Name: Johanne G.

Casires Schedule: Fri/Sat 3:00-6:00 pm

Course: BSBA-MA Subject: MA104

GHJGH 1. The fact that an amount of money that is to be received in the future is not
equivalent to the same amount of money to be received now is referred to as:

a. Present value of money

b. Future value of money
c. Time value of money
d. Discounted value of money

GHJGH 2. The kind of investment project which has no direct relationship with other
projects can therefore be implemented or rejected independently of others:

a. Independent investment project

b. Mutually exclusive project
c. Complimentary investment project
d. None of the above

GHJGH 3. For a project such as a plant investment, the return that should leave the market
price of the firm’s stock unchanged is known as

a. Payback c. Discounted rate of return

b. Net Value of money d. None of the above

GHJGJ 4. Which of the following capital budgeting techniques computed by dividing present
value of future cash inflows by the initial investment?

a. Time value of money

b. Uncertainty
c. Projects with unequal lives
d. None of the above

GHJGH 5. Which of the following capital budgeting techniques computed by dividing present
value of future cash inflows by the initial investment

a. Accounting rate of return

b. Payback Reciprocal
c. Time Adjustment Rate of Return
 d. Profitability

GHJGH 6. For a project such as plant investment, the return that should leave the market
price of the firm’s stock unchanged is known as the

a. Cost of capital c. Payback Period

b. Net present value d. Discounted rate of return

GHJGH 7. The payback method measures

a. How quickly investment pesos maybe recovered

b. The economic life of an investment
c. The cash flow of an investment
d. The profitability of an investement

GHJGH 8. Karen Company is considering replacing an old machine with a new machine.
Which of the following items is economically relevant to Karen’s decisions.

a. Carrying amount of old machine’s-yes: Disposable value of new machine’s-yes

b. Carrying amount of old machine’s-yes: Disposable value of new machine’s-no
c. Carrying amount of old machine’s-no: Disposable value of new machine’s-yes
d. Carrying amount of old machine’s-no: Disposable value of new machine’s-no

GHJGH 9. The method of project selection which considers the time value of money in a
capital budgeting decision is accomplished by computing the

a. Accounting rate of return on initial investment

b. Payback period
c. Accounting rate of return on average investment
d. Discounted cash flow

GHJGH 10. The capital budgeting technique known as internal rate of return uses

a. Cash flow over entire life of project-no; Time value of money-yes

b. Cash flow over entire life of project-yes; Time value of money-yes
c. Cash flow over entire life of project-yes; Time value of money-no
d. Cash flow over entire life of project-no; Time value of money-no

GHJGH 11. Which of the following methods measures the cash flows and outflows of a
project as if they occurred at a single point in time?

a. Cash flow based payback method

b. Payback method
 c. Capital Budgeting
d. Discounted cash flow

GHJGH 12. You have determined the profitability of a planned project by finding the present
value of all the cash flows from the project. Which of the following would cause
the project to lock less appealing , that is, have a lower present value?

a. The discount rate increase.

b. The cash flows are extended over a longer period of time
c. The investment cost decreases without affecting the expected income and life of
the period
d. The cash flows are accelerated and the project life is correspondingly shortened.

GHJGH 13. Which of the following statement is False?

a. The net present value (NPV) of a project with cash flow that come in relatively
slowly is more sensitive to changes in the discount rate than is the NVP of a
project with cash flows that come in rapidly.
b. Other things held constant, a decrease in the cost of capital (discount rate) will
cause an increase in a project’s internal rate of return(IRR)
c. The IRR method can be used in place of the NVP method for all independent
projects because the two methods then result in identical decisions.
d. The NPV method is preferred over the IRR method because the NPV method’s
reinvestment rate assumption is the correct assumption.

GHJGH 14. If the income tax considerations are ignored, how is depreciation used in the
capital budgeting techniques?

a. Internal Rate of Return, Included; Accounting Rate of Return, Excluded

b. Internal Rate of Return, Excluded; Accounting Rate of Return, Included
c. Internal Rate of Return, Excluded; Accounting Rate of Return, Excluded
d. Internal Rate of Return, Included; Accounting Rate of Return, Included

GHJGH 15. Mahlin Movers, Inc. is planning to purchase equipment to make its operations
more efficient. This equipment has an estimated useful life of six years. As part
of this acquisition, a P150,000 investment in working capital is required. In a
discounted cash flow analysis, this investment in working capital is.

a. Should be amortized over the useful life of the equipment

b. Should be disregarded because no cash involved
c. Should be treated as a recurring annual cash flow that is recovered at the end of
six years.
d. Should be treated as an immediate cash outflow in recovered at the end of six
years.

GHJGH 16. As a capital budgeting technique, the Payback period considers depreciation
expense (DE) and time value of money (TVM) as follows
 a. DE, relevant and TVM, relevant
b. DE, irrelevant and TVM, relevant
c. DE, Irrelevant and TVM, irrelevant
d. DE, relevant and TVM, irrelevant

GHJGH 17. The common assumption in capital budgeting analysis that cash inflows occur in
lump sum at the end of the individual years during the life of an investment
project when in fact they flow or more or less continuously during those years :

a. Results in understand estimates of NPV

b. Is done because present value tables for continuous flows cannot be constructed
c. Will result in inconsistent errors being made an estimating NPV’s such that
project cannot be evaluated reliably.
d. Results in higher estimate for the IRR on the investment.

GHJGH 18. Which of the following statement is correct?

a. One key shortcoming of discounted cash flow method is that they ignore the
recovery of original investment.
b. Although a cash outlay for noncurrent such as a machine would be considered
in a capital budgeting analysis, a cash outlay for working capital item such as an
inventory would not be considered.
c. To be acceptable, a projects time adjusted rate of return cannot be less than
the company’s cost of capital.
d. If the net present value of an investment is zero, than the project should be
rejected since it is not providing any return on the investment.

GHJGH 19. All of the following are methods that aid management in analyzing the expected
results of capital budgeting decision except

a. Accrual accounting rate of return

b. Future-value cash flow
c. Discounted cash flow
d. Payback period

GHJGH 20. Depreciation tax shield is

a. The expense cause by depreciation

b. Future-value cash flow
c. The cash provided by recording depreciation
d. An after-tax cash flow