Chapter 10 Quiz Finance

________ is the process of evaluating and selecting long-term investments that are consistent with a firm’s goal of maximizing owners’ wealth.Select one:a. Securitizationb. Capital budgetingc. Recapitalizing assetsd. Ratio analysis b. Capital budgeting
The underlying cause of conflicts in ranking for projects by internal rate of return and net present value methods is ________.Select one:a. the assumption made by the IRR method that cash inflows are spread equally throughout the timelineb. that NPV approach favors small projects with high returnsc. the reinvestment rate assumption regarding intermediate cash flowsd. that neither method explicitly considers the time value of money c. the reinvestment rate assumption regarding intermediate cash flows
________ projects have the same function; the acceptance of one ________ the others from consideration.Select one:a. Independent; does not eliminateb. Capital; eliminatesc. Replacement; eliminatesd. Mutually exclusive; eliminates d. Mutually exclusive; eliminates
Which of the following capital budgeting techniques ignores the time value of money?Select one:a. internal rate of returnb. profitability indexc. payback period approachd. net present value c. payback period approach
Unlike the net present value criteria, the internal rate of return approach assumes a reinvestment rate equal to ________.Select one:a. the market’s interest rateb. the project’s opportunity costc. the project’s internal rate of returnd. the relevant cost of capital c. the project’s internal rate of return
________ projects do not compete with each other; the acceptance of one ________ the others from consideration.Select one:a. Independent; does not eliminateb. Replacement; eliminatesc. Capital; eliminatesd. Mutually exclusive; eliminates a. Independent; does not eliminate
The basic motive for capital expenditure is to ________.Select one:a. improve leverageb. expand operationsc. renew current assetsd. replace current assets b. expand operations
A firm can accept a project with a net present value of zero because ________.Select one:a. the project would maintain the wealth of the firm’s ownersb. the project would maintain the earnings of the firmc. the project would enhance the earnings of the firmd. the project would enhance the wealth of the firm’s owners a. the project would maintain the wealth of the firm’s owners
Which of the following statements is true of payback period?Select one:a. If the payback period is less than the maximum acceptable payback period, management should be indifferent.b. If the payback period is less than the maximum acceptable payback period, accept the project.c. If the payback period is greater than the maximum acceptable payback period, accept the project.d. If the payback period is greater than the maximum acceptable payback period, management should be indifferent. b. If the payback period is less than the maximum acceptable payback period, accept the project.
Comparing net present value and internal rate of return ________.Select one:a. is only necessary on independent projectsb. always results in the same ranking of projectsc. may give different accept-reject decisionsd. always results in the same accept-reject decision c. may give different accept-reject decisions

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