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The primary objective of capital budgeting is to: Reduce financing costs. Maximize shareholders' wealth. Increase sales revenue. Minimise project risk.

The Net Present Value (NPV) of a project is the: Sum of undiscounted cash inflows. Profit after tax. Present value of cash inflows minus present value of cash outflows. Internal rate of return.

Which of the following methods considers the time value of money?. Payback Period. Accounting Rate of Return. Net Present Value. Average Return on Investment.

The Internal Rate of Return (IRR) assumes that intermediate cash flows are reinvested at: Cost of capital. IRR itself. Risk-free rate. Weighted average cost of capital.

The Modified Internal Rate of Return (MIRR) is preferred over IRR because: It ignores time value of money. It uses multiple discount rates. It assumes reinvestment at cost of capital. It gives a higher return always.

In financial management, the agency problem arises due to: Conflicts between shareholders and creditors. Differences between management and owners’ interests. Taxation policies. Market inefficiencies.

Which of the following best describes the opportunity cost of capital?. Return on safest available investment. Return that investors forgo by investing elsewhere. Weighted average cost of debt and equity. Market rate of return.

The future value of an annuity due is always: Lower than ordinary annuity. Equal to ordinary annuity. Higher than ordinary annuity. Cannot be determined.

If NPV = 0, the project’s IRR is: Equal to cost of capital. Less than cost of capital. Greater than cost of capital. Not related to cost of capital.

Sensitivity analysis in capital budgeting helps to: Identify the most profitable project. Analyze project risk by changing one variable at a time. Measure inflation impact. Determine optimal capital structure.