Financial Management - Study Mode

[#346] Which of the following is not a capital budgeting decision?
Correct Answer

(D) Inventory Level

[#347] Cost of Capital refers to:
Correct Answer

(C) Required Rate of Return

[#348] MM Model of Dividend irrelevance uses arbitrage between:
Correct Answer

(B) Dividend and Capital Issue

[#349] A point where profile of net present value crosses horizontal axis at plotted graph indicates project
Correct Answer

(C) internal rate of return

Explanation

Solution: A point where profile of net present value crosses horizontal axis at plotted graph indicates project internal rate of return. The internal rate of return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.

[#350] Modified rate of return and modified internal rate of return with exceed cost of capital if net present value is
Correct Answer

(A) positive

Explanation

Solution: Modified rate of return and modified internal rate of return with exceed cost of capital if net present value is positive. The modified internal rate of return is a financial measure of an investment's attractiveness. It is used in capital budgeting to rank alternative investments of equal size. As the name implies, MIRR is a modification of the internal rate of return and as such aims to resolve some problems with the IRR.