Learning Objective 11-6
1) In which stage of the capital budgeting process begins the choice to manage the project?
A) Stage 1: Identify projects.
B) Stage 2: Obtain information.
C) Stage 3: Make predictions.
D) Stage 4: Make decisions by choosing among the alternatives.
E) Stage 5: Implement the decision, evaluate performance, and learn.
2) Which of the following is
not
true about capital budgeting projects?
A) The building projects in capital-budget projects are less complex.
B) The building projects are more complex in capital-budget projects.
C) The managers engage in postinvestment audits when they implement capital-budget projects.
D) Building projects that involve the purchase of equipment are more complex.
E) Monitoring investment schedules and budgets is critical to success.
3) Which of the following is
not
true about postinvestment audits?
A) Postinvestment audit provides managers with feedback about the performance of a project.
B) Managers can compare actual results to the costs and benefits expected at the time of project selection.
C) Optimistic estimates may cause managers to accept a project that they should reject.
D) Optimistic estimates prevent managers from accepting a project that they should reject.
E) Postinvestment audits prevent senior management from identifying problems that could be quickly corrected.
4) In performance evaluations, it is important for managers to ensure that the method of evaluation does
not
conflict with the ________ method for making capital-budgeting decisions.
A) IR
B) IRR
C) NPV
D) AARR
E) IRRR
5) A manager may reject a project if the AARR of the initial investment is ________ than the minimum accounting rate of return the manager is expected to achieve.
A) lower
B) similar
C) higher
D) reduced
E) decreased
6) The manager should perform postinvestment audits only after project outcomes have stabilized because performing audits too early may yield misleading feedback.
7) There is an inconsistency between using the NPV method as best for capital budgeting decisions and then using a different method to evaluate performance.
8) To encourage optimistic estimates, companies such as DuPont do
not
maintain records comparing actual results to the estimates individual managers make when seeking capital investment projects.
9) What do postinvestment audits reveal to management about a project?
10) Why should managers receive evaluations on a project-by-project basis?
11) Why do conflicts arise between decision making and performance evaluation?