CAPITAL BUDGETING

Which of the following methods is used to evaluate investment proposals?

• A) Budgeting
• B) Forecasting
• C) Capital budgeting
• D) Financial accounting
• C) Capital budgeting

What are the different methods used in capital budgeting?

• A) Payback period, net present value, internal rate of return
• B) Payback period, financial accounting, budgeting
• C) Forecasting, net present value, profitability index
• D) Internal rate of return, budgeting, forecasting
• A) Payback period, net present value, internal rate of return

What is the importance of capital budgeting in the investment decision?

• A) To determine the amount of capital to be raised
• B) To evaluate investment proposals
• C) To prepare financial statements
• D) To forecast future trends
• B) To evaluate investment proposals

What is capital budgeting?

• A) A process of evaluating investments
• B) A process of forecasting future trends
• C) A process of preparing financial statements
• D) A process of budgeting capital
• A) A process of evaluating investments

What is the payback period method?

• A) A method of evaluating investments based on their profitability
• B) A method of evaluating investments based on their net present value
• C) A method of evaluating investments based on the time required to recover the initial investment
• D) A method of evaluating investments based on their internal rate of return
• C) A method of evaluating investments based on the time required to recover the initial investment

What is the net present value method?

• A) A method of evaluating investments based on their profitability
• B) A method of evaluating investments based on their payback period
• C) A method of evaluating investments based on the present value of cash inflows and outflows
• D) A method of evaluating investments based on their internal rate of return
• C) A method of evaluating investments based on the present value of cash inflows and outflows

A project requires an initial investment of $100,000 and generates cash inflows of $40,000, $50,000, and $60,000 over the next three years. What is the payback period of the project?

• A) 1 year
• B) 2 years
• C) 3 years
• D) Cannot be determined
• B) 2 years