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BM 3.8 Investment Appraisal Flashcards | StudBud
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BM 3.8 Investment Appraisal
BM 3.8 Investment Appraisal
20 terms
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StudBud Administration
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IB Business Management
Flashcards
20 cards
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Practice quiz
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Questions
20
Answers
1
The net present value is relatively easier to calculate than the payback period.
True
False
2
Discounting is important to account for the future value of cash flows. [HL Only]
False
True
3
Investment appraisal is a forward-looking decision-making tool.
False
True
4
The net present value is relatively easier to calculate than the payback period.
False
True
5
Discounting is important to account for the future value of cash flows. [HL Only]
True
False
6
Which statement below does
not
apply to the payback period?
Time, rather than profit, is the center of attention
Simpler to calculate and understand than appraisal methods
The timing of the net cash flows are largely ignored
favors projects that have high profit quality
7
Which of the following is an example of investment in a business context?
Placing money into a savings bank account
Borrowing money from a bank
Paying dividends to shareholders
Purchasing new machinery
8
Factors that affect a multinational company’s investment decision are least likely to include
Leadership and management styles
Organizational objectives
Unquantifiable risks
The impact on human relations
9
The payback period method of investment appraisal would be least important for those firms
Focusing on profitability more than cash flows
That see liquidity as more important than profitability
Requiring an early investment return
Prioritising time in investment decisions
10
Which of the following is an example of investment in a business context?
Purchasing new machinery
Paying dividends to shareholders
Borrowing money from a bank
Placing money into a savings bank account
11
The higher the value of the average rate of return, the more financially feasible an investment project tends to be.
False
True
12
Factors that affect a multinational company’s investment decision are least likely to include
Organizational objectives
Unquantifiable risks
The impact on human relations
Leadership and management styles
13
The average rate of return can best be described as an investment appraisal technique that:
Measures the period for which a project will break-even
Calculates average annual profit as a % of the principal
Measure the future value of net cash flows for an investment
Calculates total profit as a % of initial investment cost
14
Investment appraisal is a forward-looking decision-making tool.
False
True
15
Payback period uses the flow of profits to assess the feasibility of an investment.
True
False
16
Considering the future value of money, the higher the interest rate, the less money is worth if received in the future.
False
True
17
Which business situation would most suit the payback period of investment appraisal?
Firms that can afford to use cash to raise finance
A new multi-complex cinema & entertainment center
Building a new international airport
Manufacturing processes where tech changes frequently
18
Which of the following investment appraisal techniques uses time as its unit of measurement
Net Present Value
Payback period
Internal Rate of Return
Average Rate of Return
19
Payback period uses the flow of profits to assess the feasibility of an investment.
True
False
20
ARR and the net present value methods of investment appraisal are expressed in percentage terms.
False
True
