support the proper level of

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Net working capital refers to A. total assets minus fixed assets B. current assets minus current liabilities C. current assets minus inventories D. current

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The amount of current assets that varies with seasonal requirements is referred to as working capital. A. permanent B. net C. temporary D. gross

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The amount of current assets required to meet a firm's long-term minimum needs is referred to as working capital. A. permanent B. temporary C. net D. gross

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Having defined working capital as current assets, it can be further classified according to . A. financing method and time B. rate of return and financing method C. time and rate of return D. components & time

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Last Answer : D. components & time

Which of the following is not a relevant cost in capital budgeting? A. Sunk Cost B. Opportunity cost C. Allocated overheads D. Both (a) and (c) above

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Which of the following is not a capital budgeting decision? A. Expansion programme B. Merger C. Replacement of an Asset D. Inventory Level

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Capital budgeting is a part of: A. Investment decision B. Working capital management C. Marketing management D. Capital structure

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What is a cash flow table in project management? A. A table portraying inflow of cash in a project B. A table portraying outgoing expenses of a project C. It is the tool that is used to study such cash flows by breaking inflows and outflows down, usually on a monthly basis D. A table portraying debts taken for a project

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Last Answer : C. It is the tool that is used to study such cash flows by breaking inflows and  outflows down, usually on a monthly basis

Which of the following statements is incorrect regarding a normal project? A. If the NPV of a project is greater than 0, then its PI will exceed 1. B. If the IRR of a project is 8%, its NPV, using a discount rate, k, greater than 8%, will be less than 0.C. If the PI of a project equals 0, then the project's initial cash outflow equals the PV of its cash flows. D. If the IRR of a project is greater than the discount rate, k, then its PI will be greater than 1.

Description : Which of the following statements is incorrect regarding a normal project? A. If the NPV of a project is greater than 0, then its PI will exceed 1. B. If the IRR of a project is 8%, its NPV, using ... the IRR of a project is greater than the discount rate, k, then its PI will be greater than 1.

Last Answer : D. If the IRR of a project is greater than the discount rate, k, then its PI will be greater than 1.

Net Present Value of a machine is A. PV of cash inflows less cost of investment B. PV of cash inflows ÷ cost of investment C. PV of net profit after tax less cost of investment D.PV of cash inflows less average cost of investment

Description : Net Present Value of a machine is  A. PV of cash inflows less cost of investment  B. PV of cash inflows ÷ cost of investment  C. PV of net profit after tax less cost of investment  D.PV of cash inflows less average cost of investment

Last Answer : A. PV of cash inflows less cost of investment

How can a firm provide a margin of safety if it cannot borrow on short notice to meet its needs? A. Maintain a low level of current assets (especially cash and marketable securities). B. Shorten the maturity schedule of financing. C. Increasing the level of fixed assets (especially plant and equipmentD. Lengthening the maturity schedule of financing

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Last Answer : D. Lengthening the maturity schedule of financing

The __________ of a chemical company can be obtained directly from the balance sheet as the difference between current assets and current liabilities. (A) Cash ratio (B) Net working capital (C) Current ratio

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Last Answer : (B) Net working capital

When operating under a single-period capital-rationing constraint, you may first want to try selecting projects by descending order of their in order to give yourself the best chance to select the mix of projects that adds most to firm value. A. profitability index (PI) B. net present value (NPV) C. internal rate of return (IRR) D. payback period (PBP)

Description : When operating under a single-period capital-rationing constraint, you may first want to try selecting projects by descending order of their in order to give yourself the best chance to select the mix of ... net present value (NPV) C. internal rate of return (IRR) D. payback period (PBP)

Last Answer : B. net present value (NPV)

When operating under a single-period capital-rationing constraint, you may first want to try selecting projects by descending order of their in order to give yourself the best chance to select the mix of projects that adds most to firm value. A. profitability index (PI) B. net present value (NPV) C. internal rate of return (IRR) D. payback period (PBP)

Description : When operating under a single-period capital-rationing constraint, you may first want to try selecting projects by descending order of their in order to give yourself the best chance to select the mix of ... net present value (NPV) C. internal rate of return (IRR) D. payback period (PBP)

Last Answer : B. net present value (NPV)

Identify the incorrect statement in connection with working capital management. A. Long-term funds are more expensive than short-term funds but also riskier B. The objectives of working capital management are profitability and liquidity C. Permanent current assets should be financed from long-term sources if a moderate or matching policy is adopted D. Conservative financing policies use short-term funds to finance only part of fluctuating current assets E. Aggressive financing policies increase profitability at the cost of higher risk

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Last Answer : A. Long-term funds are more expensive than short-term funds but also riskier

Which of the following statements relating to working capital financing is not correct? A. An aggressive policy uses long-term debt to finance fluctuating current assetsB. Long-term debt is less risky that short-term debt C. A conservative policy uses long-term debt to finance fixed assets D. Short-term debt is cheaper than long-term debt E. The matching principle indicates that fluctuating current assets should be financed by short-term debt

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Last Answer : A. An aggressive policy uses long-term debt to finance fluctuating current assets

Which of the following statements is most correct? A. For small companies, long-term debt is the principal source of external financing. B. Current assets of the typical manufacturing firm account for over half of its total assets. C. Strict adherence to the maturity matching approach to financing wD. Similar to the capital structure management, working capital management requires the financial manager to make a decision and not address the issue again for several months.ould call for all current assets to be financed solely with current liabilities.

Description : Which of the following statements is most correct? A. For small companies, long-term debt is the principal source of external financing. B. Current assets of the typical manufacturing firm account ... the financial manager to make a decision and not address the issue again for several months.

Last Answer : B. Current assets of the typical manufacturing firm account for over half of its total assets.

To financial analysts, "working capital" means the same thing as . A. Total assets B. fixed assets C. current assets D. current assets minus current liabilities.

Description : To financial analysts, "working capital" means the same thing as . A. Total assets B. fixed assets C. current assets D. current assets minus current liabilities.

Last Answer : C. current assets

Which of the following illustrates the use of a hedging approach to financing assets? A. Temporary current assets financed with long-term liabilities. B. Permanent working capital financed with long-term liabilities. C. Short-term assets financed with equity D. All assets financed with a mixture of 50% equity and 50% long-term debt

Description : Which of the following illustrates the use of a hedging approach to financing assets? A. Temporary current assets financed with long-term liabilities. B. Permanent working capital financed with long-term ... equity D. All assets financed with a mixture of 50% equity and 50% long-term debt

Last Answer : B. Permanent working capital financed with long-term liabilities.

Which of the following statements is true of Insured Asset Allocation? A. It is aimed at benefiting from short-term under pricing and over pricing of assets. B. In this strategy the risk tolerance of the investor are ignored. C. In this strategy long-term predictions regarding the capital markets are used. D. In this strategy the asset mix is held constant. E. It is a strategy aimed at achieving the objectives of the investor without depending on market timing.

Description : Which of the following statements is true of Insured Asset Allocation? A. It is aimed at benefiting from short-term under pricing and over pricing of assets. B. In this strategy the risk ... . It is a strategy aimed at achieving the objectives of the investor without depending on market timing

Last Answer : E. It is a strategy aimed at achieving the objectives of the investor without depending on market timing.

Which of the following valuation methods would most likely not be used for business valuation? a) Discounted Cash Flow b) Net Assets Method c) Multi-period Excess Earning Method d) Industry Price Earnings Ratio

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Last Answer : c) Rs.200 crore

A time-phased budget that project managers use to measure and monitor cost performance. A. Cost Baseline B. Cost Budgeting C. Cost Estimating D. Cost Variance

Description :  A time-phased budget that project managers use to measure and monitor cost performance. A. Cost Baseline B. Cost Budgeting C. Cost Estimating D. Cost Variance

Last Answer : A. Cost Baseline

Following is(are) the responsibility(ies) of the project manager. (A) Budgeting and cost control (B) Allocating resources (C) Tracking project expenditure

Description : Following is(are) the responsibility(ies) of the project manager. (A) Budgeting and cost control (B) Allocating resources (C) Tracking project expenditure

Last Answer : (C) Tracking project expenditure

Following is(are) the responsibility(ies) of the project manager. (A)Budgeting and cost control (B)Allocating resources (C)Tracking project expenditure (D)All of the above

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Cost budgeting can be best described by which of the following? 1. The process of developing the future trends along with the assessment of probabilities, uncertainties, and inflation that could occur during the project 2. The process of assembling and predicting costs of a project over its life cycle 3. The process of establishing budgets, standards, and a monitoring system by which the investment cost of the project can be measured and managed 4. The process of gathering, accumulating, analyzing, reporting, and managing the costs on an on- going basis

Description : Cost budgeting can be best described by which of the following? 1. The process of developing the future trends along with the assessment of probabilities,  uncertainties, and inflation that  could ... of gathering, accumulating, analyzing, reporting, and managing the costs on an on- going basis

Last Answer : 3. The process of establishing budgets, standards, and a monitoring system by which the  investment cost of the project can be measured and managed

_____________ may be defined as the excess of present value of project cash inflows over that of out flows. A. Net present value technique. B. Average rate of return. C. Benefit-Cost ratio. D. Internal rate of return

Description : _____________ may be defined as the excess of present value of project cash inflows over that of out flows. A. Net present value technique. B. Average rate of return. C. Benefit-Cost ratio. D. Internal rate of return

Last Answer : A. Net present value technique.

B) Scheme for Sustainable Structuring of Stressed Assets Explanation: Under a new ‗Scheme for Sustainable Structuring of Stressed Assets‘ (S4A), RBI allowed banks to take equity in debt laden firms permitting them to split total loans of struggling companies into sustainable and unsustainable based on the cash flows of the projects.

Description : B) Scheme for Sustainable Structuring of Stressed Assets Explanation: Under a new ‗Scheme for Sustainable Structuring of Stressed Assets (S4A), RBI allowed banks to take equity in debt ... loans of struggling companies into sustainable and unsustainable based on the cash flows of the projects.

Last Answer : Which bank has launched India‟s first certified green bond at London Stock Exchange (LSE)? A) State Bank of India B) Bank of Baroda C) ICICI Bank D) Axis Bank E) None of these