Capital Budgeting
MODULE 9
CAPITAL BUDGETING
THEORIES:
Basic Concepts
Decision Making Process
2. The first step in the decision-making process is to A. determine and evaluate possible courses of action. B. identify the problem and assign responsibility. C. make a decision. D. review results of the decision.
Strategic planning
39. Strategic planning is the process of deciding on an organization’ A. minor programs and the approximate resources to be devoted to them B. major programs and the approximate resources to be devoted to them C. minor programs prior to consideration of resources that might be needed D. major programs prior to consideration of resources that might be needed
Capital budgeting defined
1. The long-term planning process for making and financing investments that affect a company’s financial results over a number of years is referred to as A. capital budgeting C. master budgeting B. strategic planning D. long-range planning
3. Capital budgeting is the process A. used in sell or process further decisions. B. of determining how much capital stock to issue C. of making capital expenditure decisions D. of eliminating unprofitable product line
5. A capital investment decision is essentially a decision to: A. exchange current assets for current liabilities. B. exchange current cash outflows for the promise of receiving future cash inflows. C. exchange current cash flow from operating activities for future cash inflows from investing activities. D. exchange current cash inflows for future cash outflows.
Risk & return
6. The higher the risk element in a project, the A. more attractive the investment is. B. higher the net present value is. C. higher the cost of capital is. D. higher the discount rate is.
9. Cost of capital is the A. amount the company must pay for its plant assets. B. dividends a company must pay on its equity securities. C. cost
CAPITAL BUDGETING
THEORIES:
Basic Concepts
Decision Making Process
2. The first step in the decision-making process is to A. determine and evaluate possible courses of action. B. identify the problem and assign responsibility. C. make a decision. D. review results of the decision.
Strategic planning
39. Strategic planning is the process of deciding on an organization’ A. minor programs and the approximate resources to be devoted to them B. major programs and the approximate resources to be devoted to them C. minor programs prior to consideration of resources that might be needed D. major programs prior to consideration of resources that might be needed
Capital budgeting defined
1. The long-term planning process for making and financing investments that affect a company’s financial results over a number of years is referred to as A. capital budgeting C. master budgeting B. strategic planning D. long-range planning
3. Capital budgeting is the process A. used in sell or process further decisions. B. of determining how much capital stock to issue C. of making capital expenditure decisions D. of eliminating unprofitable product line
5. A capital investment decision is essentially a decision to: A. exchange current assets for current liabilities. B. exchange current cash outflows for the promise of receiving future cash inflows. C. exchange current cash flow from operating activities for future cash inflows from investing activities. D. exchange current cash inflows for future cash outflows.
Risk & return
6. The higher the risk element in a project, the A. more attractive the investment is. B. higher the net present value is. C. higher the cost of capital is. D. higher the discount rate is.
9. Cost of capital is the A. amount the company must pay for its plant assets. B. dividends a company must pay on its equity securities. C. cost