91. Project appraisal is usually done by a ______ Institution.
marketing
financial
production
none of these
Answer.2. financial
Explanation:
Project appraisal is usually done by a financial Institution.
Finance is one of the most important prerequisites to establishing an enterprise. It is financed only, which facilitates an entrepreneur to bring together the labor of one, machine of another, and raw material of yet another to combine them to produce goods.
In order to adjudge the financial viability of the project, the following aspects need to be carefully analyzed.
92. Profitability index is also known as ______ ratio.
ROI
Benefit-cost
Debt-equity
none
Answer.2. Benefit-cost
Explanation:
Profitability Index (PI) is a capital budgeting technique to evaluate investment projects for their viability or profitability. Discounted cash flow technique is used in arriving at the profitability index. It is also known as a benefit-cost ratio.
93. Payback period and ARR methods are ______
traditional
discounting
modern
none
Answer.2. discounting
Explanation:
The traditional methods or non-discount methods include the Payback period and the Accounting rate of return method. The discounted cash flow method includes the NPV method, profitability index method, and IRR.
94. NPV, PI and ______ are the three discounted cash flow techniques.
ARR
IRR
NTV
urgency
Answer.2. IRR
Explanation:
Discounted cash flow (DCF) is a technique that determines the present value of future cash flows. The discounted cash flow method includes the NPV method, profitability index method, and IRR.
95. Original investment is divided by constant cash ______ to get payback period.
inflows
outflows
balance
both (a) and (b)
Answer.1. inflows
Explanation:
The payback period is the length of time it takes to recover the cost of an investment or the length of time an investor needs to reach a breakeven point. The payback period is calculated by dividing the amount of the investment by the annual cash inflow.
96. ______ is also called the trial and error method.
ARR
IRR
NTV
Urgency
Answer.2. IRR
Explanation:
The internal rate of return (IRR) is a metric used in financial analysis to estimate the profitability of potential investments. IRR calculations must be performed via guesses, assumptions, and trial and error.
97. The discount rate at which present value of cash inflows equals to the present value of cash outflows is called _____
ARR
IRR
NTV
Urgency
Answer.2. IRR
Explanation:
The internal rate of return (IRR) is a metric used in financial analysis to estimate the profitability of potential investments. IRR is a discount rate that makes the net present value (NPV) of all cash inflows equal to zero in a discounted cash outflow analysis.
98. Project ______ is done after the project is implemented.
management
appraisal
evaluation
none
Answer.3. evaluation
Explanation:
Project evaluation is done after the project is implemented.
An appraisal is an independent examination of the facts whereas evaluation is a comparative study and thereafter a conclusion is drawn.
In appraisal, facts are brought out in the process of examination while in evaluation, these facts are further compared with the alternatives available for either to accept or reject.
An appraisal is the first and starting examination while evaluation is the second stage in the total process of appraisal and evaluation.
The appraisal gives the facts, while the evaluation gives the conclusion.
99. The main object of project appraisal is to
Find whether the project is technically feasible
Ascertain whether the project is financially feasible
Decide whether to accept or reject a project
Know whether the project is eco-friendly
Answer.3. Decide whether to accept or reject a project
Explanation:
The project has to be appraised in relation to the feasibility of the technical, economic, financial commercial, managerial, social, and other aspects of the project. The purpose of a project appraisal is to decide whether to accept or reject an investment proposal.
100. Project appraisal is done by
Government
Financial institution only
Entrepreneur only
Both financial institutions and entrepreneur
Answer.4. Both financial institutions and entrepreneur
Explanation:
Project appraisal is done by both financial institutions and entrepreneurs.
An entrepreneur needs to appraise various alternative projects before allocating scarce resources for the best project. Thus, project appraisal helps select the best project among available alternative projects.
Financial institutions do project appraisals to assess their credit worthiness before extending finance to a project.
For a financial institution, project appraisal is a process whereby a leading financial institution makes an independent and objective assessment of the various aspects of an investment proposition for arriving at a financial decision and is aimed at determining the viability of a project and sometimes, also in modifying its scope and content so as to improve its viability.
101. Which one is not an element of project appraisal?
Technical feasibility
Network analysis
Economical viability
Commercial viability
Answer.2. Network analysis
Explanation:
Appraisal of a proposed project covers the following analyses:
Economic
Financial
Market
Technical
Managerial
102. The discount rate must be determined in advance for the
Payback period
Time adjusted rate of return method
IRR
NPV method
Answer.4. NPV method
Explanation:
Net present value (NPV) is a method used to determine the current value of all future cash flows generated by a project, including the initial capital investment. The discount rate must be determined in advance for the NPV method.
It’s the rate of return that the investors expect or the cost of borrowing money. If shareholders expect a 12% return, that is the discount rate the company will use to calculate NPV. If the firm pays 4% interest on its debt, then it may use that figure as the discount rate.
103. Which one of the following is not a discounted cash flow technique?
ARR
IRR
NPV
pi
Answer.1. ARR
Explanation:
Annual recurring revenue (ARR) is an essential business metric that shows how much recurring revenue you can expect, based on yearly subscriptions.
ARR stands for Accounting Rate of Return. It is one of the Non- Discounted cash flow techniques used for calculating capital budgeting. ARR is the average net income of an asset (anticipated) divided by its average capital cost. It is generally expressed as an annual percentage.
104. The difference between the total present value of a stream of cash flows of a given rate of discount and the initial capital outlay is known as the
ARR
IRR
NPV
pi
Answer.3. NPV
Explanation:
Net present value (NPV) is a method used to determine the current value of all future cash flows generated by a project, including the initial capital investment. The discount rate must be determined in advance for the NPV method.
105. The scientific technique of evaluation of capital expenditure decisions include the following except:
IRR
NPV
pi
payback period
Answer.4. payback period
Explanation:
There are several capital budgeting analysis methods that can be used to determine the economic feasibility of capital investment. They include Discounted Payment Period, Net Present Value, Profitability Index, Internal Rate of Return, and Modified Internal Rate of Return.
If we are dealing with mutually exclusive projects, the NPV method leads us to invest in projects that maximize wealth, i.e., capital budgeting decisions consistent with the owners’ wealth maximization. If we are dealing with a limit on the capital budget, the NPV and PI methods lead us to invest in the set of projects that maximize wealth.