Site MapHelpFeedbackMultiple Choice
Multiple Choice
(See related pages)



1

In the principal-agent framework, the ultimate principals are:
A)Managers
B)Board of directors
C)Shareholders
D)Government
2

Which of the following statements regarding capital budgeting and strategic planning is true?
A)Capital budgeting and strategic planning are bottom-up processes.
B)Capital budgeting and strategic planning are top-down processes.
C)Capital budgeting is a top-down process, while strategic planning is a bottom-up process.
D)Capital budgeting is a bottom-up process, while strategic planning is a top-down process.
3

Which of the following capital expenditure may not appear in capital budget?
A)Investment in a new plant
B)Investment in a new machine
C)Investment in information technology
D)All of the above are included in capital budget
4

Post audit is conducted:
A)Before starting a project
B)Before authorizing a project
C)Shortly after a project has started operating
D)Long after the project has been completed and the salvage has been realized
5

In the example of revitalizing a merchandise delivery device requires the following three investments except:
A)Buy a new diesel truck
B)Hire a new dispatch clerk
C)Buy a computer and software to keep track of packages and schedules
D)Construct a dispatching center
6

The following are agency problems in capital budgeting except:
A)Reduced effort
B)Need for good information
C)Empire building
D)Perks
7

A firm has an average investment of $1000 during the year. During the same time the firm has an after-tax earnings of $120. If the cost of capital is 10%, what is the net return on investment?
A)10%
B)12%
C)2%
D)None of the above
8

Economic value added (EVA) was first implemented and popularized by the consulting firm of:
A)Stern-Stewart
B)Anderson Counting
C)McKinsey and Company
D)None of the above
9

A firm has an average investment of 10,000 during the year. During the same period, the firm has an after-tax income of $1600. If the cost of capital is 14%, what is the economic profit?
A)+200
B)+1600
C)+1400
D)None of the above
10

The following are disadvantages of using EVA as a measure of performance except:
A)EVA does not measure present value
B)EVA rewards taking project with quick paybacks and penalizes taking projects with longer payback periods
C)EVA is difficult to apply for start-up ventures
D)EVA considers the cost of capital
11

EVA is used for:
A)Measuring performance within the firm
B)Rewarding performance within the firm
C)Improving performance within the firm
D)All of the above
12

Economic rate of return is defined as:
A)(Cash flow)(Change in present value/Initial present value)
B)(Cash flow) + (Change in present value/Initial present value)
C)(Cash flow/Change in Present Value) + (Initial present value)
D)None of the above
13

The annual capital budget contains a list of proposed new projects for the coming year and any projects from earlier years that are incomplete.
A)True
B)False
14

EVA is a measure of NPV.
A)True
B)False
15

Economic Income = cash flow + change in PV.
A)True
B)False
16

Capital investment process does not involve the following
A)Reflect corporate strategy
B)Capital Budget
C)Strategic Planning
D)Competitor risk
17

Which of the following are incorrect on decision makers requiring good information?
A)Establishing consistent forecasts
B)Increasing forecast bias
C)Getting senior management the information that it needs
D)Eliminating conflicts of interest
18

Monitoring manager's efforts and compensation and right incentives can reduce:
A)Capital budgets
B)Economic profit
C)Agency costs
D)EVA
19

Your corporation has net earnings of $150 million. You have invested $1,500 million in the Indy stadium. What is your net return if your cost of capital is 9%?
A)1%
B)0%
C)–1%
D)10%
20

Which of the following statements about EVA are true?
A)EVA equals zero when net return does not equal zero
B)EVA equals zero when rate of return equals zero
C)EVA involves the addition of cost of capital contributed in calculations
D)EVA considers all project cash flows
21

EVA pros include all of the following except:
A)EVA depends on current level of earnings
B)EVA depends on accurate measures of economic profit
C)EVA depends on accurate measures of investments
D)EVA requires minor changes in income statements and balance sheets
22

Managers can improve EVA by increasing earnings and/or reducing capital employed.
A)True
B)False
23

Post audits should be conducted before a project is started.
A)True
B)False





To learn more about the book this website supports, please visit its Information Center.
(c)2006 McGraw-Hill Higher Education
Any use is subject to the Terms of Use and Privacy Policy.
McGraw-Hill Higher Education is one of the many fine businesses of The McGraw-Hill Companies.


Principles of Corporate FinancOnline Learning Center with Powerweb

Home > Chapter 12 > Multiple Choice Quiz