Question

Which of the following is not one of the more common strategic benefits provided by capital investment projects? Multiple Choice Improving product quality Reducing the number of short-term (i.e., operational) decisions that management must make. Reducing manufacturing cycle time. Being able to deliver a product that competitors cannot (ie, product differentiation). Providing significant cost reductions, in terms of production and/or marketing costs. When ranking two mutually exclusive investments with different initial amounts but approximately the same useful life, and assuming no capital rationing, management should give priority to the project Multiple Choice That has the higher net present value (NPV). Whose net after-tax cash flows equal the initial investment outlay. That generates cash flows for the longer period of time. Whose cash flows vary the least. That has the greater accounting rate of return (ARR). is the recommended method for determining the optimal capital budget under conditions of capital rationing. Multiple Choice The net present value (NPV) method The discounted payback method The modified internal rate of return (MIRR) method Monte Carlo simulation The profitability index (PI) method Frequently results in positive net present value (NPV) on attractive projects. Generally coincides with the company's discount rate. Disregards discounted cash flows. On mutually exclusive projects may produce different project rankings than those produced by using the net present value (NPV) method. Would tend to be reduced if a company used an accelerated method of depreciation for tax purposes rather than the straight line (SL) method. Which of the following is not one of the four general classes of real options? Multiple Choice Abandonment option. Expansion option Exercise option. Investment-timing option (e.g., delay)

Answer 1

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