Chapter Five: Capital Budgeting
Multiple Choice Questions (MCQ):
1. Which is the evaluation method of
Investment below?
a. Capital budgeting
b. Time value of money
c. Selecting discount rate
d. Future value policy of investment
2. Which is the equation of calculating the
payback time?
a. Yearly cash flow ÷ Investment
b. Investment ÷ Yearly cash flow
c. Investment ÷ Yearly cash inflow
d. Yearly cash outflow ÷ Yearly cash inflow
3. What is called the difference between
cash inflow and cash outflow?
a. Initial investment
b. Cash out flow
c. Total current cost
d. Total depreciation
4. Dr. Shamim has founded and directed a
hospital by investing her own capital.
Which decision will she take through
capital budgeting?
a. Medicine procurement
b. X-ray machine purchase
c. Medicine price fixation
d. Color change of hospital building
5. Which Technique of capital budgeting is
important?
a. Project selection
b. Identify the objective of institution
c. Calculate profitability of project
d. Identify the rate of return
Read the passage and answer the question 6 & 7.
Chief managing director of Shemanto Company
Miss. Borna has divided total profit by 4 before calculating the profitability
of investment of 4 years without adding depreciation. But total investment has
divided by 2.
6. Which method was followed by Mrs. Borna?
a. Average Rate of Return
b. Payback Time
c. Net Present Value
d. IRR
7. Limitation of the method mentioned in
the stem –
i. Time
value of money is avoided
ii. Value of all cash flow is equal
iii. Divide profit and investment by the
different number.
Which one is correct?
a. i
& ii
b. i
& iii
c. ii & iii
d. i
&ii &iii
[ Answer Key : 1(a), 2(b), 3(d), 4(a),
5(b), 6(a) & 7(a)]