Provided by James R. Martin, Ph.D., CMA
Professor Emeritus, University of South Florida
Investment Manage Main Page | Investment
Manage Discussion Questions | Grad MA Course
1. Which of the following is a criticism (or are criticisms) of the traditional capital budgeting approach?
d. a and b.
2. Which of the concepts below addresses the implications of not investing in a capital budgeting project?
b. the moving baseline concept.
3. The portfolio concept related to investment management and product life cycle management
e. a., b. and c.
4. Which of the following measurements requires using the cost of capital?
c. The net present value.
5. When the present value of the cash inflows is equal to the present value of the cash outflows
b. the internal rate of return is equal to the discount rate.
6. Which of the following concepts is more closely related to the concept of opportunity cost?
e. Moving baseline.
7. Assume that compound interest depreciation is used for automated equipment, rather than straight line depreciation, or one of the accelerated depreciation methods. If the expected cash flows for the first project year of a project are as planned in the discounted cash flow capital budgeting analysis,
a. the accounting rate of return will be equal to the internal rate of return.
8. The implications of using the moving baseline concept in an investment analysis are that
b. the internal rate of return calculated in a traditional capital budgeting analysis tends to be too high.
9. If the net present value calculated for an investment project is zero, the
c. residual income is zero.
10. Which of the following most accurately reflects the level of technological risk for three investment strategies?
| d. |
Proactive Responsive Reactive |
High Medium Low |
11. Which of the following most accurately reflects the level of market risk for three investment strategies?
| b. |
Proactive Responsive Reactive |
Low Medium High |
12. In a capital budgeting analysis the cost of capital is
d. a. and b.
13. In a capital budgeting analysis, if the net present value is less than zero
a. the internal rate of return is less than the cost of capital.
14. In a capital budgeting analysis, if the net present value is equal to zero
b. the internal rate of return is equal to the cost of capital.
15. In a capital budgeting analysis, if the net present value is greater than zero
c. the internal rate of return is greater than the cost of capital.
16. In a capital budgeting analysis, if the internal rate of return is less than the cost of capital
a. the investment should be rejected from the cash flow perspective.
17. In a capital budgeting analysis, if the internal rate of return is greater than the cost of capital
b. the investment passes the screening test and should be considered in further analysis.
18. The accounting rate of return
d. a. and b.
19. Part of the conflict between discounted cash flow (DCF) methods and investing in automation and computer integrated systems is that
e. all of the above.
20. In an investment analysis, a company using the moving baseline concept
e. a. and c.
21. The multiple attribute decision model described in the CAM-I conceptual design excludes the following factor or factors.
e. none of the above.
22. A situation where deferring investments reduces a firm's profitability and their incentive to invest is referred to as
b. the disinvestment spiral problem.
23. Considering a mix of investment strategies including proactive, responsive, and reactive is part of
e. a. and c.
24. Which of the following organizational characteristics are consistent with the investment management concept?
a. flat or horizontal.
25. Which concept below is closely related to and consistent with the investment management concept?
b. product life cycle management.
Investment Management MC Questions