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