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Capital Budgeting and Cost Benefit Analysis – MCQs

28 questions. Click to practice.

Correct options are highlighted when revealed.

1.Given a tax operating income of $885,000 annually and a net initial investment of $35,750,000, what is the percentage increase in average return?

2.Based on the net present value criterion, which projects should be considered acceptable?

3.What type of cash flows are utilized in both the net present value and internal rate of return methods?

4.What is obtained by dividing the sum of recovered working capital and the net initial investment by 2?

5.What term describes the project's anticipated financial loss or gain calculated by discounting all cash inflows and outflows at the required rate of return?

6.Which rate of return consists of both the risk-free component and the business risk component?

7.When calculating for a steady annual increase in future cash flows, the payback period is multiplied to determine __________?

8.Which dimensions are considered in the dimensional analysis of cost?

9.What is the term for the rate of return that compensates for investment risk and the loss of purchasing power due to inflation?

10.Which technique determines the duration required to recover the initial investment based on projected cash inflows?

11.Given a payback period of 4 years and consistent annual cash flow increments of $2,750,000, what is the total initial investment amount?

12.Given a nominal interest rate of 26% and an inflation rate of 12%, what is the approximate real interest rate?

13.To determine __________, the net initial investment is divided by a series of uniformly increasing future cash flows.

14.Which of the following are considered categories of cash flows?

15.Given a net initial investment of $985,000 and returned working capital amounting to $7,500, what is the average investment over a period of five years?

16.Given an initial investment of $765,000 and a payback period of 4.5 years, what is the amount of the increase in future cash flow?

17.Given a net initial investment of $6,850,000 and consistent annual cash inflows of $2,050,000, what is the payback period?

18.To determine __________, the net initial investment is divided by the consistently rising future cash flows.

19.What term describes the idea that money received today holds greater worth than the same amount received at a later date?

20.Given a real interest rate of 16% and an inflation rate of 8%, what is the corresponding nominal rate of return?

Capital Budgeting and Cost Benefit Analysis – MCQs | PakQuizHub