Question

What does it mean to have a benefit-cost ratio greater than 1 (one)?
A. It means that the policy is too costly in comparison to the benefits
B. It means that present value of benefits is greater than present value of costs
C. It means that present value of costs is greater than present value of benefits
D. It means that the policy is inefficient

You have to recommend one alternative from two or more alternatives. If your recommendation has to be based on the benefit-cost ratio, you would select the alternative with:
A. the lowest benefit-cost ratio
B. the benefit-cost ratio that is closer to 0 (zero)
C. the highest benefit-cost ratio
D. the ratio that has equal benefits and costs

What does it mean to have a net present value greater than 0 (zero)?
A. It means that present value of benefits is greater than present value of costs
B. It means that the policy is inefficient
C. It means that present value of costs is greater than present value of benefits
D. It means that the policy is too costly in comparison to the benefits

Make a recommendation based on the net present value of each alternative.
A. E-government Basic
B. E-government Plus

All things being equal, lower discount rates produce:
A. Higher future values
B. Lower future values
C. Higher present values
D. Lower present values

Answer 1

What does it mean to have a benefit-cost ratio greater than 1 (one)?

Option A: This statement is INCORRECT. Benefit is greater than the cost.

Option B:The present value of benefit is greater than present value of cost. Hence the ratio is greater than 1. CORRECT OPTION.

Option C:INCORRECT OPTION. The reverse is true

Option D:Irrelevant statement. INCORRECT OPTION

You have to recommend one alternative from two or more alternatives. If your recommendation has to be based on the benefit-cost ratio, you would select the alternative with:

Option A: One should opt for highest benefit cost ratio. INCORRECT OPTION

Option B: The benefit cost ratio close to zero means ratio less than one which also means higher cost. But our objective should be to select project with maximum benefit cost ratio. INCORRECT OPTION

Option C: The highest benefit cost ratio means greater profit margin. So, CORRECT OPTION

Option D: A ratio close of 1 means break-even. We select a project with maximum ratio. INCORRECT OPTION.

What does it mean to have a net present value greater than 0 (zero)?

Option A: NPV >0 means the project is adding value as the present value of benefits is more than present value of cost. CORRECT OPTION

Option B: The policy is not inefficient. INCORRECT OPTION

Option C: The reverse of this statement is true. INCORRECT OPTION.

Option D:This is not true. The benefits are more than the cost. INCORRECT OPTION.

All things being equal, lower discount rates produce:

Option A: A discount rate is not related to future values. INCORRECT OPTION

Option B: A discount rate is not related to future values. INCORRECT OPTION

Option C:A lower discount rate means the cash flows which are discounted have a higher value. So, one can expect a higher present value. CORRECT OPTION

Option D: The reverse of this statement is true. INCORRECT OPTION