These are ACCA F2 (MA/FMA) Management Accounting MCQs for Part-D of the Syllabus “Budgeting”.

These MCQs are designed in a way that students could better understand the exam format and get used to practice online. This approach will reduce exam stress and enable students to prepare better.

We request the students, Not to solve the MCQs until they have learned and finished the entire F2 (MA/FMA) Management Accounting Chapter 12b – Methods of project appraisal and Syllabus Area Part-D “Budgeting”.

All the questions are compulsory, so do not skip any.

INFORMATION ABOUT THESE CBE MCQs Test/Quiz

Course: ACCA – Associations of Chartered Certified Accountants
Fundamental Level: Knowledge, FIA – Foundation in Accounting
Subject: Management Accounting
Paper: F2 – MA/FMA
Chapter: Methods of project appraisal
Chapter Number: 12b of the Practice and Exam Kit
Syllabus Area: D – Budgeting
Questions Type: CBE MCQs
Exam Section Type: Section A

Syllabus Area

These Multiple Choice Questions (MCQs) cover the Syllabus Area Part D of the Syllabus; Budgeting of ACCA F2 (MA/FMA) Management Accounting Module.

Time

These multiple-choice questions (MCQs) are not timed, allowing students to solve them without feeling any pressure and to pay proper attention to the questions.

Result

Students can see their result at the end of the Quiz. They can also be able to see the number of correct and wrong questions. Moreover, the explanation of wrong questions.

Types of Questions

MCQs: Choose one from the given options.
Multiple choice: Choose all those answers which seem correct/ or incorrect to you, as per the requirement of the question. Keep your eye on the wording “(select all those which are correct/ or incorrect)“.
Drop-down: Select from the list provided.
Type numbers: Type your answer in numbers as per the requirement of the question.

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F2 - Chapter 12b - Part A - MCQs

Course: ACCA - FIA
Subject: F2 (MA/FMA) Management Accounting
Chapter: 12b - Methods of project appraisal
Syllabus Area: D - Budgeting
Exam Section: Section A
Questions type: MCQs
Time: No Time Limit

INSTRUCTIONS

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1 / 23

What is the present value of ten annual payments of $700, the first paid immediately and discounted at 8%, giving your answer to the nearest $?

$1,050

$5,073

$4,435

$4,697

2 / 23

A project has an initial outflow of $12,000 followed by six equal annual cash inflows, commencing in one year's time. The payback period is exactly four years. The cost of capital is 12% per year.

What is the project's net present value (to the nearest $)?

–$2,899

–$3,778

$333

–$5,926

3 / 23

An investment project has the following discounted cash flows ($'000):

Year		Discount rate
	0%	10%	20%
0	(90)	(90)	(90)
1	30	27.3	25.0
2	30	24.8	29.8
3	30	22.5	17.4
4	30	20.5	14.5
	30	5.1	(12.3)

The required rate of return on investment is 10% per year.

What is the discounted payback period of the investment project?

3.0 years

Between 3.0 years and 4.0 years

More than 4.0 years

Less than 3.0 years

4 / 23

A capital investment project has an initial investment followed by constant annual returns.

How is the payback period calculated?

Initial investment ÷ annual net cash inflow

(Initial investment – residual value) ÷ annual profit

Initial investment ÷ annual profit

(Initial investment – residual value) ÷ annual net cash inflow

5 / 23

An investor is to receive an annuity of $19,260 for six years commencing at the end of year 1. It has a present value of $86,400.

What is the rate of interest (to the nearest whole percent)?

11%

6 / 23

Diamond Co has a payback period limit of three years and is considering investing in one of the following projects. Both projects require an initial investment of $800,000. Cash inflows accrue evenly throughout the year.

Project Alpha

Project Beta

Year	Cash inflow	Year	Cash inflow
	$		$
1	250,000	1	250,000
2	250,000	2	350,000
3	400,000	3	400,000
4	300,000	4	200,000
5	200,000	5	150,000
6	50,000	6	150,000

The company's cost of capital is 10%.

What is the non-discounted payback period of Project Beta?

2 years and 2 months

2 years and 4 months

2 years and 5 months

2 years and 6 months

7 / 23

A bank offers depositors a nominal 4% pa, with interest payable quarterly.

What is the effective annual rate of interest?

4.06%

1.025%

8 / 23

What is the effective annual rate of interest of 2.1% compounded every three months?

8.67%

8.40%

10.87%

6.43%

9 / 23

The net present value of an investment at 12% is $24,000, and at 20% is –$8,000.

What is the internal rate of return of this investment?

_____ %

(State your answer to the nearest whole percent.)

10 / 23

Which of the following accurately defines the internal rate of return (IRR)?

The rate (%) at which discounted net profits from an investment are zero

The net present value of the cash flows from an investment discounted at the required rate of return

The average annual profit from an investment expressed as a percentage of the investment sum

The discount rate (%) at which the net present value of the cash flows from an investment is zero

11 / 23

A machine has an investment cost of $60,000 at time 0. The present values (at time 0) of the expected net cash inflows from the machine over its useful life are:

Discount rate	Present value of cash inflows
10%	$64,600
15%	$58,200
20%	$52,100

What is the internal rate of return (IRR) of the machine investment?

Below 10%

Over 20%

Between 10% and 15%

Between 15% and 20%

12 / 23

How much should be invested now (to the nearest $) to receive $24,000 per year in perpetuity if the annual rate of interest is 5%?

$120,000

$1,200

$25,200

$480,000

13 / 23

A project requiring an investment of $1,200 is expected to generate returns of $400 in years 1 and 2 and $350 in years 3 and 4. If the NPV = $22 at 9% and the NPV = –$4 at 10%, what is the IRR for the project?

10.85%

10.15%

9.15%

9.85%

14 / 23

If the interest rate is 8%, what would you pay for a perpetuity of $1,500 starting in one year's time? (to the nearest $)

$_______

15 / 23

Which is worth most, at present values, assuming an annual rate of interest of 8%?

$1,400 in exactly two years from now

$1,200 in exactly one year from now

$1,600 in exactly three years from now

$1,800 in exactly four years from now

16 / 23

A sum of money was invested for 10 years at 7% per year and is now worth $2,000.

What was the original amount invested (to the nearest $)?

$3,937

$1,017

$14,048

$1,026

17 / 23

A one-year investment yields a return of 15%. The cash returned from the investment, including principal and interest, is $2,070.

What is the interest?

$270

$250

$300

$310.50

18 / 23

If a single sum of $12,000 is invested at 8% per year with interest compounded quarterly, what is the amount to which the principal will have grown by the end of year three? (approximately)

$15,117

$30,924

$9,528

$15,219

19 / 23

A building society adds interest monthly to investors' accounts even though interest rates are expressed in annual terms. The current rate of interest is 6% per year. An investor deposits $1,000 on 1 January.

How much interest will have been earned by 30 June? (to two decimal places)

$_______

20 / 23

Project Alpha

Project Beta

Year	Cash inflow	Year	Cash inflow
	$		$
1	250,000	1	250,000
2	250,000	2	350,000
3	400,000	3	400,000
4	300,000	4	200,000
5	200,000	5	150,000
6	50,000	6	150,000

The company's cost of capital is 10%.

What is the discounted payback period of Project Alpha?

Between 5 and 6 years

Between 4 and 5 years

Between 1 and 2 years

Between 3 and 4 years

21 / 23

An investor has the choice between two investments. Investment Exe offers interest of 4% per year compounded semi-annually for a period of three years. Investment Wye offers one interest payment of 20% at the end of its four-year life.

What is the annual effective interest rate offered by the two investments?

Investment Exe 4.00%, Investment Wye 4.66%

Investment Exe 4.04%, Investment Wye 5.00%

Investment Exe 4.04%, Investment Wye 4.66%

Investment Exe 4.00%, Investment Wye 5.00%

22 / 23

An investment project has a positive net present value (NPV) of $7,222 when its cash flows are discounted at the cost of capital of 10% per year. Net cash inflows from the project are expected to be $18,000 per year for five years. The cumulative discount (annuity) factor for five years at 10% is 3.791.

What is the investment at the start of the project?

$75,460

$82,778

$61,016

$68,238

23 / 23

House prices rise at 2% per calendar month.

What is the annual rate of increase correct to one decimal place?

12.2%

12.7%

24.0%

26.8%

Your score is

F2 (MA/FMA) – Chapter 12b – PART D – CBE MCQs – ACCA