Chapter Five: Capital Budgeting-Multiple Choice Questions (MCQ):

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)]