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1 Finance MCQs

A discount rate where the present value of terminal value equals the project cost present value is called ____________?

  • Negative internal rate of return
  • Modified internal rate of return
  • Existed internal rate of return
  • Relative rate of return
0 Comments
Correct Answer: B. Modified internal rate of return

Explanation:

The Modified Internal Rate of Return (MIRR) is the discount rate that makes ... Read More Details

2 Finance MCQs

An uncovered cost at the start of the year is $300, full cash flow during recovery year is $650, and prior years to full recovery is 4. The payback period is ____________?

  • 3.46 years
  • 2.46 years
  • 5.46 years
  • 4.46 years
0 Comments
Correct Answer: D. 4.46 years

Explanation:

The formula for Payback Period is:


Payback Period=Prior Years to Recovery+Uncovered Cost at Start of YearCash Flow During Recovery Year\text{Payback Period} = \text{Prior Years ... Read More Details

3 Finance MCQs

The present value of future cash flows is $2,000, and the initial cost is $1,100. The Profitability Index (PI) is ____________?

  • 0.55
  • 1.82
  • 0.55
  • 0.0182
0 Comments
Correct Answer: B. 1.82

Explanation:

The formula for Profitability Index (PI) is:


PI=Present Value of Future Cash FlowsInitial InvestmentPI = \dfrac{\text{Present Value ... Read More Details

4 Finance MCQs

The Profitability Index (PI) in capital budgeting is used to ____________?

  • Negative projects
  • Relative projects
  • Evaluate projects
  • Earned projects
0 Comments
Correct Answer: D. Earned projects

Explanation:

The Profitability Index (PI) is a capital budgeting technique used to evaluate and compare investment ... Read More Details

5 Finance MCQs

In calculating the Internal Rate of Return (IRR), it is assumed that the project’s cash flows must ____________?

  • Be reinvested
  • Not be reinvested
  • Be earned
  • Not be earned
0 Comments
Correct Answer: A. Be reinvested

Explanation:

When calculating IRR, it is assumed that the project’s cash flows are reinvested at the ... Read More Details

6 Finance MCQs

In capital budgeting, a project with non-normal cash flows can have ____________ internal rates of return (IRR)?

  • One
  • Multiple
  • Accepted
  • Non_accepted
0 Comments
Correct Answer: B. Multiple

Explanation:

When a project has non-normal cash flows, meaning cash flows change signs more ... Read More Details

7 Finance MCQs

The situation where a firm limits its capital expenditures is called ____________?

  • Optimal rationing
  • Capital rationing
  • Marginal rationing
  • Transaction rationing
0 Comments
Correct Answer: B. Capital rationing

Explanation:

When a firm sets a limit on the total amount of funds available ... Read More Details

8 Finance MCQs

If the initial cost is $5,000 and the Profitability Index (PI) is 3.2, then the present value of cash flows is ____________?

  • 8,200
  • 16,000
  • 0.0064
  • 1,562.5
0 Comments
Correct Answer: B. 16,000

Explanation:

The Profitability Index (PI) formula is:


PI=Present Value of Cash FlowsInitial InvestmentPI = \dfrac{\text{Present Value of ... Read More Details

9 Finance MCQs

The present value of future cash flows divided by the initial project cost is called ____________?

  • Negative index
  • Exchange index
  • Project index
  • Profitability index
0 Comments
Correct Answer: D. Profitability index

Explanation:

The profitability index (PI) is calculated by dividing the present value of future ... Read More Details

10 Finance MCQs

If the Net Present Value (NPV) is positive, the Profitability Index (PI) will be ____________?

  • Greater than two
  • Equal to one
  • Less than one
  • Greater than one
0 Comments
Correct Answer: A. Greater than two

Explanation:

The Profitability Index (PI) is calculated by dividing the present value of future cash inflows ... Read More Details

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