Financial Management - Study Mode

[#996] In mutually exclusive projects, project which is selected for comparison with others must have
Correct Answer

(A) higher net present value

Explanation

Solution: In mutually exclusive projects, project which is selected for comparison with others must have higher net present value. A positive net present value indicates that the projected earnings generated by a project or investment - in present dollars - exceeds the anticipated costs, also in present dollars. It is assumed that an investment with a positive NPV will be profitable, and an investment with a negative NPV will result in a net loss.

[#997] Relationship between Economic Value Added (EVA) and Net Present Value (NPV) is considered as
Correct Answer

(C) direct relationship

Explanation

Solution: Relationship between Economic Value Added (EVA) and Net Present Value (NPV) is considered as direct relationship.

[#998] An uncovered cost at start of year is Rs 200, full cash flow during recovery year is Rs 400 and prior years to full recovery is 3 then payback would be
Correct Answer

(B) 3.5 years

[#999] In capital budgeting, positive net present value results in
Correct Answer

(B) positive economic value added

Explanation

Solution: In capital budgeting, positive net present value results in positive economic value added. Capital budgeting is the process a business undertakes to evaluate potential major projects or investments.

[#1000] A risk which is classified as its contribution to risk of portfolio is classified as
Correct Answer

(D) relevant risk

Explanation

Solution: A risk which is classified as its contribution to risk of portfolio is classified as relevant risk. Relevant risk is the fluctuation of returns caused by the macroeconomic factors that affect all risky assets.