In proper capital budgeting analysis we evaluate incremental a. Accounting income.
b. Cash flow.
c. Earnings.
d. Operating profit.

Capital Budgeting is a part of:
(a)Investment Decision
(b) Working Capital Management
(c) Marketing Management
(d) Capital Structure

A project's average net income divided by its average book value is referred to as the project's average: A. net present value.
B. internal rate of return.
C. accounting return.
D. profitability index.
E. payback period.

The internal rate of return is defined as the:
A. maximum rate of return a firm expects to earn on a project. B. rate of return a project will generate if the project in financed solely with internal funds. C. discount rate that equates the net cash inflows of a project to zero. D. discount rate which causes the net present value of a project to equal zero. E. discount rate that causes the profitability index for a project to equal zero.

Which two methods of project analysis were the most widely used by CEO's as of 1999? A. net present value and payback
B. internal rate of return and payback
C. net present value and average accounting return
D. internal rate of return and net present value
E. payback and average accounting return

The length of time a firm must wait to recoup, in present value terms, the money it has in invested in a project is referred to as the: A. net present value period.
B. internal return period.
C. payback period.
D. discounted profitability period.
E. discounted payback period.

Capital Budgeting deals with
(a) Long-term Decisions
(b) Short-term Decisions
(c) Both (a) and (b)
(d) Neither (a) nor (b)

A project's average net income divided by its average book value is referred to as the project's average: A. net present value.
B. internal rate of return.
C. accounting return.
D. profitability index.
E. payback period
The present value of an investment's future cash flows divided by the initial cost of the...

...Proposal B. Both cost the amount of $ 60,000. The discount rate is 10%. The cash flows before depreciation and tax are as follows:
Year Proposal A Proposal B
$ $
0 (60,000) (60,000)
1 18,000 19,000
2 15,000 17,000
3 18,000 19,000
4 16,000 14,000
5 19,000 15,000
6 14,000 13,000
Evaluate the above proposals according to:
1. Pay Back Period.
2....

...Examples Of NetPresentValue (NPV), ROI and
Payback Analysis
Introduction
Terms and Definitions
NetPresentValue - Method of calculating the expected net monetary gain or loss from a project by discounting all expected future cash inflows and outflows to the present point in time.
Discount Rate...

...Time Value of Money
Exercise
1. If you invest $1000 today at an interest rate of 10% per year, how much will you have 20 years from now, assuming no withdrawals in interim?
2. a. If you invest $100 every year from the next 20 years starting one year from today and you earn interest of 10% per year, how much will you have at the end of the 20 years?
b. How much must you invest each year if you want to have $50000 at the end of the 20 years?...

..._______________
1. What is the netpresentvalue of a project with the following cash flows if the discount rate is 14 percent?
[pic]
A. -$3,140.43
B. -$929.90
C. $247.181
D. $1,027.67
E. $1,127.08
2. Timothy is considering an investment of $10,000. This investment is supposedly going to provide him with cash inflows of $2,500 in the first year and $6,000 a year for the following 2 years. At a...

...Cynthia should employ is true?
1) Cynthia should rank the projects in increasing order of NPV and choose the highest ranked projects in order until the capital available is exhausted.
2) Cynthia should rank the projects in increasing order of internalrate of return and choose the highest ranked projects in order until the capital available is exhausted.
3) Cynthia should calculate the NPV of various combinations of projects and choose that combination that...

...Netpresentvalue
In finance, the netpresentvalue (NPV) or netpresent worth (NPW) of a time series of cash flows, both incoming and outgoing, is defined as the sum of the presentvalues (PVs) of the individual cash flows. In case when all future cash flows are incoming (such as coupons and principal of a bond) and the only outflow of cash is the...

...MS-04/SEM - I /2011
Coverage : All Blocks
Note: Answer all the questions and send them to the Coordinator of the Study Centre you are attached with.
1. Discuss and explain the relevance of the following accounting concepts
a) Business entity
b) Money measurement
c) Continuity
d) Cost
e) Accrual
f) Conservatism
g) Materiality
h) Consistency
i) Periodicity
Solution: FUNDAMENTAL CONCEPTS OF ACCOUNTING
Accounting is the language of business and it is...

...decision? a Whether to acquire a subsidiary company. b Whether to expand a product line. c Whether to fill a special order. d Whether to purchase a fleet of trucks. 2 Which of the following is an example of a nonfinancial consideration in capital budgeting? a Will an investment generate adequate cash flows to promptly recover its cost? b Will an investment generate an acceptable rate of return? c Will an investment have a positive net...

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