Q1. The following chart shows revenue and cost figures for a product development effort over a five year period of time. In what year does payback occur?YearCostRevenue1$30k$02$20k$52k3$10k$61k4$0$30k5$0$2k[removed] a. Year 2[removed] b. Year 3[removed] c. Year 4[removed] d. There is not enough information to determine when payback occursQ2. Wages for a project are $50,000. Fringe benefits and overhead add up to an additional $100,000. What is the loading or burden rate for the work effort?[removed] a. $50,000[removed] b. 2.00[removed] c. 3.00[removed] d. $100,000Q3. When viewing the Net Present Value (NPV) of an investment opportunity, you are looking at:[removed] a. The rate of return on your investment over a fixed period of time[removed] b. The profit associated with your future investment measured in terms of todays dollars[removed] c. The point of time in which the investment finally has returns that are greater than outlays[removed] d. Discounted, pre-tax profitsQ4. It is generally a good idea to develop budget worksheets as a precursor to full fledged budgets.[removed] a. true[removed] b. falseQ5. In options trading, strike price is the price of a stock determined by market forces.[removed] a. true[removed] b. falseQ6. Crashing a schedule entails:[removed] a. adding extra resources to the job to speed things up[removed] b. abandoning a schedule, and replacing it with a new one that takes into account current information[removed] c. recognizing that because a schedule will not be achieved, it should be abandoned[removed] d. lengthening the amount of time tasks need to be carried out in order to reflect the realities of getting a job doneQ7. Capital expenditures are those that will benefit the firm for a period of time of more than a year.[removed] a. true[removed] b. falseQ8. Zero based budgeting looks at last years expenditures as the basis of computing this years budget.[removed] a. true[removed] b. falseQ9. At the beginning of the year, Hank puts $100,000 into an investment. At the end of the year, the investment is completed and he is given a check for $110,000. Meanwhile, Susan puts $100,000 in another investment, and receives $140,000. In retrospect, what was Hanks opportunity cost?[removed] a. $30,000[removed] b. $40,000[removed] c. $100,000[removed] d. $110,000Q10. I need two designers working three days each to design a new software system. One code-writer will spend eleven days writing software to implement the design. One tester will test and correct the resulting code over three days. What is the level of effort associated with this project?[removed] a. 20 person days[removed] b. $2,525[removed] c. 15 days[removed] d. Cannot compute without data on indirect costsQ11. In doing benefit-cost analysis, you often encounter situations where an element of the analysis can be treated as either a cost or benefit.[removed] a. true[removed] b. falseQ12. A frequently encountered problem with budgets is that the project cost data that forms the basis of the budget is often based on optimistic assumptions.[removed] a. true[removed] b. falseQ13. Treasury notes and bonds are examples of:[removed] a. Risky investments[removed] b. Above zero risk options[removed] c. Zero risk options[removed] d. Unreliable measures of rate of return on investmentsQ14. In making decisions using benefit-cost analysis, analysts often find themselves struggling to deal with trade-offs between benefits and costs.[removed] a. true[removed] b. falseQ15. If a frost causes widespread damages to orange crops in Florida, and this leads to a jump in the price of oranges, this can be captured by movement along the demand curve.[removed] a. true[removed] b. falseQ16. Which of the following items is an example of direct costs?[removed] a. The cost of lumber used in building a structure[removed] b. Lease payments for office space[removed] c. Cost of heating and air conditioning[removed] d. Salaries of supervisors, secretaries, and attorneysQ17. Following are the benefit-cost ratios for three investment opportunities. Which is the best investment?Investment opportunityBenefit-cost ratioA1.8B2.1C1.5[removed] a. A[removed] b. B[removed] c. C[removed] d. We have insufficient information to determine which investment opportunity is the most attractiveQ18. A price elasticity of 1.2 indicates that:[removed] a. an item costs 20% more after an increase in demand than before[removed] b. a 10% increase in demand leads to a 12% increase of revenue[removed] c. a 1% increase in quantity demanded, leads to a 1.2% decrease in price[removed] d. a 1% increase in price, leads to 1.2% decrease in quantity demandedQ19. In SWOT analyses, weakness refers to:[removed] a. internal factors that can harm project performance[removed] b. external factors that can harm project performance[removed] c. situations where costs exceed benefits[removed] d. projects that have not yet achieved profitabilityQ20. An assessment of high impact project requirements finds that the following requirements have varying beneficial impacts (indicated by percentage figure in parentheses). The Pareto Rule suggests which requirements should be addressed first?
Requirements and their corresponding beneficial impacts: A (2%), B (50%), C (2%), D(5%), E(10%), F(1%), G (30%), H (1%), I (2%), J(2%)[removed] a. A, C, F, H, I, J[removed] b. B, G[removed] c. B, G, E[removed] d. A, B, EQ21. If a product has a low price elasticity of demand, this indicates that there is little demand for that product.[removed] a. true[removed] b. falseQ22. The Caldor-Hicks criterion is an approach to determining the benefits associated with public sector projects.[removed] a. true[removed] b. falseQ23. A benefit-cost ratio is a measure of how efficiently investment dollars are being used.[removed] a. true[removed] b. falseQ24. NPV and IRR analyses are basically the same, but viewed from different perspectives.[removed] a. true[removed] b. falseQ25. An advantage that the accrual method has over the cash method of accounting is that:[removed] a. It is an insurance against financial scandals[removed] b. It makes it more difficult for a company to overstate its revenues[removed] c. The cost of doing a job is tied to the time period when payment was made for the work effort[removed] d. The cost of doing a job is tied to the time when the work was doneQ26. In principle, the salary paid a worker should be:[removed] a. less than the required level of profit[removed] b. equal to minimum wage requirements[removed] c. determined by opportunity costs of the investment opportunity[removed] d. less than the workers value marginal productQ27. An important component of cost of capital is:[removed] a. your estimate of cash outflows[removed] b. your estimate of cash inflows[removed] c. the level of risk you are facing in the investment[removed] d. the size of the initial investmentQ28. The ratio of discounted benefit streams divided by discounted cost streams is commonly called:[removed] a. Profitability index[removed] b. NPV index factor[removed] c. IRR index factor[removed] d. Busss discounting and rank-ordering techniqueQ29. IRR is the best capital budgeting technique because it identifies the rate of return on an investment.[removed] a. true[removed] b. falseQ30. The financial tool that shows the profitability of an enterprise is called:[removed] a. a cash flow statement[removed] b. a balance sheet[removed] c. a pro forma statement[removed] d. an income statementQ31. If your project was supposed to have spent $100,000 to date, has actually spent $120,000, but has done $80,000 worth of work (your earned value), what is your cost variance according to the earned value management perspective?[removed] a. on target performance[removed] b. $20,000 overrun[removed] c. $40,000 overrun[removed] d. $60,000 overrunQ32. The issue of determining how to weigh costs and benefits for different players who are being examined in a benefit-cost analysis (e.g., Who should count more: rich people or poor people) is an example of:[removed] a. the equity problem[removed] b. the extrapolation problem[removed] c. the aggregation problem[removed] d. the negation problemQ33. When preparing a bid price for a project, Debby uses the following data: Johns salary ($20,000), Marys salary ($30,000), cost of materials ($10,000), required profit ($10,000). What is the bid price for doing the project?[removed] a. $70,000[removed] b. $60,000[removed] c. More than $70, 000, because cost overruns always occur[removed] d. More than $70,000 in order to include indirect costsQ34. A budget variance of -10% for expenditures during the month of April shows that a project is:[removed] a. losing money[removed] b. will face a cost overrun at its conclusion[removed] c. is still on target[removed] d. We dont have enough information to determine budget statusQ35. The best way to develop a budget is to identify all the things you want and to include these items in the budget[removed] a. true[removed] b. falseQ36. The coding system by which project data are organized is called:[removed] a. the code of accounts[removed] b. the general ledger[removed] c. the cost account[removed] d. the chart of accountsQ37. On the balance sheet, patented technology should appear as:[removed] a. a short term asset[removed] b. a long term asset[removed] c. a short term liability[removed] d. a long term liabilityQ38. A call option is the opportunity to sell a stock at a given price within a defined time frame.[removed] a. true[removed] b. falseQ39. Critics of using NPV analysis for the purpose of making investment decisions maintain that:[removed] a. you cannot use it productively, since it is impossible to know what cash flows will be[removed] b. it is biased against long-term investments[removed] c. it only shows the relative performance of a project and not absolute levels of profitability[removed] d. it does not take into account riskQ40. The IRR figure resulting from an analysis of projected cash flows can be used:[removed] a. to negotiate an interest rate for a bank loan[removed] b. to measure the profitability of the investment[removed] c. to assess the payback point of the investment[removed] d. to compare the investment opportunity being examined with other investment opportunities