Capital Budgeting or Capital Investment Decisions MCQs

Welcome to our comprehensive collection of Multiple Choice Questions (MCQs) on Capital Budgeting or Capital Investment Decisions, a fundamental topic in the field of IC 89 Management Accounting. Whether you're preparing for competitive exams, honing your problem-solving skills, or simply looking to enhance your abilities in this field, our Capital Budgeting or Capital Investment Decisions MCQs are designed to help you grasp the core concepts and excel in solving problems.

In this section, you'll find a wide range of Capital Budgeting or Capital Investment Decisions mcq questions that explore various aspects of Capital Budgeting or Capital Investment Decisions problems. Each MCQ is crafted to challenge your understanding of Capital Budgeting or Capital Investment Decisions principles, enabling you to refine your problem-solving techniques. Whether you're a student aiming to ace IC 89 Management Accounting tests, a job seeker preparing for interviews, or someone simply interested in sharpening their skills, our Capital Budgeting or Capital Investment Decisions MCQs are your pathway to success in mastering this essential IC 89 Management Accounting topic.

Note: Each of the following question comes with multiple answer choices. Select the most appropriate option and test your understanding of Capital Budgeting or Capital Investment Decisions. You can click on an option to test your knowledge before viewing the solution for a MCQ. Happy learning!

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Capital Budgeting or Capital Investment Decisions MCQs | Page 2 of 7

Discover more Topics under IC 89 Management Accounting

Q11.
What does financial feasibility study involve?

a.

Analysis of NPV and IRR

b.

Appraisal and analysis of isolated projects

c.

Determining market demand and price

d.

Evaluating social infrastructure

Discuss
Answer: (a).Analysis of NPV and IRR Explanation:Financial feasibility study in Capital Budgeting involves detailed financial analysis, including analysis of NPV (Net Present Value) and IRR (Internal Rate of Return), among other considerations.
Q12.
What does Cost-Benefit Analysis in Capital Budgeting assess?

a.

Market demand and price

b.

Economic resources and employment

c.

Technical details and operating costs

d.

Social infrastructure appraisal

Discuss
Answer: (b).Economic resources and employment Explanation:Cost-Benefit Analysis in Capital Budgeting assesses gains and losses to society as a whole, considering the use of economic resources, foreign exchange, and employment, among other factors.
Q13.
What is the purpose of Simulation Analysis in Capital Budgeting?

a.

Identifying proposed investments

b.

Randomly testing various aspects to identify associated risks

c.

Allocating resources for capital projects

d.

Assessing and evaluating proposed investments

Discuss
Answer: (b).Randomly testing various aspects to identify associated risks Explanation:Simulation Analysis involves randomly testing various aspects to identify associated risks and make proper analyses.
Q14.
What is the first step in Simulation Analysis?

a.

Determining NPV

b.

Modeling the project

c.

Selecting values from probability distribution

d.

Plotting frequency distribution of NPV

Discuss
Answer: (b).Modeling the project Explanation:The first step in Simulation Analysis is modeling the project, which shows the relationship of NPV with parameters and probable variables.
Q15.
What does Simulation Analysis involve in terms of values and probability distribution?

a.

Determining NPV

b.

Plotting frequency distribution of NPV

c.

Selecting values from probability distribution

d.

Assessing and evaluating proposed investments

Discuss
Answer: (c).Selecting values from probability distribution Explanation:Simulation Analysis involves selecting values at random from probability distribution for variables/alternatives.
Q16.
What is the last step in Simulation Analysis?

a.

Determining NPV

b.

Assessing and evaluating proposed investments

c.

Plotting frequency distribution of NPV

d.

Implementing Capital Budget

Discuss
Answer: (c).Plotting frequency distribution of NPV Explanation:The last step in Simulation Analysis is plotting the frequency distribution of NPV.
Q17.
What characterizes Replacement Projects?

a.

Long-term investments for capacity building

b.

Simplified and easier capital budgeting

c.

Compliance with statutory requirements

d.

Aimed at reducing production costs and increasing volume

Discuss
Answer: (b).Simplified and easier capital budgeting Explanation:Replacement Projects involve long-term investment, and their capital budgeting is comparatively simpler and easier. They are aimed at reducing production costs and/or increasing the volume of production.
Q18.
Why are Mandatory Investments made?

a.

To comply with statutory or regulatory requirements

b.

For project diversification

c.

To enhance capacity for growth

d.

To reduce production costs

Discuss
Answer: (a).To comply with statutory or regulatory requirements Explanation:Mandatory Investments are made to comply with statutory or regulatory requirements.
Q19.
What is the purpose of analyzing Mandatory Investments?

a.

Project diversification

b.

To find the most cost-effective and best-yielding project while fulfilling statutory requirements

c.

Enhancing capacity for growth and survival

d.

Reducing production costs

Discuss
Answer: (b).To find the most cost-effective and best-yielding project while fulfilling statutory requirements Explanation:The purpose of analyzing Mandatory Investments is to find the most cost-effective and best-yielding project while fulfilling statutory requirements.
Q20.
What is the primary aim of Project Diversification?

a.

Complying with statutory requirements

b.

Reducing production costs

c.

Enhancing capacity for growth

d.

Producing new products, services, or entering new markets

Discuss
Answer: (d).Producing new products, services, or entering new markets Explanation:Project Diversification aims at producing new products, product mix, services, entering new markets, new areas, or new segments of customers.
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