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WorksheetsChapter 1 Worksheet Questions
Total questions: 107
Worksheet time: 54mins
The objective of a project can be:
Entering a specific business
Expanding market share
Improving product quality
All of the above
The initial investment capital of a project can be:
Fixed assets and working capital
Cash capital and loans
Financial, physical, and intangible assets
All of the above
Which of the following is a characteristic of an investment project?
Project success is certain
Risk must be eliminated
Uniqueness of project products must be described
All of the above
Which of the following is an investment activity?
Daily business operations
Having a start date but no end date
One-time activity
All of the above
Which of the following is a need for project capital use?
Financial investment
Investing in other businesses
Debt repayment
Dividend payments
A project aimed at improving the quality of products, goods, and services is:
Standalone project
Expansion project
In-depth project
All of the above
A project that involves a detailed study of all relevant aspects is:
Pre-feasibility project
Feasibility project
Expansion project
In-depth project
Which statement indicates two projects are independent?
Accepting or rejecting one does not affect the other
Accepting or rejecting one leads to the same decision for the other
Accepting one means rejecting the other
None of the above
Private investment projects often aim at:
Financial benefits
Economic benefits
Social benefits
All of the above
The purpose of a project should be determined in which phase?
Investment opportunity study
Pre-feasibility study
Feasibility study
Project implementation
Which of the following statements is correct?
All projects, regardless of capital size, must conduct pre-feasibility and feasibility studies
All projects, regardless of capital size, only need a feasibility study
Large-scale projects need both pre-feasibility and feasibility studies, while medium/small-scale projects need only a feasibility study
None of the above
Project implementation includes:
Project establishment
Project design and construction
Project operation
All of the above
When is the project management board established during the project cycle?
Investment opportunity study
Project establishment study
Project implementation
Project operation
When should quantitative risk analysis be conducted?
Pre-feasibility stage
Feasibility stage
Operational stage
All of the above
Project liquidation is carried out when:
The project reaches the end of its cycle
Investors are forced to terminate the project
Investors go bankrupt
All of the above
The project analysis framework includes (in order):
Market – Technology – Human resources
Market – Technology – Human resources – Finance
Market – Technology – Human resources – Finance – Economy
Market – Technology – Human resources – Finance – Economy – Society
Market analysis involves:
Examining demand for project outputs
Examining supply of project inputs
Examining the labor market
All of the above
Technology analysis involves:
Construction and installation of project equipment
Raw materials and inputs
Environmental impacts of the project
All of the above
Financial analysis is conducted from the perspective of:
Banks
Shareholders
Investors
All of the above
Economic analysis involves:
Assessing project contribution to economic growth
Assessing ability to meet basic economic needs
Assessing income distribution in the economy
All of the above
Social analysis involves:
Assessing the project’s ability to meet fundamental economic needs
Assessing income distribution among beneficiary groups
Assessing the social impacts of the project
All of the above
When do investors participate in project appraisal?
Pre-feasibility study
Feasibility study
Operational stage
All stages of the project cycle
When do credit institutions appraise projects to grant loans?
Pre-feasibility study
Feasibility study
Operational stage
When do government agencies appraise environmental issues?
Pre-feasibility study
Feasibility study
Operational stage
Both B and C
The role of project appraisal is to:
Avoid implementing ineffective projects or missing valuable opportunities
Perform inspection and audit functions throughout the project’s life
Save scarce resources
All of the above
At which stage is a preliminary estimate of demand for project outputs made?
Investment opportunity study
Pre-feasibility study
Feasibility study
Operational stage
Biased estimates that understate benefits and overstate costs are often made in:
Investment opportunity study
Pre-feasibility study
Feasibility study
Operational stage
Improving accuracy of key project variables is done in:
Investment opportunity study
Pre-feasibility study
Feasibility study
Operational stage
Re-evaluating financial, economic, and social criteria is carried out in:
Pre-feasibility study
Feasibility study
Detailed design
Operational stage
Appraising results and comparing them with initial estimates is done in:
Pre-feasibility study
Feasibility study
Detailed design
Operational stage
Which perspectives can be applied in project appraisal?
Financial
Economic
Social
All of the above
Which perspective do investors, banks, and shareholders use for appraisal?
Financial
Economic
Income distribution
Fundamental needs
Which perspective do government agencies use for appraisal?
Economic
Income distribution
Fundamental needs
All of the above
To be implemented, a project must be efficient in:
Finance
Economy
Society
At least one of the above
If a project benefits neither investors nor the economy, the government should:
Reduce taxes
Provide no subsidies
Impose price ceilings
Take no action
If a project does not benefit investors financially but benefits the economy, the government should:
Reduce taxes
Provide subsidies
Regulate output prices with a ceiling
All of the above
If a project benefits investors financially but not the economy, the government should:
Increase taxes
Withdraw subsidies
Impose price ceilings
All of the above
For private projects, state agencies grant licenses or incentives mainly due to:
Market, technology, and management feasibility
Financial effectiveness
Economic and/or social effectiveness
All of the above
For public projects, state agencies decide on investment mainly due to:
Market, technology, and management feasibility
Financial effectiveness
Economic and/or social effectiveness
All of the above
Market analysis is important for appraising project success because it:
Helps assess technical feasibility
Determines project capacity
Evaluates human resource feasibility
All of the above
Management and personnel research during project establishment does not directly affect:
Narrowing or expanding project scope
Market area for project products
Adjusting product quality
All of the above
When deciding to invest, investors often make the mistake of:
Accepting bad projects and rejecting good ones
Accepting projects beyond their financial capacity
Ignoring projects within their financial capacity
All of the above
Which of the following statements is incorrect?
Appraisal helps investors reduce decision-making mistakes
Appraisal helps investors control project risks
Appraisal helps determine project capital structure
Appraisal helps achieve maximum profits
A company may replace an existing project with a new one because:
Changes in investment strategy
Higher returns from the new project
Changes in consumer preferences
All of the above
A market appraisal is conducted:
Before technical appraisal
After financial appraisal
After human resources appraisal
All of the above
Project business analysis includes:
Industry life cycle
Opportunities and competition
Success factors
All of the above
Customers in market analysis include:
Buyers of the project’s products
Buyers of substitute products
Buyers of competitors’ products
All of the above
Market segmentation must satisfy:
Each segment must be distinct
Customer behavior within a segment must differ
Segment size must be appropriate
All of the above
Forecasting product demand is based on:
Industry reports
Statistics of Ministries
Associations’ reports
All of the above
Which target market is the occupied market?
Supply exceeds domestic demand
Supply falls short of domestic demand
Added capacity cannot meet rising demand
None of the above
The project’s competitors are:
Importers
Potential entrants
Domestic producers of similar products
All of the above
To appraise product competitiveness in the export market, one must consider:
Importing country’s standards
Technical barriers or quotas
Export market competitors
All of the above
At which product life cycle stage are most projects undertaken?
Growth
Beginning
Saturation
Recession
Market appraisal is the basis for choosing:
Technology and project location
Production plan
Investment scale
All of the above
Technical appraisal is conducted:
Before human resources appraisal
Before market appraisal
After financial appraisal
All of the above
Evaluating input materials provides a basis for:
Organizing production
Forecasting demand for output
Selecting machinery and technology
All of the above
When appraising input materials, appraisers consider:
Availability of raw materials
Raw material prices
Raw material quality
All of the above
Supply risk of raw materials can be reduced by:
Diversifying suppliers
Using technologies with multiple inputs
Long-term contracts with suppliers
All of the above
Requirements for selecting project technology include:
Meeting global quality standards
Reasonable transfer costs
Up-to-date technology
All of the above
Principles for selecting a project’s location include:
Near markets and raw materials
Location economics
Social and environmental impacts
A combination of the above
To select a project’s location:
Environmental impact assessment is mandatory
It is not mandatory
It depends on regulations for each project
It is decided by the investors
A project’s production plan can:
Increase gradually until stable capacity
Reach maximum capacity in the first year
Decrease during the project cycle
All of the above
By law, environmental impact assessment is required for:
All projects
Projects specified by the government
Only projects that cause impacts
No project is required
Which factor may change once the project begins operation?
Selected technologies
Designed capacity
Implementation schedule
Ability to exploit designed capacity
Management and human resources appraisal is carried out:
Before market appraisal
After technical appraisal
After financial appraisal
All of the above
Appraisers of management and HR must collect information on:
Project management regulations
Local labor market
Minimum wage rules
All of the above
Contents of management and HR assessment include:
Appraisal of project form
Appraisal of labor supply and quality
Appraisal of wages and salaries
All of the above
A project's organizational model:
Remains unchanged during the project cycle
Changes through project stages
Is designed in the feasibility report
Is designed only in the operational stage
Purpose of organizational structure assessment:
Suitability to project functions
Rationality of the structure
Operating costs
All of the above
Labor for the project can be recruited from:
Local sources
Other regions
Imported labor
All of the above
Availability of human resources assessment includes:
Types of human resources available locally/nationally
Labor supply and demand in the area
Possible shortages in structure
All of the above
The number of working days in a year is based on:
Holidays
Weekends
Personal leave
All of the above
Salaries and wages for project workers are based on:
Job position
Worker’s skills and experience
Labor supply and demand
All of the above
Personnel costs of a project include:
Salaries, wages, allowances
Salary deductions
Training expenses
All of the above
What is the purpose of project cash flow planning?
Identifying the funding needs and sources
Assessing the repayment capacity and payback period of a project
Evaluating the financial performance of a project
All of the above
What is incremental cash flow?
Cash flow with a new project versus without the new project
Cash flow with an expansion project versus without the expansion project
Cash flow with a replacement project versus without the replacement project
All of the above
What is the sunk cost of a project?
Costs incurred during the investment preparation stage
Costs that cannot be recovered regardless of project implementation
Costs not relevant to investment decision-making
All of the above
Opportunity cost is defined as:
The best return forgone
The lowest return forgone
The next best return forgone
The next lowest return forgone
Which of the following cash flows should be considered after-tax cash flows?
Operating cash flow
Investing cash flow
Financing cash flow
All of the above
Which of the following is a sunk cost of a project?
Project establishment cost
Construction cost
Construction start-up cost
Project company establishment cost
When should sunk costs be included in a project's cash flows?
When sunk costs are relatively large
When sunk costs are paid by investors
When sunk costs are for preparation and appraisal
Sunk costs are not included in project cash flows
If opportunity costs are calculated at market prices, how are they treated?
Included in operating cash outflows
Included in operating expenses
Included in both operating cash outflows and operating expenses
Included in neither operating cash outflows nor operating expenses
Which of the following effects increases cash flows of other projects?
Yogurt and fermented yogurt projects
Oral treatment drug and injectable drug projects
Gas car and electric car projects
Billiards café and office lunch projects
Which of the following effects reduces cash flows of other projects?
Apple Watch and iPhone projects
Gas station and convenience store projects
Walking shoe and running shoe projects
Pig farming and catfish farming projects
Which of the following effects may increase or decrease cash flows of other projects?
An expansion project reduces revenues before expansion
A replacement project eliminates revenues from the replaced project
An expansion project increases investors’ revenues
None of the above
Which of the following is incorrect in planning a project’s cash flow?
Counting incremental cash flows of the project
Including opportunity costs
Including sunk costs
Considering effects that increase or decrease cash flows of other projects
Operating cash flow refers to inflows and outflows from:
Production and supply of project outputs
Project investment activities
Project funding activities
Project financing activities
Investing cash flow refers to inflows and outflows from:
Real asset investments of a project
Fixed asset investments of a project
Financial asset investments of a project
Asset investment activities of a project
Financing cash flow refers to inflows and outflows from:
Debt financing activities of a project
Equity financing activities of a project
Internal financing activities of a project
External financing activities of a project
Payments to raw material suppliers are included in:
Operating cash flow
Investing cash flow
Financing cash flow
None of the above
Fixed asset liquidation is included in:
Operating cash flow
Investing cash flow
Financing cash flow
None of the above
Interest expense is included in:
Operating cash flow
Investing cash flow
Financing cash flow
None of the above
Equity funding to a project is included in which cash flow?
Operating cash flow
Investing cash flow
Financing cash flow
None of the above
Which of the following items is included in cash flow from the Equity Point of View (EPV)?
Dividends to shareholders
Equity financing
Costs of project preparation and appraisal
Opportunity costs of land use
Which of the following is considered the financial point of view?
All Equity Point of View (AEPV)
Total Investment Point of View (TIPV)
Equity Point of View (EPV)
All of the above
Cash flow from the All Equity Point of View (AEPV) refers to a project in the case of:
No debt financing
Debt and equity financing
Full repayment of debt to creditors
None of the above
Cash flow from the Total Investment Point of View (TIPV) refers to a project in the case of:
No debt financing
Debt financing
Full repayment of debt to creditors
None of the above
Cash flow from the Equity Point of View (EPV) refers to a project in the case of:
No debt financing
Debt and equity financing
Full repayment of debt to creditors
None of the above
Which of the following statements is correct?
AEPV cash flow excludes the tax shield benefit from interest, while TIPV cash flow includes it
AEPV cash flow includes the tax shield benefit from interest, while TIPV cash flow excludes it
Both AEPV and TIPV cash flows include the tax shield benefit from interest
Both AEPV and TIPV cash flows exclude the tax shield benefit from interest
The required working capital during a project’s operational stage is:
The minimum to maintain normal operations
The average to maintain normal operations
The maximum to maintain normal operations
All of the above
Which of the following cash flows can be prepared using the direct method?
Operating cash flow
Investing cash flow
Financing cash flow
All of the above
Which of the following cash flows can be prepared using the indirect method?
Operating cash flow
Investing cash flow
Financing cash flow
All of the above
What is the impact of depreciation on a project’s cash flow or income?
Reduces cash flow by the amount of annual depreciation
Increases cash flow by the amount of annual depreciation
Reduces taxable income by the amount of annual depreciation
Increases taxable income by the amount of annual depreciation
Which of the following statements is correct regarding land use liquidation value?
It is always equal to the initial value
It is always equal to the market value at the liquidation year
Which of the following statements is always true?
If Project A’s IRR is higher than Project B’s, then A’s NPV is higher than B’s
If Project A’s IRR is higher than Project B’s, then A’s NPV is lower than B’s
For two mutually exclusive projects, investors should select the one with the higher IRR
None of the above
NPV(A) = 389 and IRR(A) = 25%. Project B has the same life as A but double the annual cash flows. Then:
NPV(B) = 389 and IRR(B) = 25%
NPV(B) = 778 and IRR(B) = 50%
NPV(B) = 389 and IRR(B) = 50%
NPV(B) = 778 and IRR(B) = 25%
MIRR is designed to overcome which disadvantage of IRR?
No IRR exists
Multiple IRRs exist
IRR assumes reinvestment at IRR
All of the above
