Financial Management - Study Mode

[#131] In cash flow analysis, two projects are compared by using common life is classified as
Correct Answer

(D) Both B and C

Explanation

Solution: In cash flow analysis, two projects are compared by using common life is classified as replacement chain approach and common life approach.

[#132] Other factors held constant, but lesser project liquidity is because of
Correct Answer

(B) greater payback period

Explanation

Solution: Other factors held constant, but lesser project liquidity is because of greater payback period. Payback period in capital budgeting refers to the period of time required to recoup the funds expended in an investment, or to reach the break-even point.

[#133] In capital budgeting, an internal rate of return of project is classified as its
Correct Answer

(B) internal rate of return

Explanation

Solution: In capital budgeting, an internal rate of return of project is classified as its internal rate of return. Internal rate of return (IRR) is the interest rate at which the NPV of all the cash flows (both positive and negative) from a project or an investment equals zero.

[#134] In independent projects evaluation, results of internal rate of return and net present value lead to
Correct Answer

(C) same decisions

Explanation

Solution: In independent projects evaluation, results of internal rate of return and net present value lead to cost decision. An Independent Project Evaluation is the evaluation of an individual project designed to achieve specific objectives within specified resources, in an adopted time span and following an established plan of action, often within the framework of a broader programme.

[#135] In internal rate of returns, discount rate which forces net present values to become zero is classified as
Correct Answer

(D) internal rate of return

Explanation

Solution: In internal rate of returns, discount rate which forces net present values to become zero is classified as internal rate of return. The internal rate of return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.