MBA Capital Budgeting — practice questions
22 free MCQs with worked solutions. Tap any question for the answer + explanation, or practice them all in the app.
Practice MBA Capital Budgeting in the app →A sports shop spends 16,000 on a machine and expects inflows of 2,000, 4,000, 5,000, 5,000 and 5,000. Its paybOn that machine, the accumulated inflow at the end of year two is:At the end of year three, the accumulated inflow on that machine reaches:The principal advantage claimed for the payback method is its:The first shortcoming of the payback method is that it ignores the:A second disadvantage of that method is that it lacks a clearly defined:The method that fixes that flaw by discounting each inflow before adding it is the:Spending money today hoping for more money later means inflows and outflows occur in different:The measure that converts all a project's cash flows into today's rupees and nets them is the:The rate a firm should theoretically use when discounting for that measure is its:On the graph of that measure against discount rates, lower rates give a value that is:The discount rate at which that measure equals zero is the:In the worked example, that crossing point sits at about:The measure that divides the present value of benefits by the present value of costs is the:In that ratio, the numerator is the present value of the project's:When the net present value of a project is greater than zero, that ratio will be:Two machines that cannot both be bought, so only one may be chosen, are described as:In the comparison offered, the heavy-duty machine costs:The reason a firm might still prefer that costlier machine is that it will generate more:The payback measure is described as giving managers information about how long money will be:When using the payback method, a company must itself set a length of time as its:Compared with payback, both the net present value and the internal rate of return take account of: