Investment Appraisal Quiz by Shubhrata Shrestha | Sep 2, 2025 | 0 comments Investment Appraisal Quiz 1. What does the Payback Period (PBP) primarily measure? A) Long-term profitability B) Liquidity and recovery time C) Market share growth D) Risk profile None 2. Which formula correctly represents ARR? A) Capital cost ÷ Contribution per month B) (Total returns ÷ Years of use) ÷ Capital cost × 100 C) (Total returns – Capital cost ÷ Years of use) ÷ Capital cost × 100 D) Σ (Present values – Capital cost) None 3. A project costs $400,000 and earns $700,000 over 5 years. What is the ARR? A) 10% B) 15% C) 20% D) 25% None 4. Which method accounts for the time value of money? A) PBP B) ARR C) NPV D) Break-even analysis None 5. A positive NPV indicates: A) The project should be rejected B) The investment is not profitable C) The project is financially viable D) Inflation is falling None 6. Which of the following is a disadvantage of PBP? A) It ignores liquidity concerns B) It encourages short-termism C) It is difficult to calculate D) It ignores cash flow timing None 7. Which of these is a qualitative factor in investment appraisal? A) Cumulative cash flow B) Discount rate C) Staff morale D) Net cash inflows None 8. In which scenario might a company be less likely to invest in risky projects? A) Rising business confidence B) Falling interest rates C) Economic recession D) Rapid innovation None 9. What is a key advantage of ARR? A) Considers the time value of money B) Useful for short-term liquidity C) Enables easy project comparison D) Immune to forecasting errors None 10. An investment project has a payback of 2 years 11 months, but the firm’s policy requires 2 years maximum. What should the firm do? A) Accept the project B) Reject the project C) Delay the project D) Recalculate the ARR None Time's up Submit a Comment Cancel replyYour email address will not be published. Required fields are marked *Comment * Name * Email * Website Save my name, email, and website in this browser for the next time I comment. Δ
