Financial Management And Financial Markets

BUDGETING AND CASH FLOW ESTIMATION MCQs

Total Questions : 88

Page 1 of 9 pages
Question 1. In the mutually exclusive projects, the project which is selected for comparison with others must have
  1.    higher net present value
  2.    lower net present value
  3.    zero net present value
  4.    all of the above
 Discuss Question
Answer is Option A. -> higher net present value
Answer: (a).higher net present value
Question 2. A project whose cash flows are more than the capital invested for rate of return then the net present value will be
  1.    positive
  2.    independent
  3.    negative
  4.    zero
 Discuss Question
Answer is Option A. -> positive
Answer: (a).positive
Question 3. In capital budgeting, the positive net present value results in
  1.    negative economic value added
  2.    positive economic value added
  3.    zero economic value added
  4.    percent economic value added
 Discuss Question
Answer is Option B. -> positive economic value added
Answer: (b).positive economic value added
Question 4. An uncovered cost at start of year is $200, full cash flow during recovery year is $400 and prior years to full recovery is 3 then payback would be
  1.    5 years
  2.    3.5 years
  3.    4 years
  4.    4.5 years
 Discuss Question
Answer is Option B. -> 3.5 years
Answer: (b).3.5 years
Question 5. The relationship between Economic Value Added (EVA) and the Net Present Value (NPV) is considered as
  1.    valued relationship
  2.    economic relationship
  3.    direct relationship
  4.    inverse relationship
 Discuss Question
Answer is Option C. -> direct relationship
Answer: (c).direct relationship
Question 6. The cash inflows are the revenues of project and are represented by
  1.    hurdle number
  2.    relative number
  3.    negative numbers
  4.    positive numbers
 Discuss Question
Answer is Option D. -> positive numbers
Answer: (d).positive numbers
Question 7. In large expansion programs, the increased riskiness and the floatation cost associated with project can cause
  1.    rise in marginal cost of capital
  2.    fall in marginal cost of capital
  3.    rise in transaction cost of capital
  4.    rise in transaction cost of capital
 Discuss Question
Answer is Option A. -> rise in marginal cost of capital
Answer: (a).rise in marginal cost of capital
Question 8. The present value of future cash flows is $4150 and an initial cost is $1300 then the profitability index will be
  1.    0.0319
  2.    3.19
  3.    0.31 times
  4.    5450
 Discuss Question
Answer is Option A. -> 0.0319
Answer: (a).0.0319
Question 9. A type of project whose cash flows would not depend on each other is classified as
  1.    project net gain
  2.    independent projects
  3.    dependent projects
  4.    net value projects
 Discuss Question
Answer is Option B. -> independent projects
Answer: (b).independent projects
Question 10. The project whose cash flows are less than the capital invested for required rate of return then the net present value will be
  1.    negative
  2.    zero
  3.    positive
  4.    independent
 Discuss Question
Answer is Option A. -> negative
Answer: (a).negative