MCQ on Capital Budgeting

MCQ on Capital Budgeting

University

25 Qs

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MCQ on Capital Budgeting

MCQ on Capital Budgeting

Assessment

Quiz

Other

University

Practice Problem

Hard

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25 questions

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1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which method is commonly used to compare projects with unequal lives?

Payback Period

Accounting Rate of Return

Equivalent Annual Annuity (EAA)

Profitability Index

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following best explains the conflict between NPV and IRR?

It occurs when discount rate equals IRR

It occurs when projects are independent

It occurs due to differences in project scale and timing of cash flows

It never occurs in real life

3.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

In capital rationing, the primary constraint is:

Lack of positive NPV projects

Limited availability of capital

High operating leverage

Excessive working capital

4.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which method is most suitable under capital rationing?

IRR

NPV

Profitability Index (PI)

Payback Period

5.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Sensitivity analysis measures:

The variability of NPV to changes in one input at a time

Probability distribution of all inputs

The correlation between two projects

The break-even IRR

6.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Which of the following statements about replacement decisions is correct?

Replacement is never optimal when the existing asset still generates positive cash flow

Replacement occurs when marginal cost of keeping the old asset exceeds cost of the new one

Replacement decisions are based on sunk cost

Replacement is decided by the book value of the old asset

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Expected NPV is computed as:

Sum of discounted inflows minus outflows

Weighted average of NPVs under different scenarios

Average IRR of multiple projects

NPV under the most likely scenario only

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