Asset allocation is performed toA) reduce the load that intermediaries chargemaximize the earning potential of anB)investment vehicleC) maximize the earning potential of a portfolioprotect against significant declines in anyD)one investment vehicleO E) maximize the returns from any one vehicle Short selling refers to sellingO A) a stock priced below the market priceB) stocks sold from an investor's portfolioa contract to sell a product at a later date,C)and at a lower pricebuying and selling stock borrowed from aD)brokera stock priced much higher than the marketE)price

Asset Allocation means the process of allocating money across different financial assets (such as…

Asset allocation is performed to A) reduce the load that intermediaries charge maximize the earning potential of an B) investment vehicle C) maximize the earning potential of a portfolio protect against significant declines in any D) one investment vehicle U E) maximize the returns from any one vehicle

Asset allocation is performed to A) reduce the load that intermediaries charge maximize the earning potential of an B) investment vehicle C) maximize the earning potential of a portfolio protect against significant declines in any D) one investment vehicle U E) maximize the returns from any one vehicle

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter12: Capital Investment Decisions

Section: Chapter Questions

Problem 2MCQ: To make a capital investment decision, a manager must a. estimate the quantity and timing of cash...

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To make a capital investment decision, a manager must a. estimate the quantity and timing of cash flows. b. assess the risk of the investment. c. consider the impact of the investment on the firms profits. d. choose a decision criterion to assess viability of the investment (such as payback period or NPV). e. All of these.
The strategy that is used to determine the long-term policy asset weights in a portfolio is called O a. strategic asset allocation. O b. tactical asset allocation. O c. integrated asset allocation. O d. sector rotation. O e. insured asset allocation.
“Explain the reasons why the net present value (NPV) method of investment appraisal is likely to be more reliable than the accounting rate of return method (ARR).”
Which approach to investment analysis is "best" in terms of accounting for both the timing and amount of revenue streams from a potential investment? A. the payback period B. the simple rate of return C. the net present value D. the internal rate of return
Explain what is meant by Accounting Rate of Return (ARR) and Net Present Value (NPV) in the context of investment appraisal. Discuss at least TWO advantages and TWO disadvantages of each method.
The third step for making a capital investment decision is to establish baseline criteria for alternatives. Which of the following would not be an acceptable baseline criterion? A) accounting rate of return B) payback method C) inventory turnover D) internal rate of return
Methods that ignore the time value of money in capital investment appraisal include which of the following? a. Net present valueb. Discounted payback c. Average rate of return d. All of the above
__________ considers the impact of changing one or more inputs or assumptions on the resulting answer (output) of an analysis. a.Sensitivity analysis b.Capital rationing c.Expected value analysis d.The net present value method
Comparing Investment Criteria. Define each of the following investment rules and discuss any potential shortcomings of each. In your definition, state the criterion for accepting or rejecting independent projects under each rule. a. Payback period. b. Internal rate of return. c. Profitability index. d. Net present value.
Which of the following investment appraisal techniques does not involve discounting? a. NPV b. Discounted payback period c. ARR d. IRR
Explain what is meant by the internal rate of return of an investment and discuss its relationship to the NPV of an investment. Explain the problems posed for the use of the IRR when it is necessary (i) to choose between two investments and when (ii) investments are characterised by negative net cash flows at the end of their lives. Discuss and evaluate the use of the payback period as an investment criterion.
Which of the following statements is true regarding the sensitivity analysis approach to investment appraisal? a. It involves changing many factors at the same time b. It provides an indication of the likelihood of changes in the key factors c. It provides managers with clear guidance concerning the investment decision d. It is commonly called ‘how-now’ analysis e. Noneoftheabovearetrue