Questions from Financial Markets


Q: What is meant by capital budgeting? Briefly describe some characteristics of

What is meant by capital budgeting? Briefly describe some characteristics of capital budgeting.

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Q: Identify the internal rate of return method and describe how it is

Identify the internal rate of return method and describe how it is used in making capital budgeting decisions.

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Q: How does the modified internal rate of return measure improve upon the

How does the modified internal rate of return measure improve upon the IRR measure?

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Q: Describe the term “profitability index” and explain how it is

Describe the term “profitability index” and explain how it is used to compare projects.

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Q: Describe the payback period method for making capital budgeting decisions.

Describe the payback period method for making capital budgeting decisions.

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Q: Why do the NPV, IRR, and profitability index technique sometimes

Why do the NPV, IRR, and profitability index technique sometimes rank projects differently?

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Q: Why might managers want to use other techniques besides NPV to make

Why might managers want to use other techniques besides NPV to make capital budgeting decisions?

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Q: 1. Systematic risk is _____________ and unsystematic risk is _____________.

1. Systematic risk is _____________ and unsystematic risk is _____________. a. diversifiable, diversifiable b. un diversifiable, un diversifiable c. un diversifiable, diversifiable d. diversifiabl...

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Q: How is the “stand-alone principle” applied when evaluating

How is the “stand-alone principle” applied when evaluating whether to invest in projects?

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Q: What are the three types of relevant cash flows to be considered

What are the three types of relevant cash flows to be considered in analyzing a project?

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