Ch. 11 Capital Budgeting Quiz

What is the primary purpose of capital budgeting?

• To manage daily operational expenses

• To make decisions about investments in major capital assets

• To calculate employee salaries

• To determine marketing strategies

Which of the following is NOT typically considered in the capital budgeting process?

• Plant Expansions

• Equipment Replacement

• Employee Training

• Cost Reduction

What are the two main types of capital investment decisions?

• Screening Decisions and Ranking Decisions

• Financial Decisions and Operational Decisions

• Strategic Decisions and Tactical Decisions

• Budgeting Decisions and Forecasting Decisions

What is the purpose of screening decisions in capital investment?

• To rank alternatives from most appealing to least appealing

• To determine if a proposed investment is acceptable

• To forecast future financial performance

• To allocate resources efficiently

What do ranking decisions attempt to do in capital investment?

• Determine the feasibility of a project

• Rank acceptable alternatives from most appealing to least appealing

• Allocate budget resources

• Predict market trends

What are the two categories of capital budgeting decisions?

• Independent Projects and Dependent Projects

• Independent Projects and Mutually-Exclusive Projects

• Exclusive Projects and Inclusive Projects

• Dependent Projects and Exclusive Projects

What is true about independent projects in capital budgeting?

• They are related to each other.

• Investing in one project eliminates the possibility of investing in others.

• They are unrelated to each other.

• Accepting one project leads to rejection of others.

What happens when a mutually-exclusive project is accepted?

• It allows for investment in other projects.

• It leads to rejection of other projects.

• It has no impact on other projects.

• It requires investment in all projects.

Which of the following is a non-discounting method of capital budgeting?

• Net Present Value

• Internal Rate of Return

• Accounting Rate of Return

• Discounted Payback Period

What is the basis for the Accounting Rate of Return method in capital budgeting?

• Cash Flow

• Net Income

• Gross Profit

• Operating Expenses