Quiz 1

Which of the following capital budgeting techniques takes into account the incremental accounting income rather than cash flows?

• Net present value

• Internal rate of return

• Accounting/Simple rate of return

• Cash payback period

Which of the following techniques does not take into account the time value of money?

• Internal rate of return method

• Simple cash payback method

• Net present value method

• Discounted cash payback method

The current worth of a sum of money to be received at a future date is called:

• real value

• future value

• present value

• salvage value

Although it ignores the time value of money, what is the most common method used in practice for capital budgeting?

• internal rate of return

• net present value

• payback

• accounting rate of return

This is a form of analysis defined by calculating how long it will take for the asset to "earn back" the money you invested in purchasing it.

• internal rate of return

• net present value

• payback method analysis

• tax accounting

Solve the question?

• $5000

• $35,000

• $1,500

• $7,500

A significant advantage of the net present value is that it

• fully considers time value of money

• takes into consideration the yield to maturity

• uses profit in the analysis

• none of the above

Which of the following statements best describe the IRR?

• The rate of return on the investment calculated based on cash inflows and outflows.
• The rate of return on the investment calculated based on investment capital and profit generate.
• The minimum rate of return required for the business to be profitable.
• The maximum rate of return that business could generate.