FEB 324224 CHAPTER 21: CAPITAL BUDGETING
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TRUE/FALSE
Capital budgeting focuses on projects over their entire lives in order to
consider all the cash flows or cash savings from investing in a single
project.
Answer: True
The identification stage of capital budgeting explores alternative capital
investments that will achieve the objectives of the organization.
Answer: False
This is the definition of the search stage.
The information-acquisition stage of capital budgeting considers the
expected costs and the expected benefits of alternative capital investments.
Answer: True
The selection stage of the capital budgeting process consists of
choosing projects for possible implementation.
FEB 324224 CHAPTER 21: CAPITAL BUDGETING
AND COST ANALYSIS Exam Questions and
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,FEB 324224 CHAPTER 21: CAPITAL BUDGETING
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Answer: True
Discounted cash flow methods measure all the expected future cash
inflows and outflows of a project as if they occurred at equal intervals
over the life of the project.
Answer: False
As if they occurred at a single point in time.
Discounted cash flow methods focus on operating income.
Answer: False
Discounted cash flow method focus on cash inflows and cash outflows.
The net present value method calculates the expected monetary gain
or loss from a project by discounting all expected future cash inflows
and outflows to the present point in time using the hurdle rate.
Answer: True
FEB 324224 CHAPTER 21: CAPITAL BUDGETING
AND COST ANALYSIS Exam Questions and
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,FEB 324224 CHAPTER 21: CAPITAL BUDGETING
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Internal rate of return is a method of calculating the expected net
monetary gain or loss from a project by discounting all expected future
cash inflows and outflows to the present point in time.
Answer: False
The internal rate of return calculates the discount rate at which the present
value of expected cash inflows from a project equals the present value of
expected cash outflows.
A capital budgeting project is accepted if the required rate of return
equals or exceeds the internal rate of return.
Answer: False
A capital budgeting project is accepted if the internal rate of return equals
or exceeds the required internal rate of return.
The net present value method can be used in situations where the required
rate of return varies over the life of the project.
Answer: True
FEB 324224 CHAPTER 21: CAPITAL BUDGETING
AND COST ANALYSIS Exam Questions and
Answers New Update 100% guaranteed success
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, FEB 324224 CHAPTER 21: CAPITAL BUDGETING
AND COST ANALYSIS Exam Questions and
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Relevant cash flows are expected future cash flows that differ among
the alternative uses of investment funds.
Answer: True
Deducting depreciation from operating cash flows would result in
counting the initial investment twice, in the discounted cash flow
analysis.
Answer: True
Unlike the net present value method and the internal rate-of-return
method, the payback method does not distinguish between the origins of
the cash flows.
Answer: False
None of the three capital budgeting methods distinguish between the
origins of the cash flows.
FEB 324224 CHAPTER 21: CAPITAL BUDGETING
AND COST ANALYSIS Exam Questions and
Answers New Update 100% guaranteed success
graded A+
AND COST ANALYSIS Exam Questions and
Answers New Update 100% guaranteed success
graded A+
TRUE/FALSE
Capital budgeting focuses on projects over their entire lives in order to
consider all the cash flows or cash savings from investing in a single
project.
Answer: True
The identification stage of capital budgeting explores alternative capital
investments that will achieve the objectives of the organization.
Answer: False
This is the definition of the search stage.
The information-acquisition stage of capital budgeting considers the
expected costs and the expected benefits of alternative capital investments.
Answer: True
The selection stage of the capital budgeting process consists of
choosing projects for possible implementation.
FEB 324224 CHAPTER 21: CAPITAL BUDGETING
AND COST ANALYSIS Exam Questions and
Answers New Update 100% guaranteed success
graded A+
,FEB 324224 CHAPTER 21: CAPITAL BUDGETING
AND COST ANALYSIS Exam Questions and
Answers New Update 100% guaranteed success
graded A+
Answer: True
Discounted cash flow methods measure all the expected future cash
inflows and outflows of a project as if they occurred at equal intervals
over the life of the project.
Answer: False
As if they occurred at a single point in time.
Discounted cash flow methods focus on operating income.
Answer: False
Discounted cash flow method focus on cash inflows and cash outflows.
The net present value method calculates the expected monetary gain
or loss from a project by discounting all expected future cash inflows
and outflows to the present point in time using the hurdle rate.
Answer: True
FEB 324224 CHAPTER 21: CAPITAL BUDGETING
AND COST ANALYSIS Exam Questions and
Answers New Update 100% guaranteed success
graded A+
,FEB 324224 CHAPTER 21: CAPITAL BUDGETING
AND COST ANALYSIS Exam Questions and
Answers New Update 100% guaranteed success
graded A+
Internal rate of return is a method of calculating the expected net
monetary gain or loss from a project by discounting all expected future
cash inflows and outflows to the present point in time.
Answer: False
The internal rate of return calculates the discount rate at which the present
value of expected cash inflows from a project equals the present value of
expected cash outflows.
A capital budgeting project is accepted if the required rate of return
equals or exceeds the internal rate of return.
Answer: False
A capital budgeting project is accepted if the internal rate of return equals
or exceeds the required internal rate of return.
The net present value method can be used in situations where the required
rate of return varies over the life of the project.
Answer: True
FEB 324224 CHAPTER 21: CAPITAL BUDGETING
AND COST ANALYSIS Exam Questions and
Answers New Update 100% guaranteed success
graded A+
, FEB 324224 CHAPTER 21: CAPITAL BUDGETING
AND COST ANALYSIS Exam Questions and
Answers New Update 100% guaranteed success
graded A+
Relevant cash flows are expected future cash flows that differ among
the alternative uses of investment funds.
Answer: True
Deducting depreciation from operating cash flows would result in
counting the initial investment twice, in the discounted cash flow
analysis.
Answer: True
Unlike the net present value method and the internal rate-of-return
method, the payback method does not distinguish between the origins of
the cash flows.
Answer: False
None of the three capital budgeting methods distinguish between the
origins of the cash flows.
FEB 324224 CHAPTER 21: CAPITAL BUDGETING
AND COST ANALYSIS Exam Questions and
Answers New Update 100% guaranteed success
graded A+
