do all companies use the same tools to assess investment decisions/proposals? 1.yes 2.no
TRANSCRIPT
Do all companies use the same tools to assess investment decisions/proposals?
1 2
50%50%1. Yes
2. No
Do you think that XM Satellite Holdings, Inc. prepared a detailed investment proposal/analysis to determine if it should launch its first satellite?
1 2
50%50%1. Yes
2. No
Can some of the assumptions that are made related to an investment, such as a useful life,
have a significant impact on the investment decision?
1 2
50%50%1. Yes
2. No
Do you think that it is difficult for a company like XM Satellite Holdings, Inc. to prepare an
investment proposal/analysis?
1 2
50%50%1. Yes
2. No
Do all companies use investment analysis to make decisions related to investments?
1 2
50%50%1. Yes
2. No
Capital investment evaluation methods can be grouped by methods that do not use present
values and methods that do use present values.
1 2
50%50%1. True
2. False
The average rate of return method for investment valuation uses present values.
1 2
50%50%1. True
2. False
Investment valuation methods that ignore present values are often useful in evaluating capital
investment proposals that have relatively short useful lives.
1 2
50%50%1. True
2. False
The primary disadvantage of the internal rate of return method is that the present values of the net cash flows
over the entire useful life of the proposal are considered.
1 2
50%50%1. True
2. False
Qualitative considerations in investment analysis are most appropriate for non-
strategic investments.
1 2
50%50%1. True
2. False
The final steps in the capital rationing process are ranking the proposals according
to management’s criteria.
1 2
50%50%1. True
2. False
The process by which management plans, evaluates, and controls investments in fixed
assets is called
1 2 3 4
25% 25%25%25%1. sensitivity analysis
2. capital investment analysis
3. cost-benefit analysis
4. quantitative analysis
Which of the following investment evaluation methods uses present values?
1 2 3 4
25% 25%25%25%1. Internal rate of
return method
2. Cash payback method
3. Average rate of return method
4. Declining balance method
The investment evaluation method that divides the estimated annual average income by the average
investment is called the
1 2 3 4
25% 25%25%25%1. net present value
method
2. internal rate of return method
3. average rate of return method
4. cash payback method
The net present value method
1 2 3 4
25% 25%25%25%
1. is the present value of the investment’s cash inflows
2. adds the investment’s initial cash outflow to the present value of its cash inflows
3. compares an investment’s initial cash outflow with the current value of its cash inflows
4. compares an investment’s initial cash outflow with the present value of its cash inflows
Which of the following factors does not complicate capital investment analysis?
1 2 3 4
25% 25%25%25%1. Income taxes
2. Unequal proposal lives
3. Adequate financial information on the proposals
4. Leasing
The process by which management allocates funds among competing capital
investment proposals is called
1 2 3 4
25% 25%25%25%1. incremental
analysis
2. capital rationing
3. cost-benefit analysis
4. differential analysis
A project will have a present value index greater than one when the net present value is
1 2 3 4
25% 25%25%25%
1. positive
2. negative
3. equal to zero
4. equal to one
Which of the following is an advantage of using the net present value method?
1 2 3 4
25% 25%25%25%1. It is easy to calculate
2. It ignores the cash flows near the end of the investment’s useful life
3. It ignores the time value of money
4. It considers the time value of money
A series of equal net cash flows at fixed time intervals is called a(n)
1 2 3 4
25% 25%25%25%1. return on
investment
2. gross profit
3. annuity
4. internal rate of return