d. Project D costs $5,000 and will generate sales of $4,000 each year for 5 years. Capital budgeting techniques. Under Net present value criterion, a project is approved if, 6. b. Selection of one investment precludes the selection of an alternative. Sciences, Culinary Arts and Personal Basic Capital Budgeting Techniques Answer each independent question, (a) through (e).a. I thought the answer was bottom-up budgeting at the top-down means that the budgets will be imposed by the managers … She should purchase the building, because a profitability index of two means that the investment is very profitable. These questions and answers will help you strengthen your technical skills, prepare for the new job test and quickly revise the concepts. Why or why not? Projects with __________ are preferred. If we can make an investment of $20,000 that gives us $25,000 in future cash flow, then what is the investment's profitability index? 3. Your email address will not be published. Following market and financial research conducted by the company, the expected cash flows of two marketing projects (A and B) for the next ten years are provided in the table below. Project A costs $5,000 and will generate annual after-tax net cash inflows of $1,800 for 5 years.What is the payback period (in years, rounded to 2 decimal places) for this investment under theassumption that the cash inflows occur evenly throughout the year?b. The span of time within which the investment made for the project will be recovered by the net returns of the project is known as, 15. She should purchase the building, because a profitability index of two means that the investment is modestly profitable. Sample Questions Of Capital Budgeting 1. She currently rents the building out of which she runs her business. In this article let us talk about the important techniques adopted for capital budgeting along with its importance and example. To so... Q: Define asymmetric information theory (capital structure). Payback And Discounted Payback Provide An Indication Of Both The Risk And The Liquidity Of A Project. Project A which has a payback period of 2.0 years. 18. Which of the following criterion is often preferred, (A) if the profitability index is equal to one, (C) If the profitability index is greater than one, 9. Biological and Biomedical (10%), Show the ranking of the projects using all the above criteria, and as a professional accountant, critically advise your client on the best investment action, on whether to invest in project A or B. Which of the following is not used in Capital Budgeting? You can skip questions if you would like and come 20. Answer: b. It excludes all the additional expenses from the calculation. What is the NPV for each of the projects (A) through (D)? With the prevailing interest rate in the lending and borrowing markets, as a professional accountant, you consider that the cost of capital (r or i) at present is 5 per cent. In question 9, the discount rate has been ignored because we do not take into account the time value of money while computing simple payback period. capital-budgeting-questions-and-answers 1/1 Downloaded from sexassault.sltrib.com on November 25, 2020 by guest Read Online Capital Budgeting Questions And Answers Right here, we have countless book capital budgeting questions and answers and collections to check out. Premium members get access to this practice exam along with our entire library of lessons taught by subject matter experts. It does not take into account the time value of money. As the accounting consultant of Tesco Marketing Ltd, you are required to provide critical advice to a client on the best investment decision, on whether to invest in marketing projects A or B. (30%), You are required to comment on the stability of the projects. Copyright All Right Reserved by casestudyhelp.com, copyright 2018, MKTG1203 Introduction to Marketing Case Study Assessment Answers, Case of Generosity Water – Project Management Assignment Answers, LAW2036 Criminology and Public Policies Assessment Answers, MKT6108 Introduction to Hospitality and Tourism Marketing Assessment Answers, BCOM 3360 Business Development Plan Assignment Answers, Legal and Ethical Issues in Media and Communication Assignment Answers, MKTG 201 Marketing Management Assessment Answers, MGT 255 Strategic Management Assignment Question and Answers, Investment Appraisal (Capital Budgeting) Techniques Assignment Answers, Finance Insights and Business Intelligence Indicative Assessment Answers, BUSI 2123 Business Strategy Assessment Answers, SAP103 Introduction to Welfare Law Assignment Answers, HRMT20024 Managing Human Resources Assignment Question and Answers, PHIL 152 Introduction to Philosophy Assignment Answers, You are required to calculate the PP, ARR, NPV, IRR and Discounted PP of each project. If the discount rate is 5%, what is the project's net present value? When you make an investment, you want to know how much money you expect to make from the investment. Project C costs $5,000 and will generate net cash inflows of $2,500 before taxes each year for 5years. Capital Budgeting MCQs is a set of important multi-choice questions. Which one is NOT a technique used to make a capital budgeting decision. Project A costs $5,000 and will generate annual after-tax net cash inflows of $1,800 for 5 years.What is the payback period (in years, rounded to 2 decimal places) for this investment under theassumption that the cash inflows occur evenly throughout the year?b. Question: In Making The Accept/reject Decision, Each Of The Capital Budgeting Decision Methods Provides Decision Makers With A Somewhat Different Piece Of Relevant Information. Most Asked Technical Basic CIVIL | Mechanical | CSE | EEE | ECE | IT | Chemical | Medical MBBS Jobs Online Quiz Tests for Freshers Experienced. ), Risk preference, investment return, cash flow, Risk aversion, investment profitability, time value, Cash flow, financial implications, investment criteria, Credit availability, cash return, investment criteria. The cash expenditures will be $1,500 per year. ___________ on capital is called ‘Cost of capital’. Present value of future cash flows over the cost of the investment, Cost of the investment over expected profit. A series of Ansoff growth strategies can set the direction for the company‘s strategy such as market penetration (project A), market development (project B), product development (project C) and diversification (project D). Use the built-in NPV function for all calculations;round all answers to nearest whole dollar. We additionally find the money for variant types and next type of the books to browse. Discussion of capital budgeting methods NPV, IRR, IRR and even MIRR. Reply. Multiple choice questions (MCQs) rojielyn . Required fields are marked * Comment . Budgeting related Frequently Asked Questions by expert members with experience in Budgeting. Which of the following is not a capital budgeting decision? All rights reserved. Recently, someone... A: Hello. The cash flows are as follows: Year Project A Project B 1 $6,000 $5,000 2 4,000 3,000 3 3,000 8,000 . 19. On Target Performance Group. back Since your question has multiple sub-parts, we will solve first three sub-parts for you. Good luck! A: Efficient Market Hypothesis is a hypothesis that states that the asset prices reflect all available ... Q: What types of fees and conditions are prohibited under RESPA? Good luck! Where capital availability is unlimited and the projects are not mutually exclusive, for the same cost of capital, following criterion is used, (A) Net present value is greater than zero, (B) Internal Rate of Return will be greater than cost of capital, (C) Profitability index will be greater than unity, 11.
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