Finance MCQs

Page No. 30

In capital budgeting, positive net present value results in_________________?


aNegative economic value added

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bPositive economic value added

✓


cZero economic value added

✖


dPercent economic value added

✖



Life that maximizes net present value of an asset is classified as__________?


aMinimum life

✖


bPresent value life

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cEconomic life

✓


dTransaction life

✖


View Answer Economic life

First step in calculation of net present value is to find out_________?


aPresent value of equity

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bFuture value of equity

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cPresent value cash flow

✓


dFuture value of cash flow

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Present value of future cash flows is divided by an initial cost of project to calculate_______?


aNegative index

✖


bExchange index

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cProject index

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dProfitability index

✓


View Answer Profitability index

An uncovered cost at start of year is $200, full cash flow during recovery year is $400 and prior years to full recovery is 3 then payback would be__________?


a5 years

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b3.5 years

✓


c4 years

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d4.5 years

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View Answer 3.5 years

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


aValued relationship

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bEconomic relationship

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cDirect relationship

✓


dInverse relationship

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View Answer Direct relationship

Profitability index in capital budgeting is used for_________?


aNegative projects

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bRelative projects

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cEvaluate projects

✓


dEarned projects

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View Answer Evaluate projects

In mutually exclusive projects, project which is selected for comparison with others must have____________?


aHigher net present value

✓


bLower net present value

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cZero net present value

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dAll of above

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A project whose cash flows are more than capital invested for rate of return then net present value will be___________?


aPositive

✓


bIndependent

✖


cNegative

✖


dZero

✖


View Answer Positive

An equity multiplier is multiplied to return on assets to calculate_________?


aReturn on assets

✓


bReturn on multiplier

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cReturn on turnover

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dReturn on stock

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View Answer Return on assets

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