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1. Especially for projects with long lives, estimation of revenues (or benefits), costs, and
cash flows of a capital investment project is a difficult task principally because of:
2. Which of the following is not one of the more common strategic benefits provided by
capital investment projects?
3. Which of the following methods is potentially useful for helping an organization align its
capital expenditures with its strategy?
4. Which of the following statements regarding capital investment analysis is false?
5. For a typical capital investment project, the bulk of the investment-related cash outflow
occurs:
6. Accounting makes all of the following contributions to the capital budgeting process
except:
7. The Analytic Hierarchy Process (AHP) is:
8. In making sound capital budgeting decisions, the principal focus is on:
9. The process of identifying, evaluating, selecting, and controlling capital investments is
referred to as:
10. The tax impact of a capital investment project (such as the replacement of a major piece
of machinery) is present during:
11. Which of the following is not a characteristic of capital budgeting post-audits?
12. Which of the following can a cash flow analysis of the final disposal of a capital asset (for
example, machinery used in the operation of a business) not produce?
13. Which of the following is not a characteristic of the payback method for making capital
budgeting decisions?
14. The capital budgeting method(s) that is(are) most likely to provide consistency between
data for capital budgeting, and data for subsequent performance evaluation, is(are) the:
15. The time value of money is explicitly considered in which one of the following capital
budgeting method(s)?
16. Results from the net present value (NPV) method and the internal rate of return (IRR)
method may differ between projects if the projects differ in all of the following except:
17. Which of the following statements regarding cost of capital is not true?
18. Given two projects with the same total (i.e., project lifetime) cash flow returns (CFRs),
the internal rate of return (IRR) method of capital budgeting would favor a proposal having yearly
CFRs that were:
19. In terms of evaluating mutually exclusive projects, the internal rate of return (IRR)
method may mistakenly favor investment proposals with:
20. Which of the following is not true regarding the appropriate discount rate to be used in
conjunction with discounted cash flow (DCF) decision models?
21. Research has shown that in framing capital investment decisions past (i.e., "sunk") costs
or losses tend to:
22.
Intolerance of uncertainty
is a behavioral effect that often motivates managers to:
23. Which one of the following capital budgeting decision models consists of dividing the
total initial investment outlay by annual after-tax cash inflows (when such inflows are assumed
equal over time)?
24. Which one of the following is calculated by dividing average annual net operating income
of a proposed project by the average investment associated with the project?
25. The internal rate of return (IRR) for an investment:
26. Which one of the following is the estimated rate (i.e., percentage) that makes the
discounted present value of future cash flows of a project equal to the initial investment outlay
for the project?
27. Which one of the following is an advantage of the payback method of evaluating capital
investment proposals?
28. Which one of the following is an advantage of the accounting (book) rate of return (ARR)
method for analyzing capital investment proposals?
29. A composite of the cost of various sources of funds comprising a firm's capital structure
is its:
30. The difference between the present value of future cash inflows and the present value of
future cash outflows of an investment project is the:
31. A capital budgeting model that accounts for an assumed rate of return on interim-period
cash inflows from an investment is the:
32. Under conditions of capital rationing (i.e., limited capital funds are available), the optimal
allocation of funds occurs when management uses which one of the following decision models?
33. Which one of the following methods assumes (inherently, according to some) that all
interim cash inflows generated by an investment earn a return equal to the internal rate of return
(IRR) of the investment?
34. For a capital investment project, a net present value (NPV) of $500 indicates that the:
35. A 15% internal rate of return (IRR) on a proposed capital investment indicates all of the
following except:
36. Which one of the following is true for the internal rate of return (IRR) method?
