Question 1: The automatic rejection of one investment upon the acceptance of another investment is the definition of:
a) inflation
b) differential analysis
c) unequal time periods
d) mutually exclusive investments
Question 2: The cost of capital is sometimes referred to as:
a) the discount rate
b) the hurdle rate
c) the required rate of return
d) All of these answers are correct.
Question 3: If the appropriate tax rate is 30%, the after-tax effect of an $100,000 savings in labor cost is:
a) $30,000 net after-tax cash outflow
b) $30,000 net after-tax cash inflow
c) $70,000 net after-tax cash outflow
d) $70,000 net after-tax cash inflow
Question 4: ________ is not a common way to recognize risk.
a) Increasing the minimum desired rate of return for riskier projects
b) Reducing individual expected cash inflows by an amount that depends on their risk
c) Increasing expected cash outflows by an amount that depends on their risk
d) Increasing the expected life of riskier projects
Question 5: Long-term planning for making and financing investments that affect financial results for more than the current year is called:
a) operational budgeting
b) capital budgeting decisions
c) strategic analysis
d) sensitivity analysis