basics of capital budgeting evaluating cash flows

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Relationship between Economic Value Added (EVA) and Net Present Value (NPV) is considered as

Relationship between Economic Value Added (EVA) and Net Present Value (NPV) is considered as
  • A. valued relationship
  • B. economic relationship
  • C. direct relationship
  • D. inverse relationship
  • Correct Answer: Option C

In capital budgeting, a technique which is based upon discounted cash flow is classified as

In capital budgeting, a technique which is based upon discounted cash flow is classified as
  • A. net present value method
  • B. net future value method
  • C. net capital budgeting method
  • D. net equity budgeting method
  • Correct Answer: Option A

Present value of future cash flows is $4150 and an initial cost is $1300 then profitability index will be

Present value of future cash flows is $4150 and an initial cost is $1300 then profitability index will be
  • A. 3%
  • B. $3.19
  • C. 0.31 times
  • D. $5,450
  • Correct Answer: Option A

Other factors held constant, but lesser project liquidity is because of

Other factors held constant, but lesser project liquidity is because of
  • A. shorter payback period
  • B. greater payback period
  • C. less project return
  • D. greater project return
  • Correct Answer: Option B

Graph which is plotted for projected net present value and capital rates is called

Graph which is plotted for projected net present value and capital rates is called
  • A. net loss profile
  • B. net gain profile
  • C. net future value profile
  • D. net present value profile
  • Correct Answer: Option D

Payback period in which an expected cash flows are discounted with help of project cost of capital is classified as

Payback period in which an expected cash flows are discounted with help of project cost of capital is classified as
  • A. discounted payback period
  • B. discounted rate of return
  • C. discounted cash flows
  • D. discounted project cost
  • Correct Answer: Option A

Process in which managers of company identify projects to add value is classified as

Process in which managers of company identify projects to add value is classified as
  • A. capital budgeting
  • B. cost budgeting
  • C. book value budgeting
  • D. equity budgeting
  • Correct Answer: Option A

Profitability index in capital budgeting is used for

Profitability index in capital budgeting is used for
  • A. negative projects
  • B. relative projects
  • C. evaluate projects
  • D. earned projects
  • Correct Answer: Option C

Situation in which firm limits expenditures on capital is classified as

Situation in which firm limits expenditures on capital is classified as
  • A. optimal rationing
  • B. capital rationing
  • C. marginal rationing
  • D. transaction rationing
  • Correct Answer: Option B

Cash flows occurring with more than one change in sign of cash flow are classified as

Cash flows occurring with more than one change in sign of cash flow are classified as
  • A. non-normal cash flow
  • B. normal cash flow
  • C. normal costs
  • D. non-normal costs
  • Correct Answer: Option A

If two independent projects having hurdle rate then both projects should

If two independent projects having hurdle rate then both projects should
  • A. be accepted
  • B. not be accepted
  • C. have capital acceptance
  • D. have return rate acceptance
  • Correct Answer: Option A

Cash flow which starts negative then positive than again positive cash flow is classified as

Cash flow which starts negative then positive than again positive cash flow is classified as
  • A. normal costs
  • B. non-normal costs
  • C. non-normal cash flow
  • D. normal cash flow
  • Correct Answer: Option C

In large expansion programs, increased riskiness and floatation cost associated with project can cause

In large expansion programs, increased riskiness and floatation cost associated with project can cause
  • A. rise in marginal cost of capital
  • B. fall in marginal cost of capital
  • C. rise in transaction cost of capital
  • D. rise in transaction cost of capital
  • Correct Answer: Option A

Net present value, profitability index, payback and discounted payback are methods to

Net present value, profitability index, payback and discounted payback are methods to
  • A. evaluate cash flow
  • B. evaluate projects
  • C. evaluate budgeting
  • D. evaluate equity
  • Correct Answer: Option B

An uncovered cost at start of year is divided by full cash flow during recovery year then added in prior years to full recovery for calculating

An uncovered cost at start of year is divided by full cash flow during recovery year then added in prior years to full recovery for calculating
  • A. original period
  • B. investment period
  • C. payback period
  • D. forecasted period
  • Correct Answer: Option C
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