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multiple choice questions 33 capital budgeting is the process of analyzing a cash ou 4295817


Multiple Choice Questions

33.Capital budgeting is the process of analyzing: 

A.Cash outflows only.

B.Short-term investments.

C.Long-term investments.

D.Investments with certain outcomes only.

E.Operating revenues.

34.The process of analyzing alternative long-term investments and deciding which assets to acquire or sell is known as: 

A.Planning and control.

B.Capital budgeting.

C.Variance analysis.

D.Master budgeting.

E.Managerial accounting.

35.Capital budgeting decisions are generally based on: 

A.Tentative and potentially unreliable predictions of future outcomes.

B.Predictions of future outcomes where risk is eliminated.

C.Results from past outcomes only.

D.Results from current outcomes only.

E.Speculation of interest rates and economic performance only.

36.The calculation of annual net cash flow from a particular investment project should include all of the following except

A.Income taxes.

B.Revenues generated by the investment.

C.Cost of products generated by the investment.

D.Depreciation expense.

E.General and administrative expenses.

37.Capital budgeting decisions are risky because all of the following are true except

A.The outcome is uncertain.

B.Large amounts of money are usually involved.

C.The investment involves a long-term commitment.

D.The decision could be difficult or impossible to reverse.

E.They rarely produce net cash flows.

38.The process of restating future cash flows in today's dollars is known as: 




D.Payback period.


39.A the company's required rate of return, typically its cost of capital is called the: 

A.Internal rate of return.

B.Average rate of return.

C.Hurdle rate.

D.Maximum rate.

E.Payback rate.

40.In business decision-making, managers typically examine the two fundamental factors of: 

A.Risk and capital investment.

B.Risk and return.

C.Capital investment and rate of return.

D.Risk and payback.

E.Payback and rate of return.

41.A limitation of the internal rate of return method is that it: 

A.Does not consider the time value of money.

B.Measures results in years.

C.Lacks ability to compare dissimilar projects.

D.Ignores varying risks over the life of a project.

E.Measures net income rather than cash flows.

42.An opportunity cost: 

A.Is an unavoidable cost because it remains the same regardless of the alternative chosen.

B.Requires a current outlay of cash.

C.Results from past managerial decisions.

D.Is the potential benefit lost by choosing a specific alternative course of action among two or more.

E.Is irrelevant in decision making because it occurred in the past.



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