Pre-final Examination - Managerial Economics - 1st Sem - SY 2025

Capital budgeting refers to decisions about:

• Short-term financing

• Long-term investments

• Daily operations

• Cash management

The primary goal of capital budgeting is to:

• Reduce expenses

• Maximize shareholder wealth

• Increase market share

• Decrease liabilities

Which of the following is NOT a capital budgeting technique?

• Net Present Value (NPV)

• Internal Rate of Return (IRR)

• Payback Period

• Current Ratio

The time value of money means:

• Money has no value over time

• A peso today is worth more than a peso tomorrow

• A peso tomorrow is worth more than a peso today

• Value of money does not change

Which method ignores the time value of money?

• NPV

• IRR

• Payback Period

• Profitability Index

Which is the most consistent with maximizing firm value?

• NPV

• IRR

• Payback Period

• ARR

The Profitability Index (PI) is the ratio of:

• NPV ÷ Initial investment

• PV of inflows ÷ Initial investment

• Cash inflows ÷ Cash outflows

• IRR ÷ Cost of capital

A PI greater than 1 means:

• NPV is negative

• The project is unattractive

• NPV is positive

• Payback is infinite

Mutually exclusive projects mean:

• All must be accepted together

• Only one can be chosen

• Projects are independent

• All can be rejected

Independent projects mean:

• Acceptance of one affects others

• Only one can be accepted

• Projects are unrelated to each other

• All projects must be rejected