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Net pre
Year
23
5
28
20
30
4
24
22
34
0
21
10
38
10
26
32
19
7
45
14
12
35
20
24
10
10
10
33
9
44
15
The budget constraints for years 1, 2 and 3 are Rs.150 lacs Rs.200 lacs and Rs.8
0 lacs respectively.
The following project interrelationships exist:
a. Of the set of projects 3,4 and 8, at most two can be accepted.
b. Projects 5 and 9 are mutually exclusive, but one of the two must be accepted.
c. Project 6 cannot be accepted unless both projects 1 and 10 are accepted.
d. Project 2 can be delayed by a year. Though the cash flows required will be th
e same, the net present value will drop by 50%.
e. Projects 3 and 7 are complimentary. If the two are accepted together, the tot
al cash flows will be reduced by 10% and net present value will be increased by
12%.
You are required to develop Integer Linear Programme from the above information.
2.
Why Conflicts arise between two or more mutually exclusive projects? Ana
lyse the situations where conflicts may arise and suggest how these conflicts ca
n be resolved.
3.
Write a note on lending norms and policies of the institutions.
9
Case Study
A new company incorporated recently in Andhra Pradesh is in the processing of se
tting up a 10 million tones per annum capacity cement project and has appointed
a new project manager to
study various aspects of project appraisal in resp
ect of the proposed cement project. Put yourself in the place of the project man
ager and present the appraisal process covering all the aspects.
Assignment-C
1. The importance of capital expenditure decisions stems from inter-related
ason(s) like
a.
Long-term effects
b.
Substantial Outlays
c.
Measurement problems
d.
Both (a) and (b) above
e.
Both (b) and (c) above
re
2.
a.
b.
c.
d.
e.
3.
a.
7.
Which of the following is not a causal method?
a.
Chain Ratio Method
b.
Moving Average Method
c.
Leading Indicator Method
d.
Econometric Method
e.
End Use Method
8. When the income level was Rs.1000, the quantity demanded was 50 last year. In
this year, the demand went up to Rs.55, when the income rose to Rs.1020. What i
s the income elasticity of demand this year?
a.
4.81.
b.
1.122
c.
0.25
d.
4.10
e.
4.00
9.
The choice of technology is influenced by a variety of considerations. W
hich of them is/are not such consideration(s)?
a.
Plant capacity
b.
Investment outlay
c.
Production costs
d.
Product prices
e.
Ease of absorption
10.
a.
b.
c.
d.
e.
11.
nance?
a.
b.
c.
d.
e.
12.
The break-even point in percentage terms, for the data (Optimum Capacity
: 90%, Sales at 100% Capacity: Rs.1,80,000, Variable Cost: 60% of Sales, and Fix
ed Costs: Rs.36,000) would be
a.
55.56%
b.
50.00%
c.
45.00%
d.
33.33%
e.
30.00%
13.
Which of the following statements is/are true?
a.
Accept when BCR is greater than 1 and NBCR is greater than 0.
b.
Indifferent when BCR is equal to 1 and NBCR is equal to 0.
c.
Accept when BCR is less than 1 and NBCR is less than 0.
d.
Both (a) and (b) above
e.
All of (a), (b) and (c) above.
14.
Which of the following is/are correct?
a.
Scenario analysis looks at some plausible scenarios and examines how the
NPV behaves.
b.
Monte Carlo Simulation is a flexible and versatile tool for generating p
robabilities of NPVs.
c.
Decision Tree Analysis analyses risk free situations in decision making
d.
Both (a) and (b) above
e.
All (a), (b) and (c) above
15.
Which of the following is/are true
sing the more accurate Rule of Thumb ?
a.
At 10% interest rate, the doubling
b.
At 15% interest rate, the doubling
c.
At 10% interest rate, the doubling
d.
Both (a) and (b) above
e.
Both (b) and (c) above
in respect of
16.
Capital recovery factor is the
a.
Inverse of future value interest factor for annuity
b.
Inverse of future value interest factor
c.
Inverse of present value interest factor for annuity
d.
Inverse of present value interest factor
e.
Same as present value interest factor for annuity
17.
During the current year, ABC Ltd paid a dividend of Rs.20, which is expe
cted to grow at a rate of 5% indefinitely. If the current market price of ABC Lt
d is Rs.84, the cost of equity will be
a.
Rs.23.8%
b.
Rs.25%
c.
Rs.30%
d.
Rs.28.8%
e.
16.8%
18.
The investment required for creating a capacity of 5,000 units for a pro
duct is Rs.9 crore. What is the investment required for creating a capacity of 2
0,000 units, if the capacity cost factor is 0.5?
a.
Rs. 36 crore
b.
c.
d.
e.
Rs.
Rs.
Rs.
Rs.
18 crore
4.5 crore
13.5 crore
22.5 crore
19.
a.
b.
c.
d.
e.
20.
Which of the following is/are false?
a.
Capital projects like securities are usually divisible
b.
Capital projects are assessed in terms of NPVs whereas financial securit
ies are assessed in terms of rate of return.
c.
All the points lying on a given risk-return indifference curve offer the
same level of satisfaction.
d.
Both (a) and (c) above
e.
Both (b) and (c) above
21.
Social Cost Benefit Analysis (SCBA) focuses on social costs and benefits
, but these often tend
to differ from the monetary costs and benefi
ts of the projects. The principal sources of
discrepancy are:
a.
Taxes
b.
Market imperfections
c.
Internalities
d.
Both (a) and (c) above
e.
Both (a) and (b) above
22.
Which of the following is/are false?
a.
The extent of which a project is sheltered is measured by Domestic Resou
rce Cost.
b.
The difference between the selling price and input costs is the value ad
ded.
c.
Economic Rate of Return is simply the Internal Rate of Return of the str
eam of social costs
and benefits.
d.
If the value of Domestic Resource Cost is more than the exchange rate, i
t is favorable.
e.
Both (a) and (d) above
23.
Which of the following is/are false?
a.
Because of constraints like project dependence, capital rationing, and p
roject indivisibility, investment projects can be viewed in isolation.
b.
Capital projects are generally indivisible, which means that projects ca
n be accepted partially.
c.
Capital rationing exists when funds available for investment are inadequ
ate.
d.
Both (a) and (b) above
e.
Both (b) and (c above
24.
change
roject
a.
b.
c.
d.
e.
25.
Rs.1,30,000, the terminal value is Rs.2,14,720, the annual cash inflow is Rs.40
,000 and the project life is 4 years, the reinvestment rate assumed for the abo
ve project is
a.
20%
b.
5.37%
c.
4%
d.
1.34%n
e.
7.5%
26. Domestic Resource Cost is associated with
a.
The cost of raising resources within the country
b.
The opportunity cost of depleting the domestic resources
c.
The cost of environmental benefit
d.
The usage of domestic resources vis--vis saving/earning of one unit of fo
reign exchange
e.
Rate of Protection offered to domestic industries
27.
Which of the following is/are false?
a.
Detailed Project Report (DPR) is generally prepared for submission to th
e Financial Institutions (FIs)
b.
The format of DPR and the application form for the All-India FIs are one
and the same.
c.
There is a set pattern in which the DPR has to be presented.
d.
There is no set pattern in which the DPR has to be presented.
e.
Both (b) and (c) above
28.
Which of the following is/are not major reason(s) for the failure of a p
roject?
a.
Inefficiency of staff managers
b.
Poor project planning
c.
Wrong choice of technology
d.
Both (b) and (c) above
e.
All of (a), (b) and (c) above
29.
a.
b.
c.
d.
e.
30.
Delphi Method is a
a.
Technique in which the executives are asked to forecast demand subjectiv
ely.
b.
Technique in which salesmen of different territories are asked to collec
t information regarding buying plans of users.
c.
Technique in which estimates are called from a group of experts in the f
ield. But the group is not allowed to debate each other s opinion independently.
d.
Technique in which a group discussion is conducted to pool up creative i
deas.
e.
All of (a), (b) and (d) above.
31.
Which of the following is a time series model of demand forecasting?
a.
Exponential smoothing method
b.
Leading indicator method
c.
Consumption level method
d.
Chain ratio method
e.
End use method
32. Which of the following is not a characteristic of a project?
a.
Specific goals
b.
Unique activities
c.
d.
e.
Specified time
Sequence of activities
Unspecified activities
33.
?
a.
b.
c.
d.
e.
34.
ude
a.
b.
c.
d.
e.
Attribute listing
Black box
Directed dreaming
Brain storming
Checklist
35.
Which of the following has/have impact on the plant location?
a.
Government policies/regulations.
b.
Raw material availability and their proximity
c.
Availability of infrastructure
d.
Both (a) and (c) above
e.
All of (a), (b) and (c) above
36. Which of the following is not included in the estimation of cost of the proj
ect?
a.
Margin money for working capital
b.
Technical know-how fees
c.
Contingencies on firm costs
d.
Expenses on foreign and Indian technicians
e.
Both (a) and (b) above.
37.
a.
b.
c.
d.
e.
38.
Which of the following statements is/are false?
a.
Pre-operative expenses are allocated only to depreciable assets
b.
Cost of land and site development costs go together
c.
Margin money for working capital is included under cost of capital.
d.
Contingency need to be provided for all assets both already purchased an
d yet to be purchased
e.
All of (a), (b) and (c) above.
39.
riable
a.
b.
c.
d.
e.
40. Which of the following appraisal techniques help(s) in achieving the objecti
ve of shareholder s wealth maximization?
a.
IRR
b.
c.
d.
e.
NPV
BCR
NBCR
Both (a) and (b) above
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