ACCA Q6

AARR indicates the average rate at which…

• A dollar of investment generates after-tax operating income

• A dollar of investment generates a positive cash flow

Which of the following is the required rate of return used in the economic value added (EVA) calculation?

• WACC

• After-tax op. Income

In general, profit potential of an organization increases with…

• Lesser competition and weaker potential entrants

• Lesser competition and stronger potential entrants

Which of the following methods divides the average annual return of a project by the initial investment?

• The accurred accounting rate of return (AARR) method

• IRR method

• Payback method

• Book-value method

The cost leadership strategy is for products and services that are different to competitors product and services

• True

• False

Which is false in the internal processes of the BSC?

• Internal business process improvement targets are often determined after benchmarking against an organization’s main competitors standards

• Internal business process perspective evaluates the profitability of the strategy and the creation of shareholder value

All of the following are ways to calculate different versions of ROI except…

• Income / Investment

• ROS x Investment turnover

• Revenue / Equity

The DCF method calculates….

• All expected future CF of a project discounted to the PV

• A series of equal CF at equal time intervals from the past

The simple payback method of capital budgeting approach to an investment decision…

• Considers the initial investment

• Considers the time value of money

The PV of a project mainly depends on the…

• CF, time, RRR

• CF, time, Cost of capital