CAPITAL BUDGETING

Which of the following is not a time-adjusted method for ranking investment proposals?

• NPV Method

• Payback method

• Internal rate of return

• All of these are time adjusted methods

Cash flow can be said to equal

• operating income less taxes plus depreciation

• operating income less taxes

• operating income before depreciation and taxes plus depreciation

• operating income after taxes minus depreciation

Capital budgeting is primarily concerned with

• capital formation in the economy

• planning future financing needs

• evaluating investment alternatives

• minimizing the cost of capital

Assume a corporation has earnings before depreciation and taxes of Php100,000, depreciation of

Php40,000, and that it has a 30 percent tax bracket. What are the after-tax cash flows for the company

• Php82,000

• Php110,000

• Php42,000

• none of these

Assuming that a firm has no capital rationing constraint and that a firm's investment alternatives are not

mutually exclusive, the firm should accept all investment proposals

• or which it can obtain financing

• that have a positive net present value

• that have positive cash flows

• that provide returns greater than the after-tax cost of debt

If projects are mutually exclusive

• they can only be accepted under capital rationing

• the selection of one alternative precludes the selection of other alternatives

• the payback method should be used

• the net present-value should be used

The _________ assumes returns are reinvested at the cost of capital.

• payback method

• internal rate of return

• net present value

• capital rationing

Which of the following capital budgeting techniques takes into account the

incremental accounting income rather than cash flows

• Net present value

• internal rate of return

• accounting rate of return

• Cash payback period

The difference between the present value of cash inflows and the present value

of cash outflows associated with a project is known as

• net present value of the project

• net future value of the project

• net historical value of the project

• net salvage value of the project

A project whose acceptance prevents the acceptance of another project is

known as

• a dependent

• an independent project

• a mutually exclusive project

• a rational project