Posted by: storm93 February 1, 2006
MBA expert question.
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Try this one...( This is also from finance) 1. Capital budgeting involves how companies spend a. Day to day resources. b. Money raised in capital markets. c. Expenses only. d. Large sums on infrequent projects. 2. If a project's NPV is negative a. the project earns less than the cost of capital b. the investment will not add value or contribute to shareholder wealth c. the present value of expected cash outflows is greater than the present value of expected cash inflows d. all of the above 3. The internal rate of return is the rate of interest that makes the present value of a projects cash inflows: a. greater than the present value of its cash outflows b. less than the present value of its cash outflows c. equal to the present value of its cash outflows d. none of the above 4. The internal rate of return (IRR) is simply the return on a project viewed as an investment. Therefore any project whose IRR exceeds the cost of capital a. should be undertaken if the company has the resources to do it b. contributes to wealth because it earns more than the cost of the money used to do it c. should not be undertaken because IRR isn't as good as NPV d. a and b 5. Payback does not include the following in its analysis a. the time value of money. b. all of the project's cash flows. c. a measure of the change in shareholders wealth. d. all of the above. 6. The NPV and IRR techniques can give conflicting results a. in standalone cases where the project's NPV profile is downward sloping. b. in mutually exclusive decisions in which the NPV profiles do not cross. c. in mutually exclusive situations in which the NPV profiles cross anywhere. d. in mutually exclusive decisions in which the NPV profiles cross in the first quadrant.
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