CAPITAL BUDGETING

1. 1. It involves choosing projects that add value to a company.

• Capital Gaining

• Capital Budgeting

• Operating Activities

• Financing Activities

2. 2. It is the potential loss from a missed opportunity-the result of choosing one alternative and forgoing another.

• Opportunity Cost

• Cost of Debt

• Cost of equity

• Sunk Cost

3. 3. The following are the techniques in capital budgeting, EXCEPT:

• Net Present Value (NPV)

• Internal Rate of Return

• Payback Period

• Discounted Cash flow

4. 4. The first step in calculating the NPV is to solve for the Present Value of cash inflows. What is the formula in solving Present Value?

• FV/ (1 + n)^k

• FV/ (1 + k) ^n

• FV (1 + k)^n

• FV (1 + n) ^k

5. 5. What is the most intuitive and accurate valuation approach to capital budgeting problems?

• NPV

• IRR

• Profitability Index

• Payback Period

6. 6. It is a prediction of how much inflow and outflow of cash business will have at any given time.

• Operating Activities

• Capital Budgeting

• Cash Flow Estimation

• Risk Analysis

7. 7. If discount rate is greater than internal rate of return, the NPV is ____?

• Positive

• Negative

• Zero

• No Value

8. 8. What is the risk a company would have of the company had only one project?

• Stand-alone Risk

• Market Risk

• Corporate risk

• Bank risk

9. What is the process of changing one or more variables to determine how sensitive a projects' returns are to these changes?

• Scenario Analysis

• Sensitivity Analysis

• Simulation Analysis

• Beta Estimation

This approach involves the determination of what happens to NPV estimates when we ask what-if questions?

• Scenario Analysis

• Sensitivity Analysis

• Simulation Analysis

• Beta Estimation