Ünite Sınavı Soruları

...refers to a firm’s attribute that may allow the firm to generate economic profits.

Which one of the following completes the sentence?

The greater the risk of an investment project, the ........ will be the requried rate of return from the project and accordingly the ....... will be discount rate since there is a ..... relationship between risk and return. 

1. Investment refers to all kinds of spendings made to acquire, sustain, and increase production factors.
2. Capital expenditure refers to outlay of funds by the firm that is expected to produce benefits over a period of time longer than one year.
3. Capital budgeting refers to the process of evaluating and selecting long-term investments which are consistent with the firm’s main objective of maximizing shareholders’ wealth.
4. Capital budgeting activity is a process consisting of a number of stages.

Which of the definitions above are correct?

Which one of the following is the first step of calculating the Net Present Value?

1. Capital budgeting includes long-term decisions about non-current assets of a company.
2. Decisions about non-current assets need extra attention from managers because they are more expensive than the current assets.
3. The outcome of capital budgeting is either approval or rejection of the investment project.
4. In order to come to approval or rejection point, a financial manager needs analytical tools to make analysis.
5. There are a number of simple and sophisticated analytical tools that managers use for project analysis.
6. Main consideration is “return and risk” and “benefit and cost” of each project proposal.
7. In the end, if a financial manager approves an investment project, we can assume that he/she thinks that returns/benefits from the project will be greater than the associated risks/costs.

Which of the statements above related to capital budgeting are correct?

Which of the following projects does internal rate of return technique approve if it is mutually exclusive?

Which capital budgeting evaluation technique tells the length of time it takes cumulative present values of cash inflows will be equal to the initial cash outflow?

Which capital budgeting evaluation technique finds the sum of present value of all cash inflows and cash outflows of a project over its life?

At which rate does the present value of cash inflows equal the present value of cash outflows?

Which of the following term refers to a change in a firm’s net cash flow attributable to an investment project?

1. Profitability index technique tells the ratio of the present value of a project’s cash inflows to the present value of all cash outflows or initial cash outflow.
2. Profitability index technique assumes that all investment projects the same same level of risk.
3. If a project is independent, approve the project(s) that provides profitability index greater than 1.
4. If a project is mutually exclusive, choose the project that provides the biggest profitability index (which is also greater than 1).

Which of the statements above related to profitability index technique are correct?

The type of projects in which selecting one project prevents other projects from being undertaken are referred to as ..................

When NPV is greater than "0", then IRR is ........ the cost of capital. When NPV is smaller than "0", then IRR is ........  the cost of capital.

Which of the following shows the correct order of the process of capital budgeting activity?

A company has a budget of $50,000 for expansion projects. There are three projects such as A, B and C. If Projects A and B each cost $40,000, and Project C costs only $10,000, which of the following investment type explains the dependence of Project C?

1. Modified internal rate of return technique finds the rate of return that equates the future value of all cash outflows with the sum of the future value of all cash inflows as of the end of the project’s life.
2. Terminal value refers to the sum of the future value of all cash inflows as of the end of the project’s life.
3. If a project is independent approve the project(s) that provides MIRR that is greater than the minimum rate of return (discount rate used in NPV technique).
4. If a project is mutually exclusive, choose the project that provides the highest MIRR (that is greater than the minimum rate of return (discount rate used in NPV technique)).

Which of the statements above related to modified internal rate of return technique are correct?

1. Sunk costs
2. Opportunity costs
3. Externalities
4. Shipping and installation costs
5. Inflation

Which of the above are problematic areas related to incremental cash flows that are not always very easy to identify?

1. It requires projected cash flows are discounted at an appropriate discount rate. 
2. It tells the length of time it takes to get initial cash outflow back.
3. It is a simple, easy to use and easy to understand technique.
4. It has the assumption that cash flow occurs at a constant rate throughout the year.

Which of the above are among the characteristics of payback period decision-making technique?
 

Which one of the following refers to all kinds of spendings made to acquire, sustain, and increase production factors?

1. If a project is independent, approve the project(s) that pays the initial investment back less than a specified payback period.
2. If a project is mutually exclusive, choose the project that provides the shortest payback period.
3. Payback period technique tells the length of time it takes to get the initial cash outflow back.
4. All you have to do is find when cumulative cash inflows will be equal to initial cash outflow.
5. Payback period technique assumes that all investment projects have the same level of risk.

Which of the statements above related to payback period technique are correct?