APSC 221 MC

On a cash flow diagram, the vertical arrows pointing upwards represent a negative cash flow. (T/F)

False

Prices of goods and services bought and sold over time by individuals and firms generally remain constant over time. (T/F)

False

Prices of goods and services brought and sold over time by individuals and firms generally remain constant over time. (T/F)

False

Sensitivity graphs illustrate the sensitivity of a particular measure to multiple-at-a-time changes in the uncertain parameters of a project. (T/F)

False

The after-tax IRR is simply the iRR calculation on the before-tax cash flows. (T/F)

False

The book value is usually taken as the actual value an asset can be sold for in an open market. (T/F)

False

Typically, entrepreneurs acquire the various resources needed to make the venture a reality by "bootstrapping", which means "doing less with more". (T/F)

False

When using CAPM, risk is measured as the variance of returns. (T/F)

False

The general price-demand relationship can be expressed as a linear function. (T/F)

True

Which of the following is NOT one of the replacement cases discussed in this chapter? a) the defender and challenger are identical and the challenger does not repeat. b) the defender and challenger are identical and repeat indefinitely. c) the challenger is different from the defender and the challenger does not repeat. d) the challenger is different from the defender and the challenger repeats indefinitely. e) none of the above

a)

Which of the following is a true statement about forms of business ownership? a) the ease of formation for partnerships is high b) gaining easy access to capital is a major advantage of a sole proprietorship c) a corporation offers no protection against liability for bad debts to its owners d) after a cooperative is formed it is difficult to transfer ownership e) sole proprietorships have significant tax disadvantages and are thus difficult to form

a)

The duration and structure of change initiatives vary significantly, but all have a degree of complexity and... a) monitor resources, costs, quality and budget b) are outside the normal daily workload c) require equity sources of funding d) involve cost accounting and management accounting

b)

What does 'd' stand for in the equation, CSF = 1-(td)/(i+d)? a) Depreciation b) The CCA rate c) Salvage value d) After-tax MARR

b)

Which of the following is NOT one of the risk management steps? a) mitigation strategies b) planning and scheduling c) control and documentation d) analysis of probability and consequences

b)

Which of the following is not an essential quality of an opportunity? a) attractive b) adaptable c) timely d) durable

b)

Which technique sums the product of several quantities or components and adds these to any components estimated directly? a) unit technique. b) power-sizing techniques. c) factor techniques. d) adding techniques

c)

___ are used in the preliminary or conceptual design stage of a project. a) cost and revenue estimates b) definitive estimates c) semi-detailed or budget estimates d) order of magnitude estimates

c)

Efficiency means achieving the organizational goals that have been set. (T/F)

False

If a business sells a single product plus a service guarantee, it only has one revenue driver. (T/F)

False

The following are all typical middle management job titles: plant manager, operations manager, and office manager. (T/F)

False

The internal benefit to writing a business plan is that it forces the founding team to devote time and resources which could be spent elsewhere. (T/F)

False

Using data that has already been collected is referred to as primary research. (T/F)

False

The European Association for Project Management has developed an integrated program of risk management, based on efforts to extend risk management to cover a project's entire life cycle. The acronym for this project is ___.

PRAM

A cash flow diagram summarizes the timing and magnitude of cash flows as they occur over time. (T/F)

True

A decision tree is a graphical representation of the logical structure of a decision problem in terms of the sequence of decisions to be made and outcomes of change events. (T/F)

True

Advances in technology frequently overlap with economic and social changes to create opportunities. (T/F)

True

An asset starts to lose value as soon as it's purchased. (T/F)

True

An assumption required by the principle of discrete compounding is that the compounding periods are of equal length. (T/F)

True

An example of a current asset belonging to a new venture is the raw material it owns that has not yet been converted into its final product. (T/F)

True

An investment may be thought as an exchange of resources now for an expected flow of benefits in the future. (T/F)

True

CERs are excellent predictors of cost if they are correctly developed from good historical data. (T/F)

True

Collateral refers to assets owned by the business or individual that the borrower uses to secure a loan. (T/F)

True

Creativity, courage and drive to achieve are examples of entrepreneurial characteristics. (T/F)

True

If there are several independent projects, the IRR for each is calculated separately. (T/F)

True

Industries that are early in their life cycle are considered attractive. (T/F)

True

Material costs are an example of costs that are typically included in an engineering economy study. (T/F)

True

Selling stock is considered a financing activity. (T/F)

True

The corridor principle occurs when new venture opportunities become apparent after an entrepreneur starts a firm. (T/F)

True

The difference between the assets and liabilities of a business is the owner's equity. (T/F)

True

The effective cost of purchasing an asset is less than its first cost. (T/F)

True

The expected value associated with the node farthest to the left in a decision tree is the expected value of the overall decision. (T/F)

True

The external rate of return (ERR) is the rate of return on a project where any cash flows that are not invested in the project are assumed to earn interest at a predetermined explicit rate. (T/F)

True

The inflation rate is the rate of increase in average prices and services over a specified time period, usually a year. (T/F)

True

The main problem with the straight-line depreciation method is that the assumption of a constant rate of loss in asset value is not often valid. (T/F)

True

A company evaluating projects will set for itself a lower limit for investment acceptability known as the ___. a) Minimum acceptable rate of return b) Present worth c) Payback period d) Annual worth

a)

A set of equal disbursements or receipts over a sequence of periods, is referred to as a(n) a) annuity b) single disbursement c) geometric gradient series d) arithmetic gradient series

a)

Before undertaking a systematic analysis of mutually exclusive alternatives using the IRR method, you should ensure that the alternatives ___. a) have equal lives b) have the same initial cost c) are similar projects d) are from the same company

a)

Decisional equivalence is a consequence of the ___ on the part of a decision marker among available choices. a) indifference b) market analysis c) study of general economic activity levels within an industry d) understanding

a)

One reason why perfect monopolies rarely occur in practice is because: a) few products are so unique that substitutes cannot be used. b) a large number of vendors can supply the same product. c) additional suppliers can enter the marker freely. d) people usually stop buying the product before this occurs

a)

The ___ defines a maximum time period and establishes a range of cost and revenue elements that need to be considered in developing cash flows. a) life cycle b) work breakdown structure c) estimating techniques d) cost model

a)

The period of highest risk impact in a project's life span occurs... a) between the implementation (execute) and the termination (finish) places. b) between the conceive and develop phases. c) between the develop and implementation (execute) phases. d) at the end of the termination (finish) phase.

a)

To determine the after-tax first cost of an asset for a complete present-worth tax calculation, one must multiply the first cost by: a) The CTF b) The CSF c) (1-t) d) The MARR

a)

To find the annuity value, A, equivalent to a present amount, P, with a given interest rate, i, and the number of periods over which this annuity will be paid, N, one would use the ___ factor. a) Capital recovery b) Uniform series compound amount c) Series present worth d) None of the above

a)

Which of the following options is NOT an example of liability that would be included on a balance sheet? a) owned equipment b) a loan payment c) debt d) retained earnings

a)

Decision trees are the graphical means of structuring ___. a) the uncertainties b) a decision-making situation c) the probability distribution function d) the expected values e) all of the above

b)

Leading involves the interactions between ___. a) mobilizing the resources and the drive to achieve competitive advantage b) managers and their subordinates as they work to meet the firm's objectives c) senior managers as they monitor a firm's performance to make sure it is meeting its goals d) strategic, tactical and operational plans

b)

Roughly ___ of employed Canadians work for an owner-managed business with fewer than 100 employees. a) 29% b) 39% c) 49% d) 59% e) none of the above

b)

There are four classic outcomes from change, which reflect the risks and the ways to avoid them. They are: the disaster, the lost, the investment, the ___, and the ideal. a) redesign success b) partial success c) complete success d) unlikely sucess

b)

Very broadly, change initiatives can be categorized into three main types, which of the following is NOT one of them? a) deliverable-led or project change b) contingency or crisis change c) transformational or visionary change d) bounded or limited scope change

b)

Change is made by... a) processes b) external force c) people d) systems

c)

The ___ denoted (P/F, i, N) gives the present amount, P, that is equivalent to a future amount, F, when the interest rate is i and the number of periods is N. a) Sinking fund factor b) Future worth factor c) Present worth factor d) Annual worth factor

c)

The cost of capital for large companies is an average of costs of borrowing and of selling shares, which is referred to as the ___ average cost of capital. a) total b) annual c) weighted d) acceptable

c)

Two of the activities within SWOT analysis involves: a) assessing internal strengths and external weaknesses b) assessing internal opportunities and external threats c) assessing internal weaknesses and external opportunities d) assessing internal threats and external strengths

c)

Using the PW criterion, assuming project risks are about equal, to enumerate all feasible combinations of the projects results in a list of ___ projects. a) independent b) compatible c) mutually exclusive d) complimentary

c)

One of the most important activities of change management is developing a ___ case for change(s), and ___ the change until it is complete.

compelling, championship

A concept statement will tend NOT to include: a) the market that the organization would like to include b) a description of the details and features of the product/service c) a description of the organization's management d) the flaws and weaker points in the product/service's conception

d)

One significant cost that is often forgotten is the effect on time of everyone affected by change. Many people in the organization will need to give up time to... a) explain how things work to those involved in designing changes b) be consulted on the effectiveness and realism of planned change c) be trained and have changes explained to them d) all of the above

d)

The base unit of time over which an interest is calculated is called the___. a) interest duration b) time period c) interest cycle d) interest period

d)

What does Cn stand for in the above equation? a) reference year for which cost is known. b) cost of price of the item in reference year. c) year for which the cost is to be estimated. d) estimated cost of price of the item in year being analyzed.

d)

Which of the following is NOT an aspect of change management? a) achieve performance improvements b) understand associated implementation risks c) minimize unplanned operational disruption d) controlling, scheduling and planning

d)

You should invest in any project that has an IRR equal to or exceeding the ___. a) annual worth b) total cost c) salvage cost d) MARR

d)

Once project risk analysis has been completed, it is important to begin developing a reporting and ____ system for cataloging and future reference

documentation

A break-even analysis could be used to ___. a) determine the MARR that results in a zero present worth b) determine what parameter value causes the performance measure to reach some threshold c) compare multiple projects d) determine the revenues required to produce a zero annual worth e) all of the above

e)

Inflation can also be viewed as ___ the purchasing power of money over time. a) an increase in b) change in c) an interest rate change in d) a published number describing e) none of the above

e)

Purchase of a long-lived asset implies which of the following? a) capital cost b) maintenance cost c) operating cost d) installation cost e) all of the above

e)

Which of the following is a true statement about the disadvantage of sole proprietorship? a) a sole proprietor is personally liable for all debts incurred by the business b) a sole proprietorship legally dissolves when the owner dies c) a sole proprietorship depends on the resources of one person d) sole proprietors often find it hard to borrow money to start up or expand e) all of the above

e)

In many cases, the best source of information on future risks is ___.

history

Many project organization create relationships with suppliers and customers that include ___ requirements for risks to be shared among those involved in the project.

legal

An ideal outcome from change is a change that is ___, or at least ___, by sufficient ___ affected by the change.

supported, accepted, stakeholders

___ is an approach to project evaluation that can be used to gain a better understanding of how uncertainty affects the outcome of the evaluation by examining how sensitive the outcome is to changes in the uncertain parameters. a) break even analysis b) cash flow analysis c) sensitivity analysis d) replacement analysis e) all of the above

c)

If the lives of alternatives are not the same, one can transform them to equal lives using: a) the payback period b) the total cost method c) the salvage cost d) repeated lives

d)

There are two alternative ways to use expert opinion in assessing project risks. The more quantifiable method, commonly referred to as the ___ approach, collects and consolidates the judgement of isolated anonymous respondents.

Delphi

A comparison of rate of return and present/annual worth methods leads to the conclusion that the two sets of methods when properly used give opposing decision. (T/F)

False

A future worth of an infinitely long uniform series of cash flows is called the capitalized value of the series. (T/F)

False

The lifetime that will maximize the average cost per year of owning and using long lived assets is referred to as the economic life of the asset. (T/F)

False

The payback period method will always give results consistent with rate of return or present/annual worth methods (T/F)

False

The power-sizing technique is sometimes referred to as a linear model. (T/F)

False

The timing of cash flows is always simple and regular. (T/F)

False

When future inflation is expected over the life of the project, the MARR needs to be decreased. (T/F)

False

Typically a prince index relates the average price of a given set of ___ in some time period to the average price of the same ___ in another period. a) weightings b) prices c) goods d) stocks e) none of the above

c)

Mathematical equivalence is a consequence of the mathematical relationship between___. a) first cost and salvage value b) sunk cost and opportunity cost c) depreciation and market value d) time and money

d)

Capital purchases cannot usually be fully claimed as an expense in the year in which the purchase occurred. (T/F)

True

A license fee is an example of an incremental cost. (T/F)

False

An independent project is acceptable is the present worth is less than zero. (T/F)

False

EV is an acronym for "expected variable". (T/F)

False

If an investment yields a profit, the total investment price will be taxed. (T/F)

False

If two products are mutually exclusive if, in the process of choosing one, all other alternatives are included. (T/F)

False

In the early years of an asset's life, the capital costs per year always dominate total yearly costs. (T/F)

False

The IRR method cannot be used to determine which of a group of mutually exclusive alternatives to accept (T/F)

False

The declining-balance method assumes the rate of loss in value of an asset is constant over its useful life. (T/F)

False

Capital cost is incurred by the difference between what is paid for the asset and what the asset could be resold for some time after purchase. (T/F)

True

Compound interest takes the interest accumulated in one interest period and adds it to the principle amount used to calculated interest in the next period. (T/F)

True

Sunk costs are irrelevant to any decision to replace the current asset. (T/F)

True

The WBS is sometimes called a work element structure. (T/F)

True

The actual MARR is the real MARR plus an upward adjustment that reflects the effect of inflation. (T/F)

True

The conventional approach for computing interest is the compound interest approach. (T/F)

True

Feasibility analysis is: a) a means of assessing the viability of a business idea b) the process of determining alternative for your proposed product/service c) recognition of the pitfalls of a product/service in a certain industry d) a company's plan on how they will organize their staff

a)

Four general factors typically explain the success of small business owners; hard work, drive, and dedication, market demand for the product of service, managerial competence and___. a) luck b) negotiating skills c) extended family and friends support d) taking apsc 221 at university e) low interest bank loans

a)

The shared experiences, stories, beliefs, and norms that characterize an organization are known as: a) the corporate culture b) human relations c) the informal organizatoin d) contingency planning

a)

Which one of the option is best described by the following definition? "A business plan primarily intended for an internal audience, that contains a great amount of detail." a) operation business plan b) emergency response action plan c) full business plan d) summary plan

a)

Which of the following should be done to protect ideas (at the opportunity recognition state) from being lost of stolen? a) store the idea in a tangible form b) secure the idea c) establish patents, trademarks, or copyrights d) avoid disclose of the idea

a), b), d)

A declining-balance method in which the depreciation rate is calculated is 1.5/N for an asset with a service life of N year is known as: a) double-declining-balance b) 150%-declining-balance c) sum-of-the-year's-digits d) straight line method

b)

Actual dollars, sometimes called current or nominal dollars are expressed ___. a) as a ratio of future dollars normalized to the consumer price index b) at the time the cash flow occurs c) as the numerical value of the consumer price index d) in terms of constant purchasing power e) none of the above

b)

In determining relevant risks and formulating proactive strategies for their mitigation, the project team can pay a little in terms of extra time and cost initially, or it must be prepared to... a) spend time planning, scheduling and controlling project variables b) pay potentially exorbitant amounts of time and money in the future c) pay for in-depth strategic and tactical analysis d) assess the consequences, or effect of its occurrence

b)

In project evaluation, we cannot make comparisons of ___ across time without taking the price changes into account. a) cash flows b) dollar values c) interest rates d) accounting systems e) none of the above

b)

Models of cash flows which assume that all cash flows and all compounding of cash flows occur at the ends of conventionally defined periods are called ___. a) continuous models b) discrete models c) irregular models d) end of period models

b)

Nominal interest rate is found by multiplying the ___ by the number of compounding periods per year. a) principle sum b) interest rate per compounding period c) effective interest rate d) none of the above

b)

The CCA system specifies the ___ rate a firm can use to depreciate its assets for tax purposes, known as the CCA Rate. a) Minimum b) Maximum c) Only d) Average

b)

The IRR is the interest rate at which a project ___. a) makes a profit b) just breaks even c) fails d) incurs a loss

b)

The ___ can also be used for the annual worth method if the assumption of being to indefinitely repeat the choice of alternatives is not justified. a) payback period b) study period c) MARR d) independent project

b)

The costs discussed in the chapter on replacement decisions can be related to the more general ideas of ___ and ___ costs. a) increasing, decreasing b) fixed, variable c) primary, secondary d) none of the above e) all of the above

b)

The economic life of an asset is found at the point where the rate of increase in operating and maintenance costs per period ___ the rate of decrease in capital costs per period. a) is greater than b) equals c) is less than d) crosses e) none of the above

b)

The severity of negative consequences in a project's life span is... a) unknown until detailed modelling is concluded b) minimal early in the project's life c) greatest early in the project's life d) the period of greatest worry

b)

To protect his poultry from meteorites, the gentleman farmer made hard hats for each bird and installed a meteor detection system that opened umbrellas throughout the yard if a meteor were detected. This is an example of an even that is... a) high in consequence and high in probability b) low in probability and high in consequence c) low in consequence and low in probability d) high in probability and low in consequence

b)

___ is the use of historical cost data and statistical techniques to predict future costs. a) power-sizing. b) parametric cost estimating. c) selected estimating. d) historical estimating

b)

For executives, before worrying about the details of selecting changes and performing change management, there are four fundamental questions that are worth answering: Why ___ with change? What are the ___ of change? What are the ___ of change? What are the ___ of change?

bother, risks, costs, rewards

He knew instinctively that his professor wouldn't appreciate it if he brought his single scoop of vanilla ice cream into the lecture room with him. He could almost hear the inevitable question, "Did you bring enough for everyone?" To avoid such an embarrassment, he practically inhaled his frozen confection as he raced down the hall. He had eaten ice cream this way before and he knew he would soon have an ice cream headache. This is an example of an even that is... a) low in probability and high in consequence b) low in consequence and low in probability c) high in probability and low in consequence d) high in consequence and high in probability

c)

It is ___ true that the capital cost per year falls with increasing life. a) always b) rarely c) usually d) never e) none of the above

c)

It is very easy to use the present worth method to choose the best project (mutually exclusive) when the ___. a) salvage cost is the same b) total cost is the same c) service life is the same d) payback period is the same

c)

Market equivalence is a consequence of the ability to ____ one cash flow for another at zero cost. a) understand b) predict impact of c) exchange d) analyze

c)

Personal income taxes usually exhibit a: a) Constant tax rate b) Proportional tax rate c) Progressive tax rate d) Flat tax rate

c)

The meaning of multiple roots is seen most easily with the concept of ____. a) net cash flows b) project comparison c) project balance d) end of period models

c)

The rollback procedure on a decision tree is executed ___ a) top to bottom b) left to right c) right to left d) in any order e) highest value to lowest value

c)

Which of the following does the "Market Analysis" segment of a business plan describe? a) a type of industry the new venture will serve in b) the size and growth rate of the industry in which the new venture is entering c) the target customer group for the product or serive d) how well the new venture will do in the stock market

c)

Which of the following options best describes the benefits of a pro forma financial statement? a) it raises charitable funds b) it creates liabilities which can later be turned into profit c) it allows a venture to forecast its future financial performance so it can efficiently utilize its assets d) it allows a venture to review their past financial performance and learn where the majority of their profits are coming from

c)

A line manager at AB Engineering Inc. has initiated a mentorship program to guide and motivate new employees. Within the context of the management process, this is an example of ___. a) planning b) scheduling c) controlling d) leading

d)

An example of an outside source of capital is: a) equity partners b) stock holders c) banks d) venture capitalists e) all of the above

e)

A ___ -based approach to risk factor identification encourages identification of more comprehensive set of potential project risks.

team