MCQ for CA Intermediate FMECO - SECTION A - FINANCIAL MANAGEMENT - Chapter 7 - INVESTMENT DECISIONS

Sample Multiple Choice Questions (MCQ's) for CA Intermediate - Paper 8 - FINANCIAL MANAGEMENT & ECONOMICS FOR FINANCE - SECTION A - FINANCIAL MANAGEMENT - Chapter 7: INVESTMENT DECISIONS - For Practice relevant for May/November 23 Examinations

 

Q1. A capital budgeting technique which does not require the computation of cost of capital for decision making purposes is:  

  1. Net Present Value method
  2. Internal Rate of Return method
  3. Modified Internal Rate of Return method
  4. Payback Period method

Answer: 4

Q2. If two alternative proposals are such that the acceptance of one shall exclude the possibility of the acceptance of another then such decision making will lead to: 

  1. Mutually exclusive decisions
  2. Accept reject decisions
  3. Contingent decisions
  4. None of the above

Answer: 1

Q3. In case a company considers a discounting factor higher than the cost of capital for arriving at present values, the present values of cash inflows will be: 

  1. Less than those computed on the basis of cost of capital
  2. More than those computed on the basis of cost of capital
  3. Equal to those computed on the basis of the cost of capital
  4. None of the above

Answer: 1

Q4. If the cut off rate of a project is greater than IRR, we may:

  1. Accept the proposal
  2. Reject the proposal
  3. Be neutral about it
  4. Wait for the IRR to increase and match the cut off rate

Answer: 2

Q5. While evaluating capital investment proposals, time value of money is used in which of the following techniques: 

  1. Payback Period method
  2. Accounting rate of return
  3. Net present value
  4. None of the above

Answer: 3

Q6. IRR would favour project proposals which have: 

  1. Heavy cash inflows in the early stages of the project.
  2. Evenly distributed cash inflows throughout the project.
  3. Heavy cash inflows at the later stages of the project.
  4. None of the above.

Answer: 1

Q7. The re-investment assumption in the case of the IRR technique assumes that:

  1. Cash flows can be re-invested at the projects IRR.
  2. Cash flows can be re-invested at the weighted cost of capital.
  3. Cash flows can be re-invested at the marginal cost of capital.
  4. None of the above

Answer: 1

Q8. Multiple IRRs are obtained when:

  1. Cash flows in the early stages of the project exceed cash flows during the later stages.
  2. Cash flows reverse their signs during the project. 
  3. Cash flows are uneven. 
  4. None of the above.

Answer: 2

 

CA Intermediate FMECO - SECTION A - MCQ for Chapter 8 -   

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