TCDN2

C3: Which of the following is not a cause for the conflict between IRR and NPV method?

• A. IRR ignores the size of initial investment
• B. The assumption about reinvested rate of Cash flows ni NPV si different from that in IRR
• C The timing problem of cash flows
• D. The calculation skill of management

C3: Which technique is used for capital rationing?

• A. P P
• B. PI
• D. IRR
• C. NPV

C3: In capital budgeting, when a company has a set of attractive projects yet facing the budget constraint, it refers to the situation of:

• A. Unequal life project evaluation
• B. Conflict between IRR and NPV method
• C. Asset replacement
• D. Capital rationing

C3: To deal with capital rationing, acompany must:

• A. Choose a combination of potential projects to meet the budget limit and maximize shareholder's wealth
• B. Determine the cross-over rate and choose the project with higher positive NPV at discount rate
• C. Determine the incremental cash flows and calculate NPV of new aset
• D. Calculate EA of each project and choose hte project with hte highest EAA

C3: To determine how sensitive a NPV calculation is to changes if a particular variable is changed, managers should apply:

• A. Statistical approach
• B. Risk-adjustment approach
• C. Sensitivity analysis
• D. Decision Tree analysis

C3: Which of the following is the disadvantage of sensitivity analysis?

• A. Assign probability to each outcome is subjective
• B. Forecast process is complicated in case of multiple period project
• C. Difficult to estimate the risk premium
• D. Ignore the interdependent relationships among input variables

C3: The profitability index si computed by dividing the

• A. Total cash flows by the initial investment
• B. Present value of cash flows by the initial investment
• C. Initial investment by the total cash flows
• D. Initial investment by the present value of cash flows

C3: Which of the folowing methods is not used in capital budgeting:

• A. Net Asset Method
• B. Internal rate of return Method
• C. Net present value Method
• D. Payback Period Method

C3: Which of the following statement is correct?

• A. Sunk cost is an expenditure occurred after making decision of selecting projects
• B. Sunk cost is an expenditure occured prior making decision of selecting projects
• C. Sunk cost should not be ignored ni project cash flow estimate
• D. Sunk cost is a relevant cost that should be consider ni project cash flow analysis

C2: Which of the folowing indicators si not used for evaluating Investment Efficiency from a financial perspective?

• A. Payback Period
• B. Net Present Value
• C. Profitability Index
• D. Asset turnover