BUS5111 Applied Managerial Accounting Unit 7 Graded Quiz — 25
Q&A Verified Answers 2025
Course:
BUS5111 Applied Managerial Accounting — University of the People (UoPeople)
Level:
MBA
Year:
2025/2026
Format:
Graded Quiz Solutions — 25 Q&A with Verified Answers
BUS5111 Unit 7 Graded Quiz — Capital Budgeting
25 Questions with Verified Answers | Score: 96/100
Question 1:
Which of the following capital budgeting techniques ignores the time value of money?
A) Net Present Value (NPV)
B) Internal Rate of Return (IRR)
C) Profitability Index
D) Payback Period
Answer: D
Explanation:
The payback period calculates the amount of time required to recover the initial investment
without discounting future cash flows, thus ignoring the time value of money. NPV, IRR, and the
profitability index all use discounted cash flows.
Question 2:
When evaluating a proposed investment, the internal rate of return (IRR) is defined as the discount
rate that:
A) Maximizes the profitability index.
, B) Equates the present value of cash inflows with the present value of cash outflows.
C) Equals the company's cost of capital.
D) Recovers the initial investment in the shortest amount of time.
Answer: B
Explanation:
The IRR is the exact discount rate at which the Net Present Value (NPV) of a project is zero. This
means it is the mathematical rate that makes the present value of future cash inflows exactly equal
to the initial investment (outflows).
Question 3:
A company evaluates two mutually exclusive projects. Project A has an NPV of $50,000 and an
IRR of 15%. Project B has an NPV of $40,000 and an IRR of 18%. Assuming the company's cost of
capital is 10%, which project should be selected and why?
A) Project A, because it adds more absolute value to the firm.
B) Project B, because it offers a higher percentage return on investment.
C) Both projects, because their IRRs exceed the cost of capital.
D) Neither project, because the results from NPV and IRR are conflicting.
Answer: A
Explanation:
For mutually exclusive projects, the NPV rule is theoretically superior because it measures the
absolute wealth added to the company. Project A has a higher NPV, meaning it increases the
firm's overall value more than Project B, despite having a lower percentage return.
Question 4:
Which of the following best describes the primary purpose of conducting a post-audit in capital
budgeting?
A) To calculate the exact tax liability of a completed project.
B) To compare actual project outcomes with the original estimates used in the decision process.
C) To secure additional funding for future capital expenditures.
D) To determine the appropriate depreciation method for new equipment.
Answer: B
Explanation:
Q&A Verified Answers 2025
Course:
BUS5111 Applied Managerial Accounting — University of the People (UoPeople)
Level:
MBA
Year:
2025/2026
Format:
Graded Quiz Solutions — 25 Q&A with Verified Answers
BUS5111 Unit 7 Graded Quiz — Capital Budgeting
25 Questions with Verified Answers | Score: 96/100
Question 1:
Which of the following capital budgeting techniques ignores the time value of money?
A) Net Present Value (NPV)
B) Internal Rate of Return (IRR)
C) Profitability Index
D) Payback Period
Answer: D
Explanation:
The payback period calculates the amount of time required to recover the initial investment
without discounting future cash flows, thus ignoring the time value of money. NPV, IRR, and the
profitability index all use discounted cash flows.
Question 2:
When evaluating a proposed investment, the internal rate of return (IRR) is defined as the discount
rate that:
A) Maximizes the profitability index.
, B) Equates the present value of cash inflows with the present value of cash outflows.
C) Equals the company's cost of capital.
D) Recovers the initial investment in the shortest amount of time.
Answer: B
Explanation:
The IRR is the exact discount rate at which the Net Present Value (NPV) of a project is zero. This
means it is the mathematical rate that makes the present value of future cash inflows exactly equal
to the initial investment (outflows).
Question 3:
A company evaluates two mutually exclusive projects. Project A has an NPV of $50,000 and an
IRR of 15%. Project B has an NPV of $40,000 and an IRR of 18%. Assuming the company's cost of
capital is 10%, which project should be selected and why?
A) Project A, because it adds more absolute value to the firm.
B) Project B, because it offers a higher percentage return on investment.
C) Both projects, because their IRRs exceed the cost of capital.
D) Neither project, because the results from NPV and IRR are conflicting.
Answer: A
Explanation:
For mutually exclusive projects, the NPV rule is theoretically superior because it measures the
absolute wealth added to the company. Project A has a higher NPV, meaning it increases the
firm's overall value more than Project B, despite having a lower percentage return.
Question 4:
Which of the following best describes the primary purpose of conducting a post-audit in capital
budgeting?
A) To calculate the exact tax liability of a completed project.
B) To compare actual project outcomes with the original estimates used in the decision process.
C) To secure additional funding for future capital expenditures.
D) To determine the appropriate depreciation method for new equipment.
Answer: B
Explanation:
