Question 1

Which of the following is not a shortcoming of the Internal Rate of Return (IRR) method?

Options :

A : IRR is easier to visualize and interpret than net present value (NPV).

B : IRR assumes that funds generated from a project will be reinvested at an interest rate equal to the project’s IRR.

C : IRR does not take into account the difference in the scale of investment alternatives.

D : Sign changes in the cash flow stream can generate more than one IRR.

Answer: A

Question 2

Company A provides high speed train services between London and Paris. Company B operates airline services between London and Paris.Which of Porter's five forces characterises the provision of the services offered by Company A and Company B?

Options :

A : Power of suppliers

B : Threat of new entrants

C : Threat of substitutes

D : Competitive rivalry

Answer: C

Question 3

Which of the following best describes the long-term goals and objectives of an entity?

Options :

A : Sales forecast.

B : Master budget.

C : Capital expenditure plan.

D : Strategic plans.

Answer: D

Question 4

Structural considerations affecting the threat of substitutes include all of the following except

Options :

A : Cost of switching to substitutes.

B : Customers’ inclination to use a substitute.

C : Brand identity.

D : Relative prices.

Answer: C

Question 5

A manufacturer of sunglasses implemented a strategy to produce the highest quality sunglasses in the world. This type of strategy is Porter’s

Options :

A : differentiation strategy.

B : harvest strategy.

C : cost leadership strategy.

D : focus strategy.

Answer: A

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