1. Internal Rate of Return (IRR) criterion for project acceptance, under theoretically infinite funds, is:
Accept all projects which have –

2. What is the difference between economic profit and accounting profit?

3. Which one of the following projects – A, B, C, or D – should be accepted? The expected return on the market is 16% and the risk-free rate is 6%.

4. When operating under a single-period capital-rationing constraint, you may first want to try selecting projects by descending order of their____in order to give yourself the best chance to select the mix of projects that adds most to the firm value.

5. A firm that ignores risk differences (does not adjust for risk) when choosing new investment projects will generally –

6. You are considering two projects namely Project X and Project Y.
Project X has a low standard deviation but a high coefficient of variation as compared to Project Y.
Project Y has a high standard deviation but a low coefficient of variation as compared to Project X.
Which project will you select?

7. A Profitability Index (PI) of 0.92 for a project means that

8. Money Discount Rate is equal to:

9. The shorter the payback period –

10. What is the idea behind project-specific required rates of return for a firm or division?

11. The situation in which the company replaces existing assets with new assets is classified as

12. The profitability index of Project X is 1.20167 when its cash flow is discounted at 12%. The initial investment in the project was ₹ 1,50,000. This project generates equal cash flow over five years time. How much cash flow will be generated by the project each year?

13. The coefficient of variation of net present value measures the

14. Which of the following is the correct formula to calculate the risk-adjusted discount rate?

15. In the open-ended lease_____

16. ___ is the discount rate that should be used in capital budgeting.

17. The probability associated with the first portion of a complete branch of the probability tree is referred to as the

18. Where capital availability is unlimited and the projects are riot mutually exclusive, for the same cost of capital, following criterion is used?

19. A project whose acceptance does not prevent or require the acceptance of one or more alternative projects is referred to as

20. Which of the following relate to finance leases as opposed to operating leases?
1. At the inception of the lease the present value of the minimum lease payments amounts to at least substantially all of the fan- the value of the leased asset.
2. Ownership of the asset remains with the lessor for the entire lease period.
3. Asset acquired under a finance lease is shown as an asset in the balance sheet of the lessee.
Select the correct answer from the options given below:

21. What technique is best used when cash flows are related to cash flows in previous periods?

22. The decision-tree approach is used in:

23. Ranking projects according to their ability to repay quickly may be useful to firms:

24. Assume that a firm has accurately calculated the net cash flows relating to two mutually exclusive investment proposals. If the net present value of both proposals exceed zero and the firm is not under the constraint of capital rationing, then the firm should

25. The probability that a particular sequence of cash flows might occur is referred to as the