Profitability Index Multiple Choice Questions with Answers – PDF Download

MCQ 1: An uncovered cost at start of year is $200, full cash flow during recovery year is $400 and prior years to full recovery is 3 then payback would be:

1. 5 years
2. 3.5 years
3. 4 years
4. 4.5 years

MCQ 2: An uncovered cost at the start of year is divided by full cash flow during recovery year then added in prior years to full recovery for calculating:

1. original period
2. investment period
3. payback period
4. forecasted period

MCQ 3: The modified rate of return and modified internal rate of return with exceed cost of capital if the net present value is:

1. positive
2. negative
3. zero
4. one

MCQ 4: The number of years forecasted to recover an original investment is classified as:

1. payback period
2. forecasted period
3. original period
4. investment period

MCQ 5: The process in which the managers of the company identify projects to add value is classified as:

1. capital budgeting
2. cost budgeting
3. book value budgeting
4. equity budgeting