Question

A.TRUE FASLSE

1) 1. Capital Budgeting do not involve the allocation of funds to project that have longer life duration.

YES OR NO

2)Long time period decision of capital budgeting is good or bad ?

3)DPB is the Discounting technique of Capital Budgeting

YES OR NO

4)If a project has outlay of Rs. 40000 and yields annual cash inflow of Rs. 8000 for next 10 years. What is the Discounted Payback period of the project if rate of interest is 10%. ( write only the final answer not the calculation of it)

5)Which two techniques fails to consider time value of money?

6) Time value of money is important because of Uncertainity, opportunity cost of money and Inflation.

TRUE OR FALSE

7) ………………………….. is the difference between the total discounted inflows and outflows.

8) ………………………….. method is also known as Marginal rate of Return or Time Adjusted Rate of Return.

9)The profitability index rule tells us to accept all projects with an index greater than 1.Does this statement true in light with NPV?

yes or no

Answer 1

1) False, Capital Budeting is used to take long investment decision.

2) Good, Capital Budeting is used to take long investment decision.

3) No it is not a discounting technique it is a alternative capital budgeting technique

4) 7.27 Year

5) Payback Period, Accounting Rate Of return.

6) True

7) NPV = PV OF CASH INFLOW - PV OF CASH OUTFLOW

8) IRR (Internal Rate of Return) this rate will make PV of cash Inflow = PV of cash outflow.

9) Yes if NPV is positive than its Profitability Index is also >1