Question 1

The net present value method of investment decision-making:

Accepted Answer

A)  can only be used if net cash flows are constant throughout the project.
B)  assumes that the cash flows have occurred at the end of each relevant period
C)  assumes that projects are suitable investments if the NPV equals zero
D)  assumes that cash flows have occurred at the beginning of each relevant periodE) B) and C)
F) C) and D)

Question 2

If average profit before depreciation is $145 000,annual depreciation is $20 000 per annum for 5 years and investment at the start of the period is
$1 000 000 and at the end of the period is $200 000,the average rate of return is:

Accepted Answer

A)  7.5%
B)  0.75%
C)  12.5%
D)  20.8%E) B) and D)
F) A) and B)

Question 3

A retailer invests $20 million in capital expenditure projects to open 15 new stores.In which category of investment is this capital expenditure most likely to fit?

Accepted Answer

A)  replacement of old assets as they wear out
B)  new technology to decrease costs
C)  new investments to increase revenue
D)  the capital investment projects do not fit any of the categoriesE) A) and D)
F) A) and B)

Question 4

The net present value and the internal rate of return equations are the same,except that the IRR the equation is set to

Accepted Answer

A)  zero.
B)  one.
C)  the accounting rate of return.
D)  the lowest NPV acceptable to management.E) None of the above
F) B) and C)

Question 5

The payback method of investment decision making is generally regarded as:

Accepted Answer

A)  too simplistic.
B)  mostly accurate.
C)  very accurate.
D)  too complex for normal use.E) None of the above
F) A) and C)

Exam 12: Capital Investment

A retailer invests $20 million in capital expenditure projects to open 15 new stores.In which category of investment is this capital expenditure most likely to fit?

Correct Answer
verified

The net present value method of investment decision-making:

Correct Answer
verified

The payback method of investment decision making is generally regarded as:

Correct Answer
verified

The net present value and the internal rate of return equations are the same,except that the IRR the equation is set to

Correct Answer
verified

If average profit before depreciation is $145 000,annual depreciation is $20 000 per annum for 5 years and investment at the start of the period is $1 000 000 and at the end of the period is $200 000,the average rate of return is:

Correct Answer
verified

Exam 12: Capital Investment

A retailer invests $20 million in capital expenditure projects to open 15 new stores.In which category of investment is this capital expenditure most likely to fit?

Correct AnswerverifiedShow Answer

The net present value method of investment decision-making:

Correct AnswerverifiedShow Answer

The payback method of investment decision making is generally regarded as:

Correct AnswerverifiedShow Answer

The net present value and the internal rate of return equations are the same,except that the IRR the equation is set to

Correct AnswerverifiedShow Answer

If average profit before depreciation is $145 000,annual depreciation is $20 000 per annum for 5 years and investment at the start of the period is $1 000 000 and at the end of the period is $200 000,the average rate of return is:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified