Beyond Budgeting is essentially an approach that places modern management practices within a cultural framework. Analyze the following statements:
1. The organization structure should have clear principles and boundaries.
2. Managers should be given a high degree of freedom to make decisions.
3. Frontline managers should be made responsible for relationships with customers.
4. Information system should be transparent and ethical.
Which of the above statements relate to Beyond Budgeting?
Answer : D
To which technique for dealing with risk and uncertainty do ALL of the following statements apply?
* It requires that only one factor is considered at a time.
* It identifies areas which are crucial to a project, which can then be monitored if the project is chosen.
* It does not provide an indication of the likelihood of any change in the factors.
* Following the calculation, it requires the exercising of judgement to decide whether to accept or reject a project.
Answer : A
A company is considering the replacement of its outdated information system.
Which of the following are appropriate approaches for the company to take to assess the potential qualitative benefits of a replacement information system?
(1) Ignore the qualitative benefits that may arise because there is too much subjectivity involved in their assessment.
(2) Attempt to attribute monetary values to each of the qualitative benefits identified.
(3) Acknowledge the existence of qualitative benefits and attempt to assess them in a reasonable manner that is acceptable to all parties.
(4) Attempt to express qualitative benefits in general terms linked to a hierarchy of organizational objectives.
Answer : A
A company wishes to appraise a potential project. One of the project's relevant cash flows is the receipt, expressed in money terms, of $20,000 per year for the first 5 years.
The company's real cost of capital is 5% per year and the expected rate of inflation is 3% per year.
What is the real value of the expected receipt in year 2?
Give your answer to the nearest $10.
See Below Explanation:
Answer : A
A company is investing in a huge diversification project. The plan is to develop and sell a whole new product line that they have never sold before. They've already started a massive marketing campaign for this new
product line and they are getting good feedback in their market research.
They've had to use debt funding in order to finance the project, but they hope that the returns will be worth the investment and restructuring. If they are successful they will be a step ahead of all their competitors and offer
something none of them can.
What is the risk appetite of this company?
Answer : A
The following cash flows are forecast for a potential investment project.
The cost of capital for the project is 12% per year and the company uses a straight line depreciation policy.
What is the modified internal rate of return (MIRR) of the project?
Give your answer to the nearest whole percentage.
See Below Explanation:
Answer : A
An investment centre is appraising a potential project that is expected to yield a Return on Investment (ROI) of 12%.
Without the project the investment centre expects to earn an ROI of 14%. The cost of capital is 10%.
What would be the impact on the investment centre's performance measures if the project is accepted?
Answer : D