(13-a), ( D, a o 3 , l 0 ) , ( 1 8 - d ) , (19 - b), (20

(24-d), (25-d), (26- a), (2 a), (28-d),. (29- b), (30 b), (31- b), (32-a), (33- a), (34 - b).
(35-a), (36- a), (37- a), (38 - b). (39- a ) , (40-c), (41 -d)]

Chapter-3: Capital Budgeting

Long-term decisions are called
as

b)working capilal deccisions c) Future decisions

Cupilal budgeting decisions
decisions involve huge amount of risk duc to
2 Capital budgeting b) money lactor
c) human factor
ume 1aclor
is
3. Payback period investment
the tme
requircd to
recover the original
to deprecate asset
b) the time required
lo pay to crediior
c) the
lime required decisions
For capilal budgeting
considered
deprecation is to be
is to be ignored
depreciation
is to be calculated at 20
c) depreciation
5. ARR method
value of money
takes into account time
a)
d o e s not
take into account time
value
of money
decisions
modern of capital ot expenditure
c)most
N.P.V. method is c)mostcomplicated
6. most modern
a) most traditional

betwecn
7. P.. is the proportion
outlow
intlow and PV of cash
P V of cash eash intlow
and total
b) PV of cash intlow
nilow and total
cash outflow
C)cash decisionis
8. accept-reject
In
identical results
methods produce
N P V & IRR results difterent
NPV and IRR methods
produce
b) at all
c) NPV& TRR methods
are of no use

of cash outtlow
determination
In
in working capital is added
AIncrease is deducted
increase in working capital
b)
15 1ghored
c)increase in working capital accounting
The method which uses
accrual
c) NPV ) IRR
10.
a ) payback ARR 1s
investments profitability
consider ) IRR
method which does
not
1. The c) NPV
payback
b) ARR
The following atfects PV of an investiment c ) I y p e ot investment all of the above.
12. investiment
interest b) Length of
a) rate ol is Zero d) none of the above
The IRR is the
s a m e as
at which NPV
13. b) hurdle rate Ainterest rate
ARR budget decisions audit method

most reliable methodb)

for financing capital d) post
14, The ARR
c)payback believes that
1236,100. The company
NPV a plant. The purchase
price is in
ucquiring 1he plant will have to be replaced
considering year.
15. M. Ltd. is 3,09,025 will
be generated every
intlow of
the net cash
payback period
is
c) 6 Ycars d) 2Ycars
eightyears. The The life of the project
D 3 Ycars an
investment
of R
the second
14,54,000
4Ycars line whrch requires ? 2,80,000 for
a new product for the first year,
16. P, Ltd. is adding cash i n t l o w of 3,10,000 payback period is :
and will generate The
will be 10 years t h e r e a t t e r for eight years. d) 45 years

year and
2,40,000 for each year 7.2 months c) years

a) 6 years Sycars & d) 14.75%

ARR iS
No. 16 the 17.26 60,000. The expected
rate
**Refer to Q. b) 19% inllows of
annual net cash
a) 20% offers cight
is as 2,72,000 and
8 Cost of project A d) 4300
NPV will be
:
14%. The 8.590
ol return is 7,400
A 6,340
 7 . B . C . o m - S e m
-)
(3.
Accounting

Manogemet

p r o l i t a b i e project
is

32,000 respectively.
The most
760
25,000,
38,000 and B
Cis
NPVofprojecl
A., B & c) C
19. b)
A D inflow+ inves tment
P . I s the
proportion
betwecn

value
PV of cash above
20. inflow+ crap None of the
e) The Plis
a) PVof cash Lifc
project
of the2,38,000 and
2,00,000.
is
c)PV of cash
inflow+
is
investment
1.40 value
inliow of a project 1.21 Lile is 5 ycars, scrap
21. Py of cash is 14o
1.19
b) 1.20 3,05,450
Discount
factor
IS
is NPV
cash inflow per year is. 519 The
22. Net
outîlow is
10,00,000.
14% al the
end
ofd)5 years
1,00,000.
Cash
Is 3.433
P.V. of 1at 1.04,500

of for 5 years c) 1,25,000

P.V.
a) ot1Annuity
,00,000 1,00,510

48,000
machune
23. Cost ol 0
Residual Value
Inllow 13,000
Annual net Cash
5 years
Esumated lile d) 3.53%
The ARRIS c) 8.35%

7.08%
costs
2,40,000
24. B2B Machine
intlow o0,000
Annual net cash d) 20,000
is:
depreciation
years,
Annunl
c) 5,000
0,000Lile 6 b) 30,000
ARR IS d) 10%
25. Refer io Question No, 24. The c)9.50%
) efore
30,000. Prolit
before depreciation
depreciation d
and tax is

26. Project Acost 3

Years 15,000 19,000
Proit 8,000 10,000
Tax rate 40%
is 120%
Cost of capital
d) 6,500
The NPV of
the
ProjectA 1s c) 5,206
) 7,878
cash flow for 10 years is
a)5,600 40,000. The
Investment opportunity costing
27. Jayshree Lid has an
7,000 pa
8,000
10,000
15,000
10,000
4,000
10% The NPV is
Cost
of capital o 8.961 d) 8,506
b) 9,991
a) 8,900
27 The Pl. is
28. Refer to Question No 1.22
c)1.56 ) 143
a) 1.25 on straight line basis. The
50,000 Tax rale 1s 5»o Deprecation is provided
29. The cost of a project is
is:
inllow betore tax and depreciution
4
Years 2
15,000 15,000 25.000
Prolit 10,000 10,000
Cash inllow is
b) 15,000; 15,000; 10,000; 20.000; 16,750
) 10,000; 10,000; 12.250; 12;250; 16750 d) 4500; 6,000; 7.500; 8,000; 8,950
c) 8,000; 8,200; 9,500; 10,350; 14.500 15,O00 at the
2.50.000 with a
scrap value of
30. A Lid.is thinking to purchase
one cquipment
costing
is 20,000.
The working capital requirement
end
ol five years.
The NP before Dep and tax

Year
1.25.000
1.50,000
1.87,000
1,80,000

1,12,500
Tax Rate 40%
Depreciation under straight line method.
The Cash inflow in the 5 year is
121,300 b) 86,300 c)90,000 d) 94.000
Objective Questions SP'99 61

31. Refer to Question No. 30 the cash outflow is

a) 2,50,000 2,70,000 C)2,40,000 d) 2,90,000
32. Capital expenditure decisions include
a) Replacement decisions b) Modernisation decisions
c) Expansion decisions A l l of the above
33. Acceptance of one proposal excludes the acceptance of another proposal is a
a) Diversification decision Mutually exclusive decision

c)Expansion decision d None of the above

L &Tis
34. Starting of insurance business by a

a) Mutually exclusive decision

d)
Diversification decision
Modernisation decision
c) Expansion decision
and benefits of project is measured in terms of
Capital budgeting decision cost a
35. In
6 ) Cash Flow c) Book Profit d) None of the above
a) Accounting profit
saving on loss is considered as
36. In Capital budgeting tax
c) Both (a) & (b) d) None of the above
a) Cash outflow by Cash inflow
37. Payback period considers
No time value of money c) Both (a) && (6) d) None of the above
a) Time value of money
for machine is treated as
of workers new
58.
Expenses on training 6 ) Cash outflow c) Both (a) & (b) d) None of the above
a) Cash inflow
39. Relcase of working capital at the end of the life of
the project is
treated a s
b) Cash outlow c) Change in working capital d) None of the above
Cash inflow
40. Subsidy from Govt. is treated
as b) Cash outflow fthe respective year
Cash inflow of the respective year
None of the above
c) Both (a) & (6) machine increuses.
the end of useful life of
a

*ISalvage value
of the machine at b) Cash outflow in the last year
C a s h inflow in the last year
d) None of the above
c) Both (a) & (b)
42. The project is accepted it NPV is (3) & (b)
c) less than zero
b) more than zerop
a) cqual to zero
is
3. Pl method project is accepled when Pi ( a ) & (6)
ASper b) m o r e than I
c) less than I
a) cqual to l
in
4. NPW represents immediate increase
c) efliciency d)solvency
b) firm's profit
fim's wealth the given sales are
assumed to realized at
above
otherwise specifically mentioned d) none of the
*3.
Onless C) end ot the quarter
b) the beginning of the year (9- a), (0- b). (-a), (12-d),
t h e end of the year b), (6 b), (7 a). (8- a), -

a). (5- (25-a). (2-B

-

a). (4-
13 a), (5- (19 d), (20 b). (21 - a). (22-b).
(17-c). (18-a). (69 - D ) . © 0 - D).
-), (5- a). (16- b), a). (30-a), (31 b), (32- d), (33 -b),
(54- D).
(28 b), (29-
D , 2 0 - b ) , (27-c). d}. (43 d), (44-a), (4) -a)
a), (42
-

O7-D). S 8 - b). (39- a), (40 a). -

(41 -

Chapter-4: Concept of MIS in Computer Environment_ a n t