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Entrepreneurship Essentials
Assignment- Week 11
TYPE OF QUESTION: MCQ/MSQ
Number of questions: 10 Total mark: 10 X 1 = 10
Instruction: If all the options are correct, choose “All the options are correct” and not any
one individual option
_____________________________________________________________________________
QUESTION 1:
Read the following statements and answer the question following them.
A. All cash flows other than the initial investment occur at the end of respective periods.
B. All cash flows generated by an investment project are immediately reinvested at a rate of
return equal to the IRR of the project.
C. All cash flows other than the initial investment occur at the beginning of respective
periods.
D. All cash flows generated by an investment project are immediately reinvested at a rate of
return equal to the discount rate.
Which of the above are the two correct major assumptions of discounted net present value
estimation?
Options
a. A & C
b. A & D
c. B & D
d. C & D
Correct answer: b

Detailed solution
The major two assumptions are i. All cash flows other than the initial investment occur at the end
of respective periods; ii. All cash flows generated by an investment project are immediately
reinvested at a rate of return equal to the discount rate.
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QUESTION 2:
Which of the following statements is incorrect?
Options
a. A project may look attractive based on discounted net present value method but may not
be so based on break-even analysis.
b. The hurdle rate is the minimum rate of return below which a company will not accept a
project.
c. The break-even point estimation does not take into account the time value of money.
d. The payback period method takes into account the time value of money.
Correct Answer: d
Detailed solution
The payback period method of estimation does not take into account the time value of
money. It uses the future projected financial data at present value.

QUESTION 3:
An article appeared in the Vogue journal with the title “Netflix of Eye Wear” and that led to a
huge number of customer registration for purchasing the product. The article itself was
influenced by a word of mouth by one of the faculty members of the university where the
founders were studying. Which marketing method did Warby Parker use?
Options
a. Public relation.
b. Content marketing.
c. Social media.
d. Advertisement.
e. Influencer marketing
Correct answer: a
Detailed solution
Warby Parker used Public Relation marketing. They engineered to publish an article in the
magazine Vogue to create awareness about their product and value proposition.
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QUESTION 4:
Which of the following is not part of a great launch?
Options
a. Empathizing to define the pain-point.
b. Timing and cross-functional readiness
c. Influencers/Customers.
d. Pre-brief.
e. Messaging.
Correct answer: a
Detailed solution
Empathizing to define the painpoint is much before the launch of a product and is not part of the
elements of a great launch.

QUESTION 5:
Which of the following is not part of the go-to-market strategies?
Options
a. Market segmentation and strategic product roadmap, marketing strategies.
b. Product-market-fit, competitive landscape, and pricing model.
c. Distribution/ Channel/ Partner model.
d. Engagement with the early majority customers for achieving growth.
Correct Answer: d
Detailed solution
Without solid strategies.

QUESTION 6:
Which of the following is not true relating to either ‘Customer Acquisition Cost’ or ‘Life Time
Value’ of a customer?
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Options
a. Customer acquisition cost must be less than the life-time value.
b. If our business does not offer the choices for a customer to come back repeatedly, we
should not spend so much money to acquire customers as much we earn from that
customer in the first transaction.
c. The number of registered users is definitely regarded as an important metric that can be
highlighted during a presentation before investors since investors would view that as a
guaranteed success factor.
d. Network-based companies such as Amazon & Flipkart can afford to spend a lot of money
to acquire customers at a high burn rate since they offer many choices to customers to
come back repeatedly.
Correct answer: c
Detailed solution
The number of customers is a vanity metric and one should not chase it blindly. On the flip side,
the number of customers who have already purchased your product or service is a better metric.
The number of return / repeat customers is one of the best metrics and an indicators of success.

QUESTION 7:
Which of the following is not part of capital budgeting decision process

a) Comparing two or more business models

b) Estimating acceptability of project based on expected return
c) Selection between multiple machines based on the cash flow attributed to the machines.
d) Estimating the break-even point

Correct Answer: d

Detailed Solution:

Break-even point analysis is not part of capital budgeting decision process.

QUESTION 8:
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Which of the following statements is NOT correct about capital budgeting?

a) It helps us to assess the performance of managers in efficient deployment of capital.

b) It helps entrepreneurs to understand the comparative merits of business opportunities.
c) Though information for applying capital budgeting techniques are futuristic, it provides
useful information for decision making.
d) Helps in selection between multiple machines.

Correct Answer: a

Detailed Solution:

All the other options are correct.

QUESTION 9:
A business contract requires ₹600 initial investment. It generates an annual net cash flow of ₹200
for five years and returns no salvage value at the end of the business horizon. If required, used
the rate of return @ 10%. Estimate the net present value in rounded full Rupee (rounded off to
Rupee)? The present value multiplication factor for 10% discount rate for 5 years is 3.79.

a) ₹ 569
b) ₹ 258
c) ₹ 358
d) ₹ 158

Correct Answer: d

Detailed Solution:

NPV = 200X3.79 (discounted present value) – 600 (initial investment) = 758.15 – 600 = 158
(rounded off to rupee).

QUESTION 10:
What is hurdle rate?

a. It is the internal rate of return of a project.

b. It is the rate at which the payback period is estimated by discounting the future cash flow.
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c. It is the minimum rate of return on equity from a project for it to be favorably considered.

d. It is the minimum rate of return that a project must generate for it to be acceptable by a
company.

Correct Answer: d

Detailed Solution:

Hurdle rate is the minimum rate of return from a project for it to be acceptable for taking up by a
company. It is the weighted average cost of capital and some premium based on the risk associated with
specific project.