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WorksheetsCapital Budgeting Techniques
Total questions: 8
Worksheet time: 16mins
Which of the following capital budgeting techniques ignores time value of money? (a)
Which of the following capital budgeting techniques are used under "capital rationing"conditions? (a)
If the Net Present Value (NPV) is positive, the investment project must be rejected. (a)
Capital budgeting techniques are used to evaluate the firm's fixed asset investments which provide the basis for the firm's earning power and value. (a)
The purchase of additional physical facilities, such as additional property or a new factory, is an example of a capital expenditure. (a)
A capital expenditure is an outlay of funds invested only in fixed assets that is expected to produce benefits over a period of time less than one year. (a)
Match the following:
Payback Period
This method is used to know how much time it will take to recover the investment.
Discounted Payback Period
Same as payback period method. Only difference is that it considers discounted cash flows.
Net Present Value (NPV)
It is the sum of all future discounted cash-flow less initial investment.
Accounting Rate of Return (ARR)
It is an accounting technique to measure profit expected from an investment.
Profitability Index
It defines how much you will earn per dollar.
It is the process of evaluating and selecting long-term investments projects that will ultimately maximize the firm’s goal of maximizing owner’s wealth. (a)
