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- In capital budgeting, the term Capital Rationing implies:
- That no retained earnings available
- That limited funds are
available for investment
- That no external funds can be raised
- That no fresh investment is required in current year
- Feasibility Set Approach to Capital Rationing can be applied in:
- Accept-Reject Situations
- Divisible Projects
- Mutually Exclusive
Projects
- None of the above
- In case of divisible
projects, which of the following can be used
to attain maximum NPV?
- Feasibility Set
Approach
- Internal Rate
of Return
- Profitability Index Approach
- Any of the above
- In case of the
indivisible projects, which of the following may
not give the optimum result?
- Internal Rate of Return
- Profitability Index
- Feasibility Set Approach
- All of the above
- Profitability Index, when applied to Divisible Projects, impliedly assumes that:
- Project cannot be taken in
parts
- NPV is linearly proportionate to part of the
project taken up
- NPV is additive in
nature
- Both (b) and (c)
- If there is no inflation during a period, then
the Money Cashflow would be equal to:
- Present Value
- Real Cashflow
- Real Cashflow + Present Value
- Real Cashflow - Present
Value
- The Real Cashflows must be discounted to get the present value at a rate equal to:
- Money Discount
Rate
- Inflation Rate
- Real
Discount Rate
- Risk free rate of interest
- Real rate of return is equal to:
- Nominal Rate × Inflation Rate
- Nominal Rate ÷ Inflation
Rate
- Nominal Rate -
Inflation Rate
- Nominal
Rate + Inflation
Rate
- If the Real rate of return is 10% and
Inflation s Money Discount
Rate is:
- 14.4%
- 2.5%
- 25%
- 14%
- If the Money Discount
Rate is 19% and Inflation Rate is 12%, then the Real
Discount Rate is:
- 7%
- 5%
- 5.70%
- 6.25%
- Money Discount Rate if equal to:
- (1 + Inflation Rate) (1 + Real Rate)-1
- (1
+ Inflation Rate) 4- (1 + Real Rate)-1
- (1 + Real Rate) 4- (1 + Inflation Rate)-1
- (1 + Real Rate) + (1 + Inflation Rate)-1
- Real Discount Rate is equal to:
- (1 + Inf. Rate) (1 + Money D Rate)-1
- (1
+ Money D Rate) + (1 + Inf. Rate)-1
- (1 + Money D Rate) 4- (1 + Inf. Rate)-1
- (1 + Money D Rate) - (1 + Inf. Rate)-1
- Which of the following cannot be true?
- Inflation Rate > Money Dis.
Rate
- Real Dis.
Rate < Money Dis. Rate
- Inflation Rate < Real
Dis. Rate
- Inflation Rate = Real Dis. Rate
- Money Cash flows should be adjusted for:
- Only Inflation
Effect
- Only
Time Value of
Money
- None of (a) and (b)
- Both of (a) and
(b)
- EAV should be used in case of:
- Divisible Projects
- Repetitive Projects
- One-off Investments
- Indivisible Projects
- EAV is Equal to:
- NPV × PVAF(r,n)
- NPV + PVAF(r,n)
- NPV ÷ PVAF(r,n)
- NPV-PVAF(r,n)
- If a project has positive NPV, its EAV is
- Equal to NPV
- More than NPV
- Less than NPV
- Any of the above
- Two mutually exclusive projects with different economic lives can be compared on the basis of
- Internal Rate of Return
- Profitability Index
- Net Present Value
- Equivalent Annuity Value
Sir can you explain the question 9 and 10
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