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:
- Net Present Value method
- Internal Rate of Return method
- Modified Internal Rate of Return method
- 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:
- Mutually exclusive decisions
- Accept reject decisions
- Contingent decisions
- 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:
- Less than those computed on the basis of cost of capital
- More than those computed on the basis of cost of capital
- Equal to those computed on the basis of the cost of capital
- None of the above
Answer: 1
Q4. If the cut off rate of a project is greater than IRR, we may:
- Accept the proposal
- Reject the proposal
- Be neutral about it
- 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:
- Payback Period method
- Accounting rate of return
- Net present value
- None of the above
Answer: 3
Q6. IRR would favour project proposals which have:
- Heavy cash inflows in the early stages of the project.
- Evenly distributed cash inflows throughout the project.
- Heavy cash inflows at the later stages of the project.
- None of the above.
Answer: 1
Q7. The re-investment assumption in the case of the IRR technique assumes that:
- Cash flows can be re-invested at the projects IRR.
- Cash flows can be re-invested at the weighted cost of capital.
- Cash flows can be re-invested at the marginal cost of capital.
- None of the above
Answer: 1
Q8. Multiple IRRs are obtained when:
- Cash flows in the early stages of the project exceed cash flows during the later stages.
- Cash flows reverse their signs during the project.
- Cash flows are uneven.
- None of the above.
Answer: 2
CA Intermediate FMECO - SECTION A - MCQ for Chapter 8 -
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