Online MCQ Assignment Answer

QN1: The importance of capital expenditure decisions stems from inter-related reason(s) like

a. Long-term effects

b. Substantial Outlays

c. Measurement problems

d. Both (a) and (b) above

e. Both (b) and (c) above

Answer

Answer: d. Both (a) and (b) above

QN2: Which of the following is/are correct?

a. Accept when Benefit Cost Ratio is greater than one

b. Reject when Payback Period is greater than target period.

c. Reject when Accounting Rate of Return is less than target rate

d. Both (a) and (c) above

e. All of (a), (b) and (c) above

Answer

Answer: e. All of (a), (b) and (c) above

QN3: Which of the following is false?

a. A capital project involves a current outlay of funds which give a stream of benefits extending far into future.

b. A capital project represents a scheme for investing resources that can be analyzed and appraised reasonably independently.

c. Capital Budgeting is a simple process which may be divided into five broad phases of planning, analysis, selection, implementation and review.

d. Capital expenditure decisions pose difficulties such as uncertainty and temporal spread.

e. Both (b) and (d) above

Answer

Answer: b. A capital project represents a scheme for investing resources that can be analyzed and appraised reasonably independently.

QN4: Which of the following is not an investment strategy?

a. Capacity expansion

b. Vertical integration

c. Modernization

d. Conglomerate Diversification

e. Merger

Answer

Answer: b. Vertical integration

QN5: Which of the following is/are not the method(s) of measuring individual creativity?

a. Attribute listing

b. Brainstorming

c. Nominal Group Technique

d. Black Box

e. Both (b) and (c) above

Answer

Answer: e. Both (b) and (c) above

QN6: Which of the following is not an entry barrier, which results in positive NPV?

a. Economies of scale

b. Product differentiation

c. Technological edge

d. Low tariffs

e. Marketing reach

Answer

Answer: a. Economies of scale

QN7: Which of the following is not a causal method?

a. Chain Ratio Method

b. Moving Average Method

c. Leading Indicator Method

d. Econometric Method

e. End Use Method

Answer

Answer: b. Moving Average Method

QN8: When the income level was Rs.1000, the quantity demanded was 50 last year. In this year, the demand went up to Rs.55, when the income rose to Rs.1020. What is the income elasticity of demand this year?

a. 4.81.

b. 1.122

c. 0.25

d. 4.10

e. 4.00

Answer

Answer: % change in income = [(1020-1000)/1000]*100 = 2%

% change in Demand = [(55-50)/50]*100 = 10%

Income Elasticity = 10%/2% = 5

But not in options available. So a. 4.81 is correct answer

QN9: The choice of technology is influenced by a variety of considerations. Which of them is/are not such consideration(s)?

a. Plant capacity

b. Investment outlay

c. Production costs

d. Product prices

e. Ease of absorption

Answer

Answer: d. Product prices

QN10: Pre-operative expenses do not include

a. Company flotation expenses

b. Interest during construction period

c. Brokerage and commission on capital

d. Both (a) and (c) above

e. Both (b) and (c) above

Answer

Answer: b. Interest during construction period

QN11: To meet the cost of project, which of the following is not a means of finance?

a. Deferred Credit

b. Debenture Capital

c. Margin money for working capital.

d. Both (a) and (c) above

e. Both (b) and (c) above

Answer

Answer: d. Both (a) and (c) above

QN12: The break-even point in percentage terms, for the data (Optimum Capacity: 90%, Sales at 100% Capacity: Rs.1,80,000, Variable Cost: 60% of Sales, and Fixed Costs: Rs.36,000) would be

a. 55.56%

b. 50.00%

c. 45.00%

d. 33.33%

e. 30.00%

Answer

Answer: b. 50.00%

QN13: Which of the following statements is/are true?

a. Accept when BCR is greater than 1 and NBCR is greater than 0.

b. Indifferent when BCR is equal to 1 and NBCR is equal to 0.

c. Accept when BCR is less than 1 and NBCR is less than 0.

d. Both (a) and (b) above

e. All of (a), (b) and (c) above.

Answer

Answer: a. Accept when BCR is greater than 1 and NBCR is greater than 0.

QN14: Which of the following is/are correct?

a. Scenario analysis looks at some plausible scenarios and examines how the NPV behaves.

b. Monte Carlo Simulation is a flexible and versatile tool for generating probabilities of NPVs.

c. Decision Tree Analysis analyses risk free situations in decision making

d. Both (a) and (b) above

e. All (a), (b) and (c) above

Answer

Answer: d. Both (a) and (b) above

QN15: Which of the following is/are true in respect of ‘doubling the period by using the more accurate Rule of Thumb’?

a. At 10% interest rate, the doubling period is 7.25 years

b. At 15% interest rate, the doubling period is 4.95 years

c. At 10% interest rate, the doubling period is 7.20 years

d. Both (a) and (b) above

e. Both (b) and (c) above

Answer

Answer: d. Both (a) and (b) above

QN16: Capital recovery factor is the

a. Inverse of future value interest factor for annuity

b. Inverse of future value interest factor

c. Inverse of present value interest factor for annuity

d. Inverse of present value interest factor

e. Same as present value interest factor for annuity

Answer

Answer: c. Inverse of present value interest factor for annuity

QN17: During the current year, ABC Ltd paid a dividend of Rs.20, which is expected to grow at a rate of 5% indefinitely. If the current market price of ABC Ltd is Rs.84, the cost of equity will be

a. Rs.23.8%

b. Rs.25%

c. Rs.30%

d. Rs.28.8%

e. 16.8%

But if growth factor is also considered, then the rate of Equity will be 20%

Answer

Answer: b. Rs.25%

QN18: The investment required for creating a capacity of 5,000 units for a product is Rs.9 crore. What is the investment required for creating a capacity of 20,000 units, if the capacity cost factor is 0.5?

a. Rs. 36 crore

b. Rs. 18 crore

c. Rs. 4.5 crore

d. Rs. 13.5 crore

e. Rs. 22.5 crore

Answer

Answer: b. Rs. 18 crore

QN19: Which of the following is not a step in Decision Tree Analysis?

a. Identifying the problem and alternatives

b. Evaluating various decision alternatives

c. Delineating the decision tree

d. Grouping of probabilities

e. Specifying probabilities and monetary outcomes.

Answer

Answer: c. Delineating the decision tree

QN20: Which of the following is/are false?

a. Capital projects like securities are usually divisible

b. Capital projects are assessed in terms of NPVs whereas financial securities are assessed in terms of rate of return.

c. All the points lying on a given risk-return indifference curve offer the same level of satisfaction.

d. Both (a) and (c) above

e. Both (b) and (c) above

Answer

Answer: a. Capital projects like securities are usually divisible

QN21: Social Cost Benefit Analysis (SCBA) focuses on social costs and benefits, but these often tend to differ from the monetary costs and benefits of the projects. The principal sources of discrepancy are:

a. Taxes

b. Market imperfections

c. Internalities

d. Both (a) and (c) above

e. Both (a) and (b) above

Answer

Answer: c. Internalities

QN22: Which of the following is/are false?

a. The extent of which a project is sheltered is measured by Domestic Resource Cost.

b. The difference between the selling price and input costs is the value added.

c. Economic Rate of Return is simply the Internal Rate of Return of the stream of social costs and benefits.

d. If the value of Domestic Resource Cost is more than the exchange rate, it is favorable.

e. Both (a) and (d) above

Answer

Answer: e. Both (a) and (d) above

QN23: Which of the following is/are false?

a. Because of constraints like project dependence, capital rationing, and project indivisibility, investment projects can be viewed in isolation.

b. Capital projects are generally indivisible, which means that projects can be accepted partially.

c. Capital rationing exists when funds available for investment are inadequate.

d. Both (a) and (b) above

e. Both (b) and (c above

Answer

Answer: b. Capital projects are generally indivisible, which means that projects can be accepted partially.

QN24: If a project has Effective Rate of Protection (ERP) of 38% and if the Exchange Rate is Rs.40 to a Dollar, then the Domestic Resource Cost (DRC) of the project is

a. Rs. 55.00

b. Rs. 67.00

c. Rs. 55.20

d. Rs. 53.20

e. Rs. 15.20

Answer

Answer: d. Rs. 53.20

QN25: In respect of a project A, you are given that the Initial Investment is Rs.1,30,000, the terminal value is Rs.2,14,720, the annual cash inflow is Rs.40,000 and the project life is 4 years, the reinvestment rate assumed for the above project is

a. 20%

b. 5.37%

c. 4%

d. 1.34%n

e. 7.5%

Answer

Answer: a. 20%

QN26: Domestic Resource Cost is associated with

a. The cost of raising resources within the country

b. The opportunity cost of depleting the domestic resources

c. The cost of environmental benefit

d. The usage of domestic resources vis-a-vis saving/earning of one unit of foreign exchange

e. Rate of Protection offered to domestic industries

Answer

Answer: d. The usage of domestic resources vis-a-vis saving/earning of one unit of foreign exchange

QN27: Which of the following is/are false?

a. Detailed Project Report (DPR) is generally prepared for submission to the Financial Institutions (FIs)

b. The format of DPR and the application form for the All-India FIs are one and the same.

c. There is a set pattern in which the DPR has to be presented.

d. There is no set pattern in which the DPR has to be presented.

e. Both (b) and (c) above

Answer

Answer: c. There is a set pattern in which the DPR has to be presented.

QN28: Which of the following is/are not major reason(s) for the failure of a project?

a. Inefficiency of staff managers

b. Poor project planning

c. Wrong choice of technology

d. Both (b) and (c) above

e. All of (a), (b) and (c) above

Answer

Answer: c. Wrong choice of technology

QN29: Which of the following is/are true in respect of a project?

a. A project is a complex of routine activities

b. A project has specific starting and ending points

c. A project is a permanent endeavor to create a unique product

d. Both (a) and (c) above

e. All of (a), (b) and (c) above.

Answer

Answer: b. A project has specific starting and ending points

QN30: Delphi Method is a

a. Technique in which the executives are asked to forecast demand subjectively.

b. Technique in which salesmen of different territories are asked to collect information regarding buying plans of users.

c. Technique in which estimates are called from a group of experts in the field. But the group is not allowed to debate each other’s opinion independently.

d. Technique in which a group discussion is conducted to pool up creative ideas.

e. All of (a), (b) and (d) above.

Answer

Answer: a. Technique in which the executives are asked to forecast demand subjectively.

QN31: Which of the following is a time series model of demand forecasting?

a. Exponential smoothing method

b. Leading indicator method

c. Consumption level method

d. Chain ratio method

e. End use method

Answer

Answer: a. Exponential smoothing method

QN32: Which of the following is not a characteristic of a project?

a. Specific goals

b. Unique activities

c. Specified time

d. Sequence of activities

e. Unspecified activities

Answer

Answer: e. Unspecified activities

QN33: Which of the following methods is/are qualitative for demand forecasting?

a. Field sales force method

b. Jury of executive opinion method

c. Delphi method

d. Both (a) and (b) above

e. All of (a), (b) and (c) above

Answer

Answer: b. Jury of executive opinion method

QN34: Generation of project ideas based on individual creativity does not include

a. Attribute listing

b. Black box

c. Directed dreaming

d. Brain storming

e. Checklist

Answer

Answer: d. Brain storming

QN35: Which of the following has/have impact on the plant location?

a. Government policies/regulations.

b. Raw material availability and their proximity

c. Availability of infrastructure

d. Both (a) and (c) above

e. All of (a), (b) and (c) above

Answer

Answer: e. All of (a), (b) and (c) above

QN36: Which of the following is not included in the estimation of cost of the project?

a. Margin money for working capital

b. Technical know-how fees

c. Contingencies on firm costs

d. Expenses on foreign and Indian technicians

e. Both (a) and (b) above.

Answer

Answer: e. Both (a) and (b) above.

QN37: Pre-operative expenses do not include

a. Insurance during construction

b. Interest during construction period

c. Company floatation costs

d. Both (a) and (b) above

e. Both (b) and (c) above

Answer

Answer: a. Insurance during construction

QN38: Which of the following statements is/are false?

a. Pre-operative expenses are allocated only to depreciable assets

b. Cost of land and site development costs go together

c. Margin money for working capital is included under cost of capital.

d. Contingency need to be provided for all assets both already purchased and yet to be purchased

e. All of (a), (b) and (c) above.

Answer

Answer: e. All of (a), (b) and (c) above.

QN39: The break-even point in percentage terms, if sales are Rs.2000 crore, variable cost is 60% of sales, and fixed cost is :Rs.400 crore, would be

a. 50.00%

b. 20.00%

c. 30.00%

d. 33.33%

e. 08.00%

Answer

Answer: a. 50.00%

QN40: Which of the following appraisal techniques help(s) in achieving the objective of shareholder’s wealth maximization?

a. IRR

b. NPV

c. BCR

d. NBCR

e. Both (a) and (b) above

Answer

Answer: b. NPV

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