C3-Capital Budgeting in Practice follow slides

C3-Capital Budgeting in Practice follow slides

University

15 Qs

quiz-placeholder

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C3-Capital Budgeting in Practice follow slides

C3-Capital Budgeting in Practice follow slides

Assessment

Quiz

Other

University

Hard

Created by

Chi Chu

FREE Resource

15 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the method used to create a comparable time framework for all projects under consideration with different life spans?

Risk-Adjusted Discount Rate

Monte-Carlo simulation

Replacement-chain method

Equivalent Annual Annuity Method

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In the context of capital budgeting, what does the NPV and IRR conflict refer to?

Conflict between the risk-free rate and risk premium

Conflict between the net present value and internal rate of return

Conflict between the standard deviation and coefficient of variation

Conflict between the expected value and variance

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which approach in dealing with risk in capital budgeting involves calculating the expected value, variance, standard deviation, and coefficient of variation?

Statistical approach

Conventional approach

Sensitivity analysis

Decision Tree

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What type of real option in capital budgeting involves the manager's option of spending additional resources at a future date?

Flexibility Options

Abandonment Options

Follow-on investment option

Expansion Options

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the method used to determine the incremental cash flows of a new asset in the asset replacement decision process?

Risk-Adjusted Discount Rate

Certainty Equivalent approach

Sensitivity analysis

NPV approach

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which approach in dealing with risk in capital budgeting involves converting the risky cash flows into riskless equivalents?

Decision Tree

Sensitivity analysis

Conventional approach

Statistical approach

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

What is the main purpose of sensitivity analysis in capital budgeting?

To identify the most significant variables affecting NPV estimate

To calculate the expected value of net cash flows

To determine the risk-free rate

To conduct a Monte-Carlo simulation

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