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Capital Budgeting and Cost Benefit Analysis
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Capital Budgeting and Cost Benefit Analysis – MCQs
28 questions. Click to practice.
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Correct options are highlighted when revealed.
1.
What is the term for the vertical, upward aspect in cost analysis?
project perspective
accounting period perspective
back-flush accounting approach
lean accounting approach
cost allocation perspective
2.
What is the term for the process of planning and evaluating long-term investments in projects?
lead budgeting
lean budgeting
capital budgeting
relevant budgeting
3.
Which of the following techniques are used in capital budgeting to evaluate financial data?
Internal Rate of Return (IRR)
Accounting Rate of Return (ARR)
Net Present Value (NPV)
All of the above
4.
What is calculated by dividing the annual earned income from a project by the amount of capital invested?
accrual accounting rate of return
working capital returned
growth in projected average annual income
decline in projected average annual income
5.
What is the term for the rate of return needed to compensate for investment risk, assuming there is no inflation?
real rate of return
required rate of return
nominal rate of return
none of the above
6.
What is another term for the horizontal dimension in cost analysis?
project dimension
accounting period dimension
back-flush accounting dimension
lean accounting dimension
7.
Which of the following best describes examples such as cash outflow for working capital, cash spent on purchasing machinery, and cash received from the sale of machinery?
Cash flows generated from operational activities
Final proceeds from selling an investment
Net initial investment amount
Average rate of return on investment
8.
What term describes the reduction in the value of a currency unit, like the euro or dollar, in terms of its ability to buy goods and services?
net investment equilibrium
inflation
purchasing power parity
buying power parity
currency depreciation
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