All Free Management Sciences MCQs with Answers
Every Management Sciences question in the bank, across all chapters, each with the correct answer and a written explanation. Free and unlimited, with no account needed.
3,770 questions · page 46 of 189
- A. negative internal rate of return
- B. modified internal rate of return
- C. existed internal rate of return
- D. relative rate of return
Explanation: Modified internal rate of return is the discount rate that equates the present value of the terminal value of project cash flows with the…
Correct answer: modified internal rate of return- A. capital budgeting
- B. cost budgeting
- C. book value budgeting
- D. equity budgeting
Explanation: Capital budgeting is the process of evaluating and selecting long-term projects that are expected to add value to the company.
Correct answer: capital budgeting903. In capital budgeting, the term of bond which has great sensitivity to interest rates is __________?
- A. long-term bonds
- B. short-term bonds
- C. internal term bonds
- D. external term bonds
Explanation: Long-term bonds are more sensitive to interest-rate changes because their distant cash flows are discounted over a longer period.
Correct answer: long-term bonds- A. payback period
- B. forecasted period
- C. original period
- D. investment period
Explanation: The payback period is the number of years required for a project's cumulative cash inflows to recover its original investment.
Correct answer: payback period- A. zero economic value added
- B. percent economic value added
- C. negative economic value added
- D. positive economic value added
Explanation: A negative NPV means the project's discounted cash inflows are less than its investment cost, so it reduces value relative to the required…
Correct answer: negative economic value added- A. greater annual annuity method
- B. equivalent annual annuity
- C. lesser annual annuity method
- D. zero annual annuity method
Explanation: The equivalent annual annuity method converts an investment's cash flows into a constant annual amount with the same present value.
Correct answer: equivalent annual annuity- A. discounted payback period
- B. discounted rate of return
- C. discounted cash flows
- D. discounted project cost
Explanation: The discounted payback period measures how long it takes to recover the initial investment after discounting expected cash flows at the…
Correct answer: discounted payback period- A. positive
- B. negative
- C. zero
- D. one
Explanation: When NPV is positive, the project's return exceeds its cost of capital, so its modified internal rate of return is also above that…
Correct answer: positive- A. costs
- B. cash flows
- C. internal rate of return
- D. external rate of return
Explanation: The NPV profile shows NPV against the discount rate, and the point where it crosses the horizontal axis has an NPV of zero.
Correct answer: internal rate of return910. The set of projects or set of investments to maximize the firm value is classified as __________?
- A. optimal capital budget
- B. minimum capital budget
- C. maximum capital budget
- D. greater capital budget
Explanation: An optimal capital budget is the combination of projects or investments that maximizes the firm's value, subject to available funds and…
Correct answer: optimal capital budget911. The graph which is plotted for projected net present value and capital rates is called ___________?
- A. net loss profile
- B. net gain profile
- C. net future value profile
- D. net present value profile
Explanation: An NPV profile is a graph showing how a project's net present value changes as the discount rate or cost of capital changes.
Correct answer: net present value profile- A. positive rate of return
- B. negative rate of return
- C. external rate of return
- D. internal rate of return
Explanation: The internal rate of return is the discount rate that makes the present value of expected cash inflows equal to the initial investment…
Correct answer: internal rate of return- A. cash flow decision
- B. cost decision
- C. same decisions
- D. different decisions
Explanation: For independent projects with conventional cash flows, NPV and IRR normally give the same accept-or-reject decision because both compare…
Correct answer: same decisions914. In capital budgeting, an internal rate of return of the project is classified as its __________?
- A. external rate of return
- B. internal rate of return
- C. positive rate of return
- D. negative rate of return
Explanation: The rate that makes a project's NPV equal to zero is, by definition, its internal rate of return.
Correct answer: internal rate of return- A. shorter payback period
- B. greater payback period
- C. less project return
- D. greater project return
Explanation: Liquidity is lower when the payback period is longer because the initial investment remains tied up for more time before being recovered.
Correct answer: greater payback period- A. transaction approach
- B. replacement chain approach
- C. common life approach
- D. Both B and C
Explanation: The replacement chain approach repeats projects with unequal lives until they reach a common comparison period.
Correct answer: Both B and C- A. original period
- B. investment period
- C. payback period
- D. forecasted period
Explanation: The payback period equals the number of complete years before recovery plus the unrecovered amount at the start of the recovery year…
Correct answer: payback period- A. negative economic value added
- B. positive economic value added
- C. zero economic value added
- D. percent economic value added
Explanation: A positive NPV means the project earns more than the required return and adds value to the firm.
Correct answer: positive economic value added- A. 5 years
- B. 3.5 years
- C. 4 years
- D. 4.5 years
Explanation: Payback is calculated as three completed years plus the unrecovered fraction of the fourth year: $200 divided by $400 equals 0.5 year.
Correct answer: 3.5 years- A. valued relationship
- B. economic relationship
- C. direct relationship
- D. inverse relationship
Explanation: EVA and NPV both measure value created after charging for invested capital, so higher EVA is associated with higher NPV.
Correct answer: direct relationship