ASSESSMENT

A. TRUE or FALSE

1. Capital budgeting is related to planning and financing capital outlays.

2. Capital investment decisions require insignificant amount for capital

projects.

3. Only costs which are relevant are future costs in the decision-making

process.

4. Sunk costs affect the decision.

5. Mutually exclusive capital investment projects have many alternatives.

B. IDENTIFICATION

6. The process of deciding whether or not to commit resources to projects

whose costs and benefits are spread over several time periods.

7. Results in an “ACCEPT” or “REJECT” decision.

8. Cash flows that occur in the future and are incremental.

9. Represents the initial cash outlay that is required to obtain future

returns or the net cash outflow to support a capital investment project.

C. ENUMERATION

10-15. Process of capital investment decision

 ANSWERS

1. TRUE

2. FALSE

3. TRUE

4. FALSE

5. TRUE

6. CAPITAL BUDGETING

7. INDEPENDENT CAPITAL INVESTMENT OR SCREENING DECISIONS

8. RELEVANT CASH FLOWS

9. NET INITIAL INVESTMENT OR PROJECT COST

10. Finding investment opportunities

11. Collect relevant information and opportunities

12. Financial analysis of cash flows

13. Decision

14. Project implementation

15. Project evaluation and appraisal