Level of management

award: 0.76 points What level of management is responsible for originating capital budgeting proposals? Senior management Divisional management Lower management → All levels of management 2. award: 0.76 points The capital budget "bottom up" perspective should be consistent with the firm's "top down" view through: Growth in sales → Strategic plans Current level of funds Dividend policy 3. award: 0.76 points Which of the following would not be judged a traditional category of a capital budgeting project? Machine replacement proposals → Salary negotiations New product proposals Plant expansion proposals 4. award: 0.76 points Forecasting inconsistencies can be minimized by: Allowing managers to establish their own forecasts Establishing a standardized economic forecast to be used year in, year out → Generating current economic forecasts that are used throughout the firm Extending the current forecast into the future 5. award: 0.76 points Which of the following capital budgeting proposals is most likely to display a conflict of interests? The proposal with the highest NPV The proposal with the longest payback period 11 of 32 → The proposal with highest IRR and quickest payback The proposal to solve pollution problems 6. award: 0.76 points Which of the following is least likely to be responsible for a regional manager's conflict of interest in promoting a capital budgeting Desire for professional advancement → Thorough knowledge of the region Overly optimistic economic forecasts The need for quick profitability 7. award: 0.76 points Soft capital rationing may be beneficial to a firm if it: Reduces a firm's interest expense → Weeds out proposals with weaker or biased NPVs Allows managers to select their favourite projects Increases funds to be used for other purposes 8. award: 0.76 points The purpose of sensitivity analysis is to show: The optimal level of the capital budget How price changes affect break-even volume Seasonal variation in product demand → How variables in a project affect profitability