Question 1

A capital investment or cash _______________________ is made in exchange for future cash inflow.

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Question 2

In capital budgeting, the number of years that a capital project or investment opportunity will last is often referred to as the ________________________________ life.

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Question 3

Investment costs incurred prior to making the decision to proceed with a capital project are referred to as __________________ costs.

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Question 4

The ___________________________ methods are used in capital budgeting to calculate the "book value rate of return" of capital projects by using data presented on financial statements.

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Question 5

The yardstick used in capital budgeting to determine the number of years required for a capital investment to generate enough undiscounted cash inflow to just cover the initial cash outflow is called the ______________________ method.

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Question 6

The payback ______________________ is a capital budgeting technique that gives a "rough estimate" of the return on investment of a capital project.

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Question 7

The net present value technique measures the difference between the sum of all _______________________ and cash outflow discounted at a predetermined interest rate.

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Question 8

If the net present value of a project gives a ___________________________ amount, it means that the project is economically unattractive.

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Question 9

In order to find the present value of a particular cash flow, you have to multiply the cash flow amount by a __________________________ factor.

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Question 10

The payback method measures __________________ risk and NOT risk conditions.

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Question 11

The three steps involved in calculating the net present value are: determine the projected cash flow, determine the expected weighted average _____________________________, then calculate the net present value itself.

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Question 12

The discounted cash flow method (DCF) is also known as the __________________________________________.

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Question 13

The internal rate of return can be described as the specific interest rate used to discount all future cash inflows, so their present value ____________________ the initial cash outflow.

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Question 14

In the main, the initial cash outflow of a project takes place in year __________________.

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Question 15

One argument that favours the internal rate of return is that the yardstick considers ___________________________ instead of profit for the year.

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Question 16

One critical feature of the time-value-of-money yardsticks is that it considers the fact that money has a ____________________ value.

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The answer of One critical feature of the time-value-of-money yardsticks...

Question 17

The ___________________________ index is a capital budgeting technique that shows the ratio of the present value of cash inflow to the present value of the cash outflow, discounted at a predetermined rate of interest.

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The answer of The ___________________________ index is a capital budgeting...

Question 18

The PI is an excellent method to ____________________ capital projects in a logical way because it looks at projects both in relation to budget constraints and in terms of which ones offer the highest total net present value.

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Question 19

____________________ analysis is a capital budgeting technique that involves the identification of profitability variations as a result of one or more changes in a project's base case to certain key elements of a capital project.

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Question 20

____________________ analysis is a capital budgeting technique that helps managers attach probabilities to individual estimates in the base case of a particular project.

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