Which of the following is NOT a technique used in capital budgeting?
a) Net Present Value (NPV)
b) Internal Rate of Return (IRR)
c) Payback Period
d) Accounts Receivable Turnover
The time value of money concept is considered in which capital budgeting technique?
a) Payback Period
b) Net Present Value (NPV)
c) Accounting Rate of Return (ARR)
d) Profitability Index
Which method of capital budgeting considers the time value of money?
a) Payback Period
b) Net Present Value (NPV)
c) Accounting Rate of Return (ARR)
d) None of the above
Which of the following capital budgeting techniques provides the discount rate at which the net present value is zero?
a) Payback Period
b) Internal Rate of Return (IRR)
c) Accounting Rate of Return (ARR)
d) Profitability Index
If the Net Present Value (NPV) of a project is positive, the project should be:
a) Rejected
b) Accepted
c) Postponed
d) Evaluated again
A project’s Payback Period measures:
a) The total profit over its life
b) The time taken to recover the initial investment
c) The discount rate for present value calculation
d) The total return on investment
Which capital budgeting technique is expressed in percentage terms?
a) Payback Period
b) Internal Rate of Return (IRR)
c) Net Present Value (NPV)
d) Profitability Index
The Profitability Index (PI) is calculated as:
a) Total profit divided by initial investment
b) Present value of future cash flows divided by initial investment
c) Internal Rate of Return (IRR)
d) Net present value minus initial investment
Which of the following is NOT a limitation of the Payback Period method?
a) Ignores time value of money
b) Ignores cash flows after the payback period
c) Does not measure project risk
d) Considers profitability of the project
Which capital budgeting technique ranks projects based on relative profitability?
a) Net Present Value (NPV)
b) Payback Period
c) Profitability Index (PI)
d) Accounting Rate of Return (ARR)
Which of the following affects the Net Present Value (NPV) of a project?
a) Cash flows
b) Discount rate
c) Initial investment
d) All of the above
The decision rule for Internal Rate of Return (IRR) states that the project should be accepted if IRR is:
a) Equal to cost of capital
b) Less than cost of capital
c) Greater than cost of capital
d) Negative
The Accounting Rate of Return (ARR) is based on:
a) Net income
b) Cash flows
c) Discounted cash flows
d) Present value calculations
Which of the following methods considers risk in capital budgeting?
a) Adjusted Discount Rate
b) Payback Period
c) Accounting Rate of Return (ARR)
d) All of the above
The Internal Rate of Return (IRR) is the discount rate at which NPV is:
a) Positive
b) Zero
c) Negative
d) Maximized
The Profitability Index (PI) rule suggests accepting projects where PI is:
a) Less than 1
b) Equal to 1
c) Greater than 1
d) Negative
The Payback Period method is most useful for companies focusing on:
a) Long-term profitability
b) Liquidity concerns
c) Maximizing net present value
d) Increasing market share
Which capital budgeting technique is best when cash flows are uncertain?
a) Payback Period
b) Net Present Value (NPV)
c) Internal Rate of Return (IRR)
d) Accounting Rate of Return (ARR)
Which of the following is a capital investment decision?
a) Paying salaries
b) Purchasing new machinery
c) Buying office supplies
d) Paying rent
Capital budgeting decisions focus on:
a) Short-term profitability
b) Long-term investments
c) Daily cash flow management
d) Employee salary distribution
Which of the following is NOT a characteristic of capital investment decisions?
a) Involves large expenditures
b) Affects long-term growth
c) Involves routine transactions
d) Requires risk analysis
What is the primary objective of capital budgeting?
a) To determine financial ratios
b) To evaluate long-term investment opportunities
c) To calculate daily expenses
d) To manage employee salaries
Which of the following is a non-financial factor in capital budgeting?
a) Payback period
b) Environmental impact
c) Net present value
d) Internal rate of return
What is the first step in capital budgeting?
a) Selecting the best alternative
b) Identifying investment opportunities
c) Estimating cash flows
d) Performing sensitivity analysis
Which of the following is an example of a capital investment?
a) Purchasing inventory
b) Buying land for expansion
c) Paying electricity bills
d) Hiring temporary workers
